SELIGMAN NEW JERSEY MUNICIPAL FUND INC, 485BPOS, 1998-01-27

SELIGMAN NEW JERSEY MUNICIPAL FUND INC
485BPOS, 1998-01-27

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File No. 33-13401

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [X]

Pre-Effective Amendment No. __ [ ]

Post-Effective Amendment No. 15 |X|

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|

Amendment No. 17 |X|
- --------------------------------------------------------------------------------

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
(Exact name of registrant as specified in charter)

- --------------------------------------------------------------------------------

100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)

- --------------------------------------------------------------------------------

Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450

- --------------------------------------------------------------------------------

THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)

- --------------------------------------------------------------------------------

It is proposed that this filing will become effective (check the
appropriate box).

[X] immediately upon filing pursuant [ ] on (date) pursuant to paragraph
(b) of rule 485 to paragraph (a)(i) of rule 485

[ ] on __(DATE)________ pursuant to [ ] 75 days after filing pursuant to
paragraph (b) of rule 485 paragraph (a)(ii) of rule 485

[ ] 60 days after filing pursuant to [ ] on (date) pursuant to paragraph
paragraph (a)(i) of rule 485 (a)(ii) of rule 485

If appropriate, check the following box:

[ ] This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Registrant has registered an indefinite amount of securities under the
Securities Act of 1933 pursuant to Rule 24f-2(a)(1) and a Rule 24f-2 Notice was
filed by Registrant for its fiscal year ended September 30, 1997 on December 11,
1997.

<PAGE>

File No. 33-13401

CROSS REFERENCE SHEET
POST-EFFECTIVE AMENDMENT NO. 15
PURSUANT TO RULE 481 (A)

ITEM IN PART A OF FORM N-1A LOCATION IN PROSPECTUS
--------------------------- ----------------------
<S> <C> <C>
1. Cover Page Cover Page

2. Synopsis Summary of Series Expenses

3. Condensed Financial Information Financial Highlights

4. General Description of Registrant Cover Page; Organization and Capitalization

5. Management of the Fund Management Services

5a. Management's Discussion of Fund Management Services
Performance

6. Capital Stock and Other Securities Organization and Capitalization

7. Purchase of Securities Being Offered Alternative Distribution System; Purchase of Shares; Administration,
Shareholder Services and Distribution Plan

8. Redemption or Repurchase Telephone Transactions; Redemption of Shares; Exchange Privilege; Further
Information About Transactions In The Funds

9. Pending Legal Proceedings Not Applicable

ITEM IN PART B OF FORM N-1A LOCATION IN STATEMENT OF ADDITIONAL INFORMATION
- --------------------------- -----------------------------------------------
10. Cover Page Cover Page

11. Table Of Contents Table Of Contents

12. General Information and History Investment Objectives, Policies and Risks; General Information; Appendix C

13. Investment Objectives and Policies Investment Objectives, Policies And Risks; Investment Limitations

14. Management of the Fund Directors and Officers; Management And Expenses

15. Control Persons and Principal Directors and Officers
Holders of Securities

16. Investment Advisory and Other Services Management And Expenses; Distribution Services

17. Brokerage Allocations Administration, Shareholder Services and Distribution Plan;
Portfolio Transactions

18. Capital Stock and Other Securities General Information

19. Purchase, Redemption and Pricing of Purchase and Redemption of Fund Shares; Valuation
Securities Being Offered

20. Tax Status Taxes; Special Considerations Regarding Investments in New Jersey Municipal
Securities

21. Underwriters Distribution Services

<PAGE>

File No. 33-13401

CROSS REFERENCE SHEET (continued)

22. Calculation of Performance Data Performance Information

23. Financial Statements Financial Statements

</TABLE>

<PAGE>
SELIGMAN MUNICIPAL FUND
SERIES, INC.

SELIGMAN MUNICIPAL
SERIES TRUST

SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.

SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES

================================================================================

100 Park Avenue
New York, New York 10017

Table of Contents

Page
Summary of Series Expenses ................................... 3
Financial Highlights ......................................... 10
Alternative Distribution System .............................. 20
Investment Objectives and Policies ........................... 21
Management Services .......................................... 29
Purchase of Shares ........................................... 30
Telephone Transactions ....................................... 35
Redemption of Shares ......................................... 36
Administration, Shareholder Services
and Distribution Plans ................................... 39
Exchange Privilege ........................................... 40
Further Information about
Transactions in the Funds ................................ 42
Dividends and Gain Distributions ............................. 42
Taxes ........................................................ 43
Shareholder Information ...................................... 53
Advertising a Series' Performance ............................ 54
Organization and Capitalization .............................. 55

This prospectus does not constitute an offering in any state in which such
offering may not lawfully be made.

This prospectus is intended to constitute an offer by each Fund only of the
securities of which it is the issuer and is not intended to constitute an offer
by any Fund of the securities of any other Fund whose securities are also
offered by this prospectus. No Fund intends to make any representation as to the
accuracy or completeness of the disclosure in this prospectus relating to any
other Fund.

MUNI-1 2/98

================================================================================
PROSPECTUS

================================================================================
SELIGMAN MUNICIPAL FUND
SERIES, INC.

SELIGMAN MUNICIPAL
SERIES TRUST

SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.

SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES
================================================================================

February 1, 1998

Seeking Income
Free From Regular Income Tax

<PAGE>

SELIGMAN MUNICIPAL FUND SERIES, INC.
National Municipal Series, Colorado Municipal Series, Georgia Municipal Series,
Louisiana Municipal Series, Maryland Municipal Series, Massachusetts
Municipal Series, Michigan Municipal Series, Minnesota Municipal Series,
Missouri Municipal Series, New York Municipal Series, Ohio Municipal Series,
Oregon Municipal Series and South Carolina Municipal Series

SELIGMAN MUNICIPAL SERIES TRUST
California Municipal High-Yield Series, California Municipal Quality Series,
Florida Municipal Series and North Carolina Municipal Series

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES
100 Park Avenue o New York, New York 10017
New York Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450--all continental United States

February 1, 1998

This prospectus offers shares of nineteen different series (the "Series")
which include National Municipal Series (the "National Series") and twelve
individual state Series of Seligman Municipal Fund Series, Inc. (the "Municipal
Fund"), four individual state Series of Seligman Municipal Series Trust (the
"Municipal Trust"), Seligman New Jersey Municipal Fund, Inc. (the "New Jersey
Fund"), and Seligman Pennsylvania Municipal Fund Series (the "Pennsylvania Fund"
and collectively with the Municipal Fund, the Municipal Trust and the New Jersey
Fund, the "Funds"). Each of the Funds is a non-diversified, open-end management
investment company.

The Municipal Fund offers the following state Series: Colorado Municipal
Series, Georgia Municipal Series, Louisiana Municipal Series, Maryland Municipal
Series, Massachusetts Municipal Series, Michigan Municipal Series, Minnesota
Municipal Series, Missouri Municipal Series, New York Municipal Series, Ohio
Municipal Series, Oregon Municipal Series and South Carolina Municipal Series
(collectively, the "Municipal Fund State Series"). The Municipal Trust offers
the following state Series: California Municipal Quality Series, California
Municipal High-Yield Series, Florida Municipal Series and North Carolina
Municipal Series (collectively, the "Municipal Trust State Series", and together
with the Municipal Fund State Series, the New Jersey Fund and the Pennsylvania
Fund, the "Series").

This Prospectus sets forth concisely the information a prospective
investor should know about the Funds and each individual Series before
investing. Please read it carefully before you invest and keep it for future
reference. Additional information about the Funds, including Statements of
Additional Information, has been filed with the Securities and Exchange
Commission. Statements of Additional Information are available upon request and
without charge by calling or writing the Funds at the telephone numbers or the
address set forth above. Each Statement of Additional Information is dated the
same date as this Prospectus and is incorporated herein by reference in its
entirety. (continued on following page)

SHARES IN THE FUNDS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR
ENDORSED BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

<PAGE>

The Municipal Fund's National Municipal Series seeks to provide to its
shareholders maximum income exempt from regular federal income taxes to the
extent consistent with preservation of capital and with consideration given to
opportunities for capital gain by investing in investment grade securities the
interest on which is exempt from regular federal income taxes. The investment
objective of each of the individual Municipal Fund State Series is to maximize
income exempt from regular federal income taxes and from personal income taxes
in that state, consistent with the preservation of capital and with
consideration given to opportunities for capital gain by investing in investment
grade municipal securities of the designated state, its political subdivisions,
municipalities and public authorities.

The Municipal Trust State Series, except for the California Municipal
High-Yield Series, each seek high income exempt from regular federal income
taxes and from personal income taxes in their respective state (other than
Florida which does not impose an individual income tax) consistent with
preservation of capital and with consideration given to capital gain, by
investing in municipal securities rated in the four highest rating categories,
except that the California Municipal Quality Series pursues its investment
objective by investing only in municipal securities rated in the three highest
rating categories of Moody's Investors Service, Inc. ("Moody's") or Standard &
Poor's Corporation ("S&P").

The California Municipal High-Yield Series seeks the maximum amount of
income exempt from regular federal income taxes and California personal income
taxes consistent with preservation of capital and with consideration given to
capital gain by investing primarily in California municipal securities that are
rated in the medium and lower rating categories of Moody's or S&P or which are
unrated. The Series may invest up to 100% of its portfolio in lower rated bonds,
commonly known as "junk bonds." Such securities generally offer a higher current
yield than those in the higher rating categories but also involve greater price
volatility and risk of loss of principal and income. The California Municipal
High-Yield Series invests primarily in high-yield, high risk securities and
therefore may not be suitable for all investors. Investors should carefully
assess the risks associated with an investment in this Series. See "Investment
Objectives and Policies--Seligman California Municipal High-Yield Series," in
this Prospectus.

The New Jersey Fund seeks to maximize income exempt from regular federal
income tax and New Jersey personal income tax consistent with preservation of
capital and with consideration given to opportunities for capital gain by
investing in "investment grade" New Jersey municipal securities. Investment
grade securities are rated within the four highest rating categories of
"Moody's" or "S&P." Throughout this Prospectus, the New Jersey gross income tax
is referred to as the New Jersey personal income tax.

The Pennsylvania Fund seeks to provide a high level of income exempt from
regular federal and Pennsylvania income taxes consistent with preservation of
capital by investing primarily in investment grade Pennsylvania municipal
securities. Capital appreciation is not a consideration in the selection of
investments. The Fund may also invest in Pennsylvania municipal securities that
are unrated but are believed by the Manager (as defined below) to be of
comparable quality to investment grade securities.

There can be no assurance that a Series will achieve its objective.

Investment advisory and management services are provided to the Funds by
J. & W. Seligman & Co. Incorporated (the "Manager") and each Fund's distributor
is Seligman Financial Services, Inc., an affiliate of the Manager. Each Series
offers two classes of shares. Class A shares are sold subject to an initial
sales load of up to 4.75% and an annual service fee currently charged at a rate
of up to .25% of the average daily net asset value of the Class A shares. Class
A shares purchased in an amount of $1,000,000 or more are sold without an
initial sales load but are subject to a contingent deferred sales load ("CDSL")
of 1% on redemptions within eighteen months of purchase. Class D shares are sold
without an initial sales load but are subject to a CDSL of 1% imposed on certain
redemptions within one year of purchase, an annual distribution fee of up to
.75% and an annual service fee of up to .25% of the average daily net asset
value of the Class D shares. Any CDSL payable upon redemption of shares will be
assessed on the lesser of the current net asset value or the original purchase
price of the shares redeemed. No CDSL will be imposed on shares acquired through
the reinvestment of dividends or distributions received from any class of
shares. See "Alternative Distribution System." Shares of the Series may be
purchased through any authorized investment dealer.

<PAGE>
SUMMARY OF SERIES EXPENSES

The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of a Series bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in initial sales loads are available in
certain circumstances. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however, such shares are subject to a CDSL,
a one-time charge, only if the shares are redeemed within eighteen months of
purchase. The CDSL on Class D shares is a one-time charge paid only if shares
are redeemed within one year of purchase. For more information concerning
reduction in sales loads and for more complete descriptions of the various costs
and expenses see "Purchase of Shares," "Redemption of Shares" and "Management
Services" herein. Each Fund's Administration, Shareholder Services and
Distribution Plan, to which the caption "12b-1 Fees" relates is discussed under
"Administration, Shareholder Services and Distribution Plans" herein.
<TABLE>
<CAPTION>
NAT'L SERIES CO SERIES GA SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------ ------- ------- ------ ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .09 1.00* .10 1.00*
Other Expenses..................... .25 .25 .31 .31 .29 .29
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .84% 1.75% .90% 1.81% .89% 1.79%
==== ===== ==== ==== ==== =====

THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER
OR LESS THAN THOSE SHOWN AND THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.

NAT'L SERIES CO SERIES GA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+
3 yrs............................. 73 55 75 57 75 56
5 yrs............................. 92 95 95 98 94 97
10 yrs............................. 146 206 153 213 152 211
</TABLE>
* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NAT'L--$18; CO--$18; GA--$18.

3
<PAGE>
SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
LA SERIES MD SERIES MA SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------ ------- ------ ------- ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .10 1.00* .09 1.00* .10 1.00*
Other Expenses..................... .26 .26 .31 .31 .24 .24
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .86% 1.76% .90% 1.81% .84% 1.74%
==== ===== ==== ==== ==== =====

LA SERIES MD SERIES MA SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- -------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 56 $ 28+
3 yrs............................. 74 55 75 57 73 55
5 yrs............................. 93 95 95 98 92 94
10 yrs............................. 149 207 153 213 146 205
</TABLE>

* Includes an annual distribution fee of .75 of 1% and an annual service fee
of .25 of 1%. Pursuant to the rules of the National Association of
Securities Dealers, Inc., the aggregate deferred sales loads and annual
distribution fees on Class D shares of each Series may not exceed 6.25% of
total gross sales, subject to certain exclusions. The 6.25% limitation is
imposed on the Series rather than on a per shareholder basis. Therefore, a
long-term Class D shareholder of a Series may pay more in total sales loads
(including distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: LA--$18; MO--$18; MA--$18.

<PAGE>

SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
MI SERIES MN SERIES MO SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------ ------- ------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .10 1.00* .10 1.00* .09 1.00*
Other Expenses..................... .21 .21 .25 .25 .30 .30
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .81% 1.71% .85% 1.75% .89% 1.80%
==== ===== ==== ==== ==== =====

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: MI--$17; MN--$18; MO--$18.

<PAGE>

SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
NY SERIES OH SERIES OR SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .10 1.00* .10 1.00*
Other Expenses..................... .23 .23 .21 .21 .30 .30
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .82% 1.73% .81% 1.71% .90% 1.80%
==== ===== ==== ==== ==== =====

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: NY--$18; OH--$17; OR--$18.

<PAGE>

SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
SC SERIES CA HIGH-YIELD SERIES CA QUALITY SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .09 1.00* .10 1.00* .10 1.00*
Other Expenses..................... .25 .25 .27 .27 .22 .22
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... .84% 1.75% .87% 1.77% .82% 1.72%
==== ===== ==== ==== ==== =====

SC SERIES CA HIGH-YIELD SERIES CA QUALITY SERIES
---------------------- -------------------- --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 56 $ 28+ $ 56 $ 28+ $ 55 $ 27+
3 yrs............................. 73 55 74 56 72 54
5 yrs............................. 92 95 93 96 91 93
10 yrs............................. 146 206 150 208 144 203
</TABLE>

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: SC--$18; CA HIGH-YEILD--$18;
CA QUALITY--$17.

<PAGE>

SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
FL SERIES NC SERIES NJ SERIES
------------------------ ---------------------- ----------------------
CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
(INITIAL (DEFERRED (INITIAL (DEFERRED (INITIAL (DEFERRED
SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE) ALTERNATIVE)
<S> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)....................... 4.75% None 4.75% None 4.75% None
Sales Load on Reinvested Dividends.... None None None None None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower)...... None; 1% during None; 1% during None; 1% during
except 1% in the first except 1% the first except 1% the first
first 18 months year; None in first 18 year; None in first 18 year; None
if initial sales thereafter months if thereafter months if thereafter
load was waived initial sales initial sales
in full due to size load was load was waived
of purchase waived in full in full
due to size due to size
of purchase of purchase
Redemption Fees....................... None None None None None None
Exchange Fees......................... None None None None None None

CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
------- ------- ------- ------- ------- -------
ANNUAL SERIES OPERATING EXPENSES
FOR FISCAL 1997 (as percentage of
average net assets)
Management Fees.................... .50% .50% .50% .50% .50% .50%
12b-1 Fees......................... .23 1.00* .24 1.00* .23 1.00*
Other Expenses..................... .31 .31 .35 .35 .33 .33
---- ---- ---- ---- ---- -----
Total Series Operating Expenses.... 1.04% 1.81% 1.09% 1.85% 1.06% 1.83%
===== ===== ===== ===== ==== =====

FL SERIES NC SERIES NJ SERIES
---------------------- ------------------ --------------------
EXAMPLE CLASS A CLASS D CLASS A CLASS D CLASS A CLASS D
- ------- ------- ------- ------- ------- -------- -------
An investor would pay the following expenses
on a $1,000 investment, assuming (1) 5%
annual return and (2) redemption at the end
of each time period:
1 yr.............................. $ 58 $ 28+ $ 58 $ 29+ $ 58 $ 29+
3 yrs............................. 79 57 81 58 80 58
5 yrs............................. 102 98 105 100 103 99
10 yrs............................. 169 213 174 217 171 215
</TABLE>

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: FL--$18; NC--$19; NJ--$19.

<PAGE>

SUMMARY OF SERIES EXPENSES--(CONTINUED)

<TABLE>
<CAPTION>
PA FUND
---------------------------
CLASS A CLASS D
------- -------
(INITIAL (DEFERRED
SALES LOAD SALES LOAD
ALTERNATIVE) ALTERNATIVE)
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on
Purchases (as percentage of
offering price)................................... 4.75% None
Sales Load on Reinvested Dividends................ None None
Deferred Sales Load (as percentage
of original price or redemption
proceeds, whichever is lower).................. None; 1% during
except 1% in the first year;
first 18 months None
if initial sales thereafter
load was waived
in full due to size
of purchase
Redemption Fees.................................... None None
Exchange Fees...................................... None None

CLASS A CLASS D
------- -------
ANNUAL SERIES OPERATING EXPENSES FOR
FISCAL 1997 (as percentage of
average net assets)
Management Fees................................. .50% .50%
12b-1 Fees...................................... .23 1.00*
Other Expenses.................................. .46 .46
---- ----
Total Series Operating Expenses................. 1.19% 1.96%
===== =====

THE FOLLOWING EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND
THE 5% USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.

PA FUND
--------------------------
EXAMPLE CLASS A CLASS D
- ------- ------- -------
An investor would pay
the following expenses
on a $1,000 investment,
assuming (1) 5% annual
return and (2) redemption
at the end of each time period:
1 yr........................................... $ 59 $ 30+
3 yrs.......................................... 83 62
5 yrs.......................................... 110 106
10 yrs.......................................... 185 229

+ Assuming (1) 5% annual return and (2) no redemption at the end of one year,
the expenses on a $1,000 investment would be: PA--$20.
</TABLE>

9
<PAGE>
FINANCIAL HIGHLIGHTS

Each Series' financial highlights for Class A and Class D shares for the
periods presented below have been audited by Deloitte & Touche LLP, independent
auditors. This information, which is derived from the financial and accounting
records of the Funds, should be read in conjunction with the fiscal 1997
financial statements and notes contained in the fiscal 1997 Annual Report of
each Fund which may be obtained by calling or writing the Funds at the telephone
numbers or address provided on the cover page of this Prospectus.

"Per share operating performance" data is designed to allow investors to
trace the operating performance, on a per share basis, from the beginning net
asset value to the ending net asset value so that they can understand the effect
that individual items have on their investment, assuming it was held throughout
the period. Generally, the per share amounts are derived by converting the
actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts.

"Total return based on net asset value" measures a Series' performance
assuming investors purchased shares at the net asset value as of the beginning
of the period, invested dividends and capital gains paid at net asset value and
then sold their shares at net asset value per share on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares. Total returns for periods of less
than one year are not annualized.

NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
NATIONAL SERIES--CLASS A
Year ended 9/30/97........ $7.70 $0.39 $0.31 $0.70 $(0.39) -- $0.31 $8.01
Year ended 9/30/96........ 7.58 0.40 0.12 0.52 (0.40) -- 0.12 7.70
Year ended 9/30/95........ 7.18 0.40 0.40 0.80 (0.40) -- 0.40 7.58
Year ended 9/30/94........ 8.72 0.41 (1.04) (0.63) (0.41) $(0.50) (1.54) 7.18
Year ended 9/30/93........ 8.07 0.45 0.78 1.23 (0.45) (0.13) 0.65 8.72
Year ended 9/30/92........ 7.90 0.48 0.20 0.68 (0.48) (0.03) 0.17 8.07
Year ended 9/30/91........ 7.44 0.49 0.54 1.03 (0.49) (0.08) 0.46 7.90
Year ended 9/30/90........ 7.73 0.51 (0.19) 0.32 (0.51) (0.10) (0.29) 7.44
Year ended 9/30/89........ 7.64 0.53 0.11 0.64 (0.53) (0.02) 0.09 7.73
Year ended 9/30/88........ 7.41 0.54 0.55 1.09 (0.54) (0.32) 0.23 7.64
NATIONAL SERIES--CLASS D
Year ended 9/30/97........ 7.70 0.32 0.32 0.64 (0.32) -- 0.32 8.02
Year ended 9/30/96........ 7.57 0.33 0.13 0.46 (0.33) -- 0.13 7.70
Year ended 9/30/95........ 7.18 0.32 0.39 0.71 (0.32) -- 0.39 7.57
2/1/94*- 9/30/94 ......... 8.20 0.22 (1.02) (0.80) (0.22) -- (1.02) 7.18
COLORADO SERIES--CLASS A
Year ended 9/30/97........ 7.27 0.37 0.15 0.52 (0.37) -- 0.15 7.42
Year ended 9/30/96........ 7.30 0.37 (0.03) 0.34 (0.37) -- (0.03) 7.27
Year ended 9/30/95........ 7.09 0.38 0.21 0.59 (0.38) -- 0.21 7.30
Year ended 9/30/94........ 7.76 0.37 (0.59) (0.22) (0.37) (0.08) (0.67) 7.09
Year ended 9/30/93........ 7.34 0.39 0.49 0.88 (0.39) (0.07) 0.42 7.76
Year ended 9/30/92........ 7.22 0.42 0.12 0.54 (0.42) -- 0.12 7.34
Year ended 9/30/91........ 6.91 0.44 0.31 0.75 (0.44) -- 0.31 7.22
Year ended 9/30/90........ 7.06 0.46 (0.15) 0.31 (0.46) -- (0.15) 6.91
Year ended 9/30/89........ 6.87 0.46 0.19 0.65 (0.46) -- 0.19 7.06
Year ended 9/30/88........ 6.38 0.46 0.53 0.99 (0.46) (0.04) 0.49 6.87
COLORADO SERIES--CLASS D
Year ended 9/30/97........ 7.27 0.30 0.15 0.45 (0.30) -- 0.15 7.42
Year ended 9/30/96........ 7.29 0.31 (0.02) 0.29 (0.31) -- (0.02) 7.27
Year ended 9/30/95........ 7.09 0.30 0.20 0.50 (0.30) -- 0.20 7.29
2/1/94*- 9/30/94.......... 7.72 0.20 (0.63) (0.43) (0.20) -- (0.63) 7.09
GEORGIA SERIES--CLASS A
Year ended 9/30/97........ 7.87 0.38 0.28 0.66 (0.38) (0.03) 0.25 8.12
Year ended 9/30/96........ 7.81 0.39 0.11 0.50 (0.39) (0.05) 0.06 7.87
Year ended 9/30/95........ 7.48 0.39 0.43 0.82 (0.39) (0.10) 0.33 7.81
Year ended 9/30/94........ 8.43 0.41 (0.86) (0.45) (0.41) (0.09) (0.95) 7.48
Year ended 9/30/93........ 7.85 0.43 0.62 1.05 (0.43) (0.04) 0.58 8.43
Year ended 9/30/92........ 7.63 0.46 0.25 0.71 (0.46) (0.03) 0.22 7.85
Year ended 9/30/91........ 7.18 0.47 0.46 0.93 (0.47) (0.01) 0.45 7.63
Year ended 9/30/90........ 7.30 0.48 (0.10) 0.38 (0.48) (0.02) (0.12) 7.18
Year ended 9/30/89........ 7.09 0.48 0.22 0.70 (0.48) (0.01) 0.21 7.30
Year ended 9/30/88........ 6.49 0.49 0.60 1.09 (0.49) -- 0.60 7.09
GEORGIA SERIES--CLASS D
Year ended 9/30/97........ 7.88 0.31 0.28 0.59 (0.31) (0.03) 0.25 8.13
Year ended 9/30/96........ 7.82 0.32 0.11 0.43 (0.32) (0.05) 0.06 7.88
Year ended 9/30/95........ 7.49 0.32 0.43 0.75 (0.32) (0.10) 0.33 7.82
2/1/94*- 9/30/94.......... 8.33 0.22 (0.84) (0.62) (0.22) -- (0.84) 7.49
LOUISIANA SERIES--CLASS A
Year ended 9/30/97........ 8.16 0.41 0.23 0.64 (0.41) (0.11) 0.12 8.28
Year ended 9/30/96........ 8.14 0.42 0.08 0.50 (0.42) (0.06) 0.02 8.16
Year ended 9/30/95........ 7.94 0.43 0.34 0.77 (0.43) (0.14) 0.20 8.14
Year ended 9/30/94........ 8.79 0.44 (0.77) (0.33) (0.44) (0.08) (0.85) 7.94
Year ended 9/30/93........ 8.38 0.46 0.51 0.97 (0.46) (0.10) 0.41 8.79
Year ended 9/30/92........ 8.18 0.49 0.24 0.73 (0.49) (0.04) 0.20 8.38
Year ended 9/30/91........ 7.70 0.50 0.50 1.00 (0.50) (0.02) 0.48 8.18
Year ended 9/30/90........ 7.88 0.52 (0.12) 0.40 (0.52) (0.06) (0.18) 7.70
Year ended 9/30/89........ 7.79 0.53 0.15 0.68 (0.53) (0.06) 0.09 7.88
Year ended 9/30/88........ 7.36 0.55 0.49 1.04 (0.55) (0.06) 0.43 7.79

- ----------
@ During the periods stated, the Manager, at its discretion, reimbursed
certain expenses and/or waived all or portions of its fees. The adjusted
net investment income per share and adjusted ratios reflect what the
results would have been had the Manager not reimbursed certain expenses
and/or not waived its fees.

* Commencement of offering of shares.

</TABLE>
10
<PAGE>

ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
------------ ----- ------------ ----------- -------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
National Series--Class A
Year ended 9/30/97......... 9.40% 0.84% 5.05% 20.63% $ 97,481
Year ended 9/30/96......... 6.97 0.80 5.19 33.99 98,767
Year ended 9/30/95......... 11.48 0.86 5.46 24.91 104,184
Year ended 9/30/94......... (7.83) 0.85 5.30 24.86 111,374
Year ended 9/30/93......... 16.00 0.86 5.49 72.68 136,394
Year ended 9/30/92......... 8.84 0.77 6.02 63.99 132,130
Year ended 9/30/91......... 14.24 0.80 6.35 71.67 136,326
Year ended 9/30/90......... 4.10 0.78 6.64 55.01 133,412
Year ended 9/30/89......... 8.62 0.78 6.86 71.90 140,376
Year ended 9/30/88......... 16.43 0.83 7.35 40.58 135,667
National Series--Class D
Year ended 9/30/97......... 8.56 1.75 4.15 20.63 2,279
Year ended 9/30/96......... 6.13 1.67 4.27 33.99 4,826
Year ended 9/30/95......... 10.17 1.95 4.40 24.91 1,215
2/1/94*- 9/30/94 .......... (9.96) 1.76+ 4.37+ 24.86++ 446
Colorado Series--Class A
Year ended 9/30/97......... 7.30 0.90 5.01 3.99 49,780
Year ended 9/30/96......... 4.76 0.85 5.07 12.39 52,295
Year ended 9/30/95......... 8.56 0.93 5.31 14.70 54,858
Year ended 9/30/94......... (2.92) 0.86 5.06 10.07 58,197
Year ended 9/30/93......... 12.54 0.90 5.21 14.09 67,912
Year ended 9/30/92......... 7.74 0.81 5.81 23.22 64,900
Year ended 9/30/91......... 11.15 0.84 6.19 14.60 64,310
Year ended 9/30/90......... 4.38 0.85 6.47 31.89 63,173
Year ended 9/30/89......... 9.70 0.86 6.56 -- 62,515
Year ended 9/30/88......... 16.19 0.88 6.89 12.95 66,257
Colorado Series--Class D
Year ended 9/30/97......... 6.34 1.81 4.10 3.99 238
Year ended 9/30/96......... 3.95 1.75 4.17 12.39 255
Year ended 9/30/95......... 7.26 2.02 4.23 14.70 193
2/1/94*- 9/30/94........... (5.73) 1.78+ 4.05+ 10.07++ 96
Georgia Series--Class A
Year ended 9/30/97......... 8.65 0.89 4.82 12.28 50,614
Year ended 9/30/96......... 6.56 0.83 4.94 16.24 50,995
Year ended 9/30/95......... 11.66 0.91 5.26 3.36 57,678 $0.39 0.96% 5.21%
Year ended 9/30/94......... (5.52) 0.73 5.21 19.34 61,466 0.40 0.93 5.01
Year ended 9/30/93......... 13.96 0.63 5.34 12.45 64,650 0.40 0.93 5.04
Year ended 9/30/92......... 9.64 0.47 5.95 10.24 44,585 0.43 0.87 5.55
Year ended 9/30/91......... 13.30 0.59 6.30 6.07 28,317 0.43 1.09 5.80
Year ended 9/30/90......... 5.19 0.53 6.53 5.83 19,002 0.44 1.03 6.03
Year ended 9/30/89......... 10.15 0.64 6.59 -- 14,452 0.44 1.19 6.04
Year ended 9/30/88......... 17.51 0.36 7.15 6.32 9,752 0.43 1.35 6.17
Georgia Series--Class D
Year ended 9/30/97......... 7.67 1.79 3.92 12.28 2,640
Year ended 9/30/96......... 5.60 1.73 4.03 16.24 2,327
Year ended 9/30/95......... 10.58 1.90 4.28 3.36 2,079 0.31 1.95 4.23
2/1/94*- 9/30/94........... (7.57) 1.76+ 4.28+ 19.34++ 849 0.21 1.90+ 4.15+
Louisiana Series--Class A
Year ended 9/30/97......... 8.17 0.86 5.08 16.08 56,199
Year ended 9/30/96......... 6.32 0.82 5.15 10.08 57,264
Year ended 9/30/95......... 10.30 0.89 5.44 4.82 61,988
Year ended 9/30/94......... (3.83) 0.87 5.31 17.16 61,441
Year ended 9/30/93......... 12.10 0.87 5.40 9.21 67,529
Year ended 9/30/92......... 9.13 0.80 5.89 25.45 57,931
Year ended 9/30/91......... 13.49 0.83 6.31 20.85 50,089
Year ended 9/30/90......... 5.20 0.81 6.62 31.54 43,475
Year ended 9/30/89......... 9.04 0.84 6.82 12.94 43,908
Year ended 9/30/88......... 14.69 0.85 7.19 36.01 42,521

- ----------
+ Annualized.

++ For the year ended 9/30/94.
</TABLE>
11

<PAGE>

NET
NET ASSET REALIZED INCREASE NET NET
VALUE & (DECREASE) INCREASE ASSET
AT NET UNREALIZED FROM DIVIDENDS DISTRIBUTIONS (DECREASE) VALUE AT
PER SHARE OPERATING BEGINNING INVESTMENT INVESTMENT INVESTMENT PAID OR FROM NET IN NET END OF
PERFORMANCE: OF PERIOD INCOME@ GAIN (LOSS) OPERATIONS DECLARED GAIN REALIZED ASSET VALUE PERIOD
- ------------------- --------- ---------- ----------- ---------- --------- -------------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
LOUISIANA SERIES--CLASS D
Year ended 9/30/97........ $8.16 $0.34 $0.22 $0.56 $(0.34) $(0.11) $0.11 $8.27
Year ended 9/30/96........ 8.14 0.35 0.08 0.43 (0.35) (0.06) 0.02 8.16
Year ended 9/30/95........ 7.94 0.35 0.34 0.69 (0.35) (0.14) 0.20 8.14
2/1/94*- 9/30/94.......... 8.73 0.24 (0.79) (0.55) (0.24) -- (0.79) 7.94
MARYLAND SERIES--CLASS A
Year ended 9/30/97........ 7.99 0.40 0.19 0.59 (0.40) (0.04) 0.15 8.14
Year ended 9/30/96........ 7.96 0.40 0.06 0.46 (0.40) (0.03) 0.03 7.99
Year ended 9/30/95........ 7.71 0.41 0.38 0.79 (0.41) (0.13) 0.25 7.96
Year ended 9/30/94 ....... 8.64 0.42 (0.76) (0.34) (0.42) (0.17) (0.93) 7.71
Year ended 9/30/93........ 8.15 0.44 0.59 1.03 (0.44) (0.10) 0.49 8.64
Year ended 9/30/92........ 7.94 0.46 0.24 0.70 (0.46) (0.03) 0.21 8.15
Year ended 9/30/91........ 7.45 0.47 0.49 0.96 (0.47) -- 0.49 7.94
Year ended 9/30/90........ 7.59 0.48 (0.14) 0.34 (0.48) -- (0.14) 7.45
Year ended 9/30/89........ 7.39 0.48 0.20 0.68 (0.48) -- 0.20 7.59
Year ended 9/30/88........ 6.87 0.47 0.56 1.03 (0.47) (0.04) 0.52 7.39
MARYLAND SERIES--CLASS D
Year ended 9/30/97........ 7.99 0.33 0.20 0.53 (0.33) (0.04) 0.16 8.15
Year ended 9/30/96........ 7.97 0.33 0.05 0.38 (0.33) (0.03) 0.02 7.99
Year ended 9/30/95........ 7.72 0.33 0.38 0.71 (0.33) (0.13) 0.25 7.97
2/1/94*- 9/30/94 ......... 8.46 0.23 (0.74) (0.51) (0.23) -- (0.74) 7.72
MASSACHUSETTS SERIES--CLASS A
Year ended 9/30/97........ 7.85 0.40 0.22 0.62 (0.40) (0.08) 0.14 7.99
Year ended 9/30/96........ 7.91 0.41 0.05 0.46 (0.41) (0.11) (0.06) 7.85
Year ended 9/30/95........ 7.66 0.42 0.28 0.70 (0.42) (0.03) 0.25 7.91
Year ended 9/30/94........ 8.54 0.44 (0.67) (0.23) (0.44) (0.21) (0.88) 7.66
Year ended 9/30/93........ 8.06 0.47 0.55 1.02 (0.47) (0.07) 0.48 8.54
Year ended 9/30/92........ 7.86 0.49 0.24 0.73 (0.49) (0.04) 0.20 8.06
Year ended 9/30/91........ 7.26 0.50 0.62 1.12 (0.50) (0.02) 0.60 7.86
Year ended 9/30/90........ 7.65 0.50 (0.31) 0.19 (0.50) (0.08) (0.39) 7.26
Year ended 9/30/89........ 7.62 0.52 0.08 0.60 (0.52) (0.05) 0.03 7.65
Year ended 9/30/88........ 7.20 0.53 0.51 1.04 (0.53) (0.09) 0.42 7.62
MASSACHUSETTS SERIES--CLASS D
Year ended 9/30/97........ 7.84 0.33 0.23 0.56 (0.33) (0.08) 0.15 7.99
Year ended 9/30/96........ 7.90 0.34 0.05 0.39 (0.34) (0.11) (0.06) 7.84
Year ended 9/30/95........ 7.66 0.34 0.27 0.61 (0.34) (0.03) 0.24 7.90
2/1/94*- 9/30/94 ......... 8.33 0.24 (0.67) (0.43) (0.24) -- (0.67) 7.66
MICHIGAN SERIES--CLASS A
Year ended 9/30/97........ 8.46 0.43 0.23 0.66 (0.43) (0.09) 0.14 8.60
Year ended 9/30/96........ 8.54 0.45 0.06 0.51 (0.45) (0.14) (0.08) 8.46
Year ended 9/30/95........ 8.28 0.46 0.30 0.76 (0.46) (0.04) 0.26 8.54
Year ended 9/30/94........ 9.08 0.46 (0.71) (0.25) (0.46) (0.09) (0.80) 8.28
Year ended 9/30/93........ 8.68 0.47 0.59 1.06 (0.47) (0.19) 0.40 9.08
Year ended 9/30/92........ 8.38 0.50 0.35 0.85 (0.50) (0.05) 0.30 8.68
Year ended 9/30/91........ 7.89 0.51 0.51 1.02 (0.51) (0.02) 0.49 8.38
Year ended 9/30/90........ 8.14 0.52 (0.16) 0.36 (0.52) (0.09) (0.25) 7.89
Year ended 9/30/89........ 7.94 0.54 0.23 0.77 (0.54) (0.03) 0.20 8.14
Year ended 9/30/88........ 7.48 0.54 0.58 1.12 (0.54) (0.12) 0.46 7.94
MICHIGAN SERIES--CLASS D
Year ended 9/30/97........ 8.45 0.36 0.23 0.59 (0.36) (0.09) 0.14 8.59
Year ended 9/30/96........ 8.54 0.37 0.05 0.42 (0.37) (0.14) (0.09) 8.45
Year ended 9/30/95........ 8.28 0.37 0.30 0.67 (0.37) (0.04) 0.26 8.54
2/1/94*- 9/30/94.......... 9.01 0.25 (0.73) (0.48) (0.25) -- (0.73) 8.28
MINNESOTA SERIES--CLASS A
Year ended 9/30/97........ 7.68 0.40 0.11 0.51 (0.40) -- 0.11 7.79
Year ended 9/30/96........ 7.82 0.42 (0.12) 0.30 (0.42) (0.02) (0.14) 7.68
Year ended 9/30/95........ 7.72 0.45 0.11 0.56 (0.45) (0.01) 0.10 7.82
Year ended 9/30/94........ 8.28 0.45 (0.44) 0.01 (0.45) (0.12) (0.56) 7.72
Year ended 9/30/93........ 7.89 0.47 0.51 0.98 (0.47) (0.12) 0.39 8.28
Year ended 9/30/92........ 7.81 0.49 0.09 0.58 (0.49) (0.01) 0.08 7.89
Year ended 9/30/91........ 7.49 0.49 0.32 0.81 (0.49) -- 0.32 7.81
Year ended 9/30/90........ 7.60 0.49 (0.06) 0.43 (0.49) (0.05) (0.11) 7.49
Year ended 9/30/89........ 7.52 0.51 0.11 0.62 (0.51) (0.03) 0.08 7.60
Year ended 9/30/88........ 7.12 0.51 0.48 0.99 (0.51) (0.08) 0.40 7.52
MINNESOTA SERIES--CLASS D
Year ended 9/30/97........ 7.68 0.33 0.11 0.44 (0.33) -- 0.11 7.79
Year ended 9/30/96........ 7.82 0.35 (0.12) 0.23 (0.35) (0.02) (0.14) 7.68
Year ended 9/30/95........ 7.73 0.38 0.10 0.48 (0.38) (0.01) 0.09 7.82
2/1/94*- 9/30/94 ......... 8.22 0.25 (0.49) (0.24) (0.25) -- (0.49) 7.73

* Commencement of offering of shares.

</TABLE>

12
<PAGE>

<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- ------------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Louisiana Series--Class D
Year ended 9/30/97......... 7.07% 1.76% 4.18% 16.08% $ 509
Year ended 9/30/96......... 5.37 1.72 4.25 10.08 389
Year ended 9/30/95......... 9.17 1.91 4.41 4.82 465
2/1/94*- 9/30/94........... (6.45) 1.78+ 4.33+ 17.16++ 704
Maryland Series--Class A
Year ended 9/30/97......... 7.64 0.90 4.99 14.79 52,549
Year ended 9/30/96......... 6.00 0.84 5.05 5.56 54,041
Year ended 9/30/95......... 10.90 0.96 5.31 3.63 56,290
Year ended 9/30/94 ........ (4.08) 0.92 5.17 17.68 57,263
Year ended 9/30/93......... 13.23 0.97 5.28 14.10 64,472
Year ended 9/30/92......... 9.15 0.86 5.76 29.57 57,208
Year ended 9/30/91......... 13.26 0.88 6.09 18.84 54,068
Year ended 9/30/90......... 4.47 0.87 6.26 16.50 47,283
Year ended 9/30/89........ 9.43 0.87 6.38 2.19 46,643
Year ended 9/30/88......... 15.73 0.91 6.63 17.42 45,939
Maryland Series--Class D
Year ended 9/30/97......... 6.80 1.81 4.08 14.79 2,063
Year ended 9/30/96......... 4.91 1.72 4.14 5.56 2,047
Year ended 9/30/95......... 9.75 2.02 4.27 3.63 630
2/1/94*- 9/30/94 .......... (6.21) 1.80+ 4.26+ 17.68++ 424
Massachusetts Series--Class A
Year ended 9/30/97......... 8.11 0.84 5.06 29.26 110,011
Year ended 9/30/96......... 5.97 0.80 5.24 26.30 109,872
Year ended 9/30/95......... 9.58 0.86 5.51 16.68 115,711
Year ended 9/30/94......... (2.94) 0.85 5.46 12.44 120,149
Year ended 9/30/93......... 13.18 0.88 5.65 20.66 139,504
Year ended 9/30/92......... 9.75 0.77 6.27 27.92 128,334
Year ended 9/30/91......... 15.84 0.83 6.64 14.37 118,022
Year ended 9/30/90......... 2.48 0.79 6.66 19.26 110,246
Year ended 9/30/89......... 8.18 0.79 6.81 7.51 122,515
Year ended 9/30/88......... 15.15 0.84 7.02 21.77 126,150
Massachusetts Series--Class D
Year ended 9/30/97........ 7.29 1.74 4.16 29.26 1,245
Year ended 9/30/96........ 5.01 1.70 4.32 26.30 1,405
Year ended 9/30/95........ 8.33 1.95 4.47 16.68 890
2/1/94*- 9/30/94 ......... (5.34) 1.78+ 4.52+ 12.44++ 1,099
Michigan Series--Class A
Year ended 9/30/97........ 8.16 0.81 5.13 10.98 143,370
Year ended 9/30/96........ 6.16 0.78 5.29 19.62 148,178
Year ended 9/30/95........ 9.56 0.87 5.50 20.48 151,589
Year ended 9/30/94........ (2.90) 0.84 5.32 10.06 151,095
Year ended 9/30/93........ 12.97 0.83 5.41 6.33 164,638
Year ended 9/30/92........ 10.55 0.76 5.93 32.12 144,524
Year ended 9/30/91........ 13.34 0.80 6.28 22.81 129,004
Year ended 9/30/90........ 4.57 0.80 6.47 26.36 112,689
Year ended 9/30/89........ 9.91 0.81 6.67 8.24 111,180
Year ended 9/30/88........ 15.98 0.88 7.06 34.00 104,904
Michigan Series--Class D
Year ended 9/30/97........ 7.19 1.71 4.23 10.98 1,845
Year ended 9/30/96........ 5.09 1.68 4.39 19.62 1,486
Year ended 9/30/95........ 8.36 2.01 4.40 20.48 1,172
2/1/94*- 9/30/94.......... (5.47) 1.75+ 4.40+ 10.06++ 671
Minnesota Series--Class A
Year ended 9/30/97....... 6.85 0.85 5.21 6.88 121,674
Year ended 9/30/96....... 3.99 0.81 5.47 26.89 126,173
Year ended 9/30/95....... 7.61 0.87 5.89 5.57 132,716
Year ended 9/30/94....... 0.12 0.85 5.70 3.30 134,990
Year ended 9/30/93....... 13.06 0.90 5.89 5.73 144,600
Year ended 9/30/92....... 7.71 0.80 6.29 12.08 151,922
Year ended 9/30/91....... 11.10 0.80 6.28 2.61 182,979
Year ended 9/30/90....... 5.79 0.81 6.40 12.10 160,930
Year ended 9/30/89....... 8.34 0.83 6.61 7.55 148,425
Year ended 9/30/88....... 14.76 0.87 6.95 35.37 132,541
Minnesota Series--Class D
Year ended 9/30/97....... 5.89 1.75 4.31 6.88 1,799
Year ended 9/30/96....... 3.06 1.71 4.57 26.89 2,036
Year ended 9/30/95....... 6.45 1.85 4.92 5.57 2,237
2/1/94*- 9/30/94 ........ (3.08) 1.74+ 4.68+ 3.30++ 1,649

- ----------
+ Annualized.

++ For the year ended 9/30/94.
</TABLE>

<PAGE>

MISSOURI SERIES--CLASS A
Year ended 9/30/97........ $7.71 0.38 $0.19 $ 0.57 $(0.38) $(0.08) $0.11 $7.82
Year ended 9/30/96........ 7.70 0.39 0.08 0.47 (0.39) (0.07) 0.01 7.71
Year ended 9/30/95........ 7.41 0.40 0.36 0.76 (0.40) (0.07) 0.29 7.70
Year ended 9/30/94........ 8.31 0.40 (0.79) (0.39) (0.40) (0.11) (0.90) 7.41
Year ended 9/30/93........ 7.80 0.42 0.57 0.99 (0.42) (0.06) 0.51 8.31
Year ended 9/30/92........ 7.72 0.44 0.15 0.59 (0.44) (0.07) 0.08 7.80
Year ended 9/30/91........ 7.22 0.46 0.50 0.96 (0.46) -- 0.50 7.72
YEAR ENDED 9/30/90 7.28 0.45 (0.06) 0.39 (0.45) -- (0.06) 7.22
Year ended 9/30/89........ 7.10 0.47 0.18 0.65 (0.47) -- 0.18 7.28
Year ended 9/30/88........ 6.57 0.48 0.58 1.06 (0.48) (0.05) 0.53 7.10
MISSOURI SERIES--CLASS D
Year ended 9/30/97........ 7.72 0.31 0.18 0.49 (0.31) (0.08) 0.10 7.82
Year ended 9/30/96........ 7.70 0.32 0.09 0.41 (0.32) (0.07) 0.02 7.72
Year ended 9/30/95........ 7.41 0.32 0.36 0.68 (0.32) (0.07) 0.29 7.70
2/1/94*- 9/30/94 ......... 8.20 0.22 (0.79) (0.57) (0.22) -- (0.79) 7.41
NEW YORK SERIES--CLASS A
Year ended 9/30/97........ 7.98 0.41 0.32 0.73 (0.41) (0.02) 0.30 8.28
Year ended 9/30/96........ 7.86 0.42 0.12 0.54 (0.42) -- 0.12 7.98
Year ended 9/30/95........ 7.67 0.42 0.36 0.78 (0.42) (0.17) 0.19 7.86
Year ended 9/30/94........ 8.75 0.43 (0.88) (0.45) (0.43) (0.20) (1.08) 7.67
Year ended 9/30/93........ 8.13 0.45 0.74 1.19 (0.45) (0.12) 0.62 8.75
Year ended 9/30/92........ 7.94 0.49 0.26 0.75 (0.49) (0.07) 0.19 8.13
Year ended 9/30/91........ 7.40 0.50 0.54 1.04 (0.50) -- 0.54 7.94
Year ended 9/30/90........ 7.71 0.51 (0.26) 0.25 (0.51) (0.05) (0.31) 7.40
Year ended 9/30/89........ 7.57 0.52 0.17 0.69 (0.52) (0.03) 0.14 7.71
Year ended 9/30/88........ 7.28 0.52 0.48 1.00 (0.52) (0.19) 0.29 7.57
NEW YORK SERIES--CLASS D
Year ended 9/30/97........ 7.98 0.34 0.33 0.67 (0.34) (0.02) 0.31 8.29
Year ended 9/30/96........ 7.87 0.34 0.11 0.45 (0.34) -- 0.11 7.98
Year ended 9/30/95........ 7.67 0.34 0.37 0.71 (0.34) (0.17) 0.20 7.87
2/1/94*- 9/30/94 ......... 8.55 0.23 (0.88) (0.65) (0.23) -- (0.88) 7.67
OHIO SERIES--CLASS A
Year ended 9/30/97........ 8.09 0.42 0.17 0.59 (0.42) (0.07) 0.10 8.19
Year ended 9/30/96........ 8.11 0.43 0.02 0.45 (0.43) (0.04) (0.02) 8.09
Year ended 9/30/95........ 7.90 0.44 0.28 0.72 (0.44) (0.07) 0.21 8.11
Year ended 9/30/94........ 8.77 0.44 (0.70) (0.26) (0.44) (0.17) (0.87) 7.90
Year ended 9/30/93........ 8.28 0.46 0.56 1.02 (0.46) (0.07) 0.49 8.77
Year ended 9/30/92........ 8.06 0.49 0.26 0.75 (0.49) (0.04) 0.22 8.28
Year ended 9/30/91........ 7.62 0.51 0.45 0.96 (0.51) (0.01) 0.44 8.06
Year ended 9/30/90........ 7.80 0.52 (0.08) 0.44 (0.52) (0.10) (0.18) 7.62
Year ended 9/30/89........ 7.71 0.54 0.11 0.65 (0.54) (0.02) 0.09 7.80
Year ended 9/30/88........ 7.38 0.54 0.53 1.07 (0.54) (0.20) 0.33 7.71
OHIO SERIES--CLASS D
Year ended 9/30/97........ 8.13 0.35 0.17 0.52 (0.35) (0.07) 0.10 8.23
Year ended 9/30/96........ 8.15 0.36 0.02 0.38 (0.36) (0.04) (0.02) 8.13
Year ended 9/30/95........ 7.92 0.36 0.30 0.66 (0.36) (0.07) 0.23 8.15
2/1/94*- 9/30/94 ......... 8.61 0.24 (0.69) (0.45) (0.24) -- (0.69) 7.92
OREGON SERIES--CLASS A
Year ended 9/30/97........ 7.65 0.38 0.26 0.64 (0.38) (0.04) 0.22 7.87
Year ended 9/30/96........ 7.66 0.40 -- 0.40 (0.40) (0.01) (0.01) 7.65
Year ended 9/30/95........ 7.43 0.40 0.25 0.65 (0.40) (0.02) 0.23 7.66
Year ended 9/30/94........ 8.08 0.40 (0.59) (0.19) (0.40) (0.06) (0.65) 7.43
Year ended 9/30/93........ 7.60 0.42 0.48 0.90 (0.42) -- 0.48 8.08
Year ended 9/30/92........ 7.42 0.42 0.18 0.60 (0.42) -- 0.18 7.60
Year ended 9/30/91........ 6.96 0.44 0.46 0.90 (0.44) -- 0.46 7.42
Year ended 9/30/90........ 7.05 0.44 (0.09) 0.35 (0.44) -- (0.09) 6.96
Year ended 9/30/89........ 6.83 0.44 0.22 0.66 (0.44) -- 0.22 7.05
Year ended 9/30/88........ 6.21 0.45 0.62 1.07 (0.45) -- 0.62 6.83
OREGON SERIES--CLASS D
Year ended 9/30/97........ 7.64 0.31 0.27 0.58 (0.31) (0.04) 0.23 7.87
Year ended 9/30/96........ 7.65 0.33 -- 0.33 (0.33) (0.01) (0.01) 7.64
Year ended 9/30/95........ 7.43 0.33 0.24 0.57 (0.33) (0.02) 0.22 7.65
2/1/94*- 9/30/94 ......... 8.02 0.22 (0.59) (0.37) (0.22) -- (0.59) 7.43
SOUTH CAROLINA SERIES--CLASS A
Year ended 9/30/97........ 8.07 0.40 0.22 0.62 (0.40) (0.13) 0.09 8.16
Year ended 9/30/96........ 7.97 0.41 0.12 0.53 (0.41) (0.02) 0.10 8.07
Year ended 9/30/95........ 7.61 0.41 0.37 0.78 (0.41) (0.01) 0.36 7.97
Year ended 9/30/94........ 8.52 0.41 (0.79) (0.38) (0.41) (0.12) (0.91) 7.61
Year ended 9/30/93........ 8.00 0.43 0.54 0.97 (0.43) (0.02) 0.52 8.52
Year ended 9/30/92........ 7.71 0.45 0.31 0.76 (0.45) (0.02) 0.29 8.00
Year ended 9/30/91........ 7.23 0.46 0.52 0.98 (0.46) (0.04) 0.48 7.71
Year ended 9/30/90........ 7.37 0.48 (0.14) 0.34 (0.48) -- (0.14) 7.23
Year ended 9/30/89........ 7.21 0.48 0.17 0.65 (0.48) (0.01) 0.16 7.37
Year ended 9/30/88........ 6.67 0.50 0.54 1.04 (0.50) -- 0.54 7.21

* Commencement of offering of shares.
</TABLE>

14
<PAGE>

<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- -------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

Missouri Series--Class A
Year ended 9/30/97....... 7.70% 0.89% 4.93% 6.47% $ 52,766
Year ended 9/30/96....... 6.27 0.86 5.03 8.04 49,941
Year ended 9/30/95....... 10.67 0.88 5.31 3.88 51,169 $0.39 0.93% 5.26%
Year ended 9/30/94....... (4.85) 0.74 5.18 14.33 52,621 0.39 0.88 5.04
Year ended 9/30/93....... 13.17 0.71 5.29 17.03 56,861 0.41 0.91 5.09
Year ended 9/30/92....... 7.87 0.83 5.71 18.80 49,459
Year ended 9/30/91....... 13.61 0.88 6.10 16.30 47,659
Year ended 9/30/90 5.47 0.84 6.20 30.46 50,875
Year ended 9/30/89....... 9.33 0.96 6.43 32.81 49,162
Year ended 9/30/88....... 16.74 0.86 6.88 12.32 58,457
Missouri Series--Class D
Year ended 9/30/97....... 6.60 1.80 4.02 6.47 474
Year ended 9/30/96....... 5.46 1.76 4.13 8.04 565
Year ended 9/30/95....... 9.49 1.98 4.23 3.88 515 0.32 2.03 4.18
2/1/94*- 9/30/94 ........ (7.16) 1.70+ 4.27+ 14.33++ 350 0.22 1.80+ 4.17+
New York Series--Class A
Year ended 9/30/97....... 9.45 0.82 5.09 23.83 83,528
Year ended 9/30/96....... 6.97 0.77 5.24 25.88 82,719
Year ended 9/30/95....... 10.93 0.88 5.52 34.05 83,980
Year ended 9/30/94....... (5.37) 0.87 5.31 28.19 90,914
Year ended 9/30/93....... 15.26 0.94 5.37 27.90 104,685
Year ended 9/30/92....... 9.80 0.79 6.09 42.90 92,681
Year ended 9/30/91....... 14.56 0.80 6.57 44.57 83,684
Year ended 9/30/90....... 3.19 0.79 6.65 32.14 77,766
Year ended 9/30/89....... 9.35 0.80 6.78 47.69 75,471
Year ended 9/30/88....... 14.74 0.86 6.96 62.42 74,238
New York Series--Class D
Year ended 9/30/97....... 8.60 1.73 4.18 23.83 1,572
Year ended 9/30/96....... 5.86 1.68 4.33 25.88 1,152
Year ended 9/30/95....... 9.87 1.96 4.42 34.05 885
2/1/94*- 9/30/94 ........ (7.73) 1.81+ 4.39+ 28.19++ 476
Ohio Series--Class A
Year ended 9/30/97....... 7.54 0.81 5.19 11.76 154,419
Year ended 9/30/96....... 5.68 0.77 5.32 12.90 162,243
Year ended 9/30/95....... 9.59 0.84 5.56 2.96 170,191
Year ended 9/30/94....... (3.08) 0.84 5.34 9.37 171,469
Year ended 9/30/93....... 12.81 0.85 5.44 30.68 190,083
Year ended 9/30/92....... 9.68 0.75 6.02 7.15 170,427
Year ended 9/30/91....... 12.96 0.77 6.42 13.95 156,179
Year ended 9/30/90....... 5.70 0.77 6.63 16.05 136,251
Year ended 9/30/89....... 8.74 0.79 6.91 12.72 131,900
Year ended 9/30/88....... 15.76 0.83 7.20 26.71 122,386
Ohio Series--Class D
Year ended 9/30/97....... 6.57 1.71 4.29 11.76 1,160
Year ended 9/30/96....... 4.74 1.67 4.42 12.90 1,011
Year ended 9/30/95....... 8.67 1.93 4.48 2.96 660
2/1/94*- 9/30/94 ........ (5.36) 1.78+ 4.41+ 9.37++ 324
Oregon Series--Class A
Year ended 9/30/97....... 8.60 0.90 4.88 19.46 55,239
Year ended 9/30/96....... 5.27 0.86 5.18 28.65 57,345
Year ended 9/30/95....... 9.05 0.86 5.40 2.47 59,549 0.40 0.91 5.35
Year ended 9/30/94....... (2.38) 0.78 5.20 9.43 59,884 0.39 0.89 5.09
Year ended 9/30/93....... 12.21 0.78 5.35 8.08 62,095 0.41 0.93 5.20
Year ended 9/30/92....... 8.35 0.68 5.63 0.21 48,797 0.42 0.83 5.48
Year ended 9/30/91....... 13.25 0.71 6.06 7.60 39,350 0.42 0.91 5.96
Year ended 9/30/90....... 4.99 0.72 6.17 4.09 32,221 0.42 0.93 5.96
Year ended 9/30/89....... 9.95 0.64 6.34 0.19 30,510 0.42 0.96 6.03
Year ended 9/30/88....... 17.89 0.54 6.86 3.94 26,609 0.42 1.01 6.39
Oregon Series--Class D
Year ended 9/30/97....... 7.77 1.80 3.98 19.46 1,678
Year ended 9/30/96....... 4.33 1.76 4.28 28.65 1,540
Year ended 9/30/95....... 7.86 1.83 4.41 2.47 1,495 0.33 1.88 4.36
2/1/94*- 9/30/94 ........ (4.76) 1.72+ 4.32+ 9.43++ 843 0.22 1.82+ 4.22+
South Carolina Series--Class A
Year ended 9/30/97....... 7.99 0.84 5.04 -- 101,018
Year ended 9/30/96....... 6.82 0.80 5.15 20.66 108,163
Year ended 9/30/95....... 10.69 0.88 5.38 4.13 112,421
Year ended 9/30/94....... (4.61) 0.83 5.12 1.81 115,133
Year ended 9/30/93....... 12.52 0.85 5.19 17.69 120,589
Year ended 9/30/92....... 10.08 0.81 5.71 3.37 82,882
Year ended 9/30/91....... 13.95 0.81 6.14 9.05 63,863 0.45 0.91 6.04
Year ended 9/30/90....... 4.48 0.73 6.47 15.26 49,234 0.47 0.84 6.35
Year ended 9/30/89....... 9.41 0.68 6.48 0.03 46,487 0.46 0.88 6.28
Year ended 9/30/88....... 16.18 0.33 7.03 12.36 26,385 0.45 1.00 6.36

- ----------
+ Annualized.

++ For the year ended 9/30/94.
</TABLE>

15
<PAGE>
<TABLE>
<CAPTION>

SOUTH CAROLINA SERIES--CLASS D
Year ended 9/30/97........ $8.06 $0.33 $0.23 $0.56 $(0.33) $(0.13) $0.10 $8.16
Year ended 9/30/96........ 7.97 0.34 0.11 0.45 (0.34) (0.02) 0.09 8.06
Year ended 9/30/95........ 7.61 0.34 0.37 0.71 (0.34) (0.01) 0.36 7.97
2/1/94*- 9/30/94 ......... 8.42 0.22 (0.81) (0.59) (0.22) -- (0.81) 7.61
CALIFORNIA HIGH-YIELD SERIES--CLASS A
Year ended 9/30/97........ 6.50 0.34 0.20 0.54 (0.34) (0.09) 0.11 6.61
YEAR ENDED 9/30/96........ 6.47 0.36 0.05 0.41 (0.36) (0.02) 0.03 6.50
Year ended 9/30/95........ 6.30 0.37 0.17 0.54 (0.37) -- 0.17 6.47
Year ended 9/30/94........ 6.73 0.37 (0.34) 0.03 (0.37) (0.09) (0.43) 6.30
Year ended 9/30/93........ 6.65 0.39 0.28 0.67 (0.39) (0.20) 0.08 6.73
Year ended 9/30/92........ 6.50 0.41 0.16 0.57 (0.41) (0.01) 0.15 6.65
Year ended 9/30/91........ 6.18 0.42 0.33 0.75 (0.42) (0.01) 0.32 6.50
Year ended 9/30/90........ 6.36 0.42 (0.07) 0.35 (0.42) (0.11) (0.18) 6.18
Year ended 9/30/89........ 6.27 0.44 0.15 0.59 (0.44) (0.06) 0.09 6.36
Year ended 9/30/88........ 5.94 0.44 0.39 0.83 (0.44) (0.06) 0.33 6.27
CALIFORNIA HIGH-YIELD SERIES--CLASS D
Year ended 9/30/97......... 6.51 0.28 0.19 0.47 (0.28) (0.09) 0.10 6.61
Year ended 9/30/96......... 6.48 0.30 0.05 0.35 (0.30) (0.02) 0.03 6.51
Year ended 9/30/95......... 6.31 0.31 0.17 0.48 (0.31) -- 0.17 6.48
2/1/94*- 9/30/94........... 6.67 0.21 (0.36) (0.15) (0.21) -- (0.36) 6.31
CALIFORNIA QUALITY SERIES--CLASS A
Year ended 9/30/97......... 6.75 0.34 0.24 0.58 (0.34) -- 0.24 6.99
Year ended 9/30/96......... 6.65 0.35 0.11 0.46 (0.35) (0.01) 0.10 6.75
Year ended 9/30/95......... 6.39 0.34 0.32 0.66 (0.34) (0.06) 0.26 6.65
Year ended 9/30/94......... 7.28 0.35 (0.73) (0.38) (0.35) (0.16) (0.89) 6.39
Year ended 9/30/93......... 6.85 0.37 0.54 0.91 (0.37) (0.11) 0.43 7.28
Year ended 9/30/92......... 6.65 0.40 0.22 0.62 (0.40) (0.02) 0.20 6.85
Year ended 9/30/91......... 6.22 0.40 0.46 0.86 (0.40) (0.03) 0.43 6.65
Year ended 9/30/90......... 6.47 0.40 (0.13) 0.27 (0.40) (0.12) (0.25) 6.22
Year ended 9/30/89......... 6.29 0.42 0.19 0.61 (0.42) (0.01) 0.18 6.47
Year ended 9/30/88......... 6.01 0.42 0.39 0.81 (0.42) (0.11) 0.28 6.29
CALIFORNIA QUALITY SERIES--CLASS D
Year ended 9/30/97......... 6.74 0.28 0.23 0.51 (0.28) -- 0.23 6.97
Year ended 9/30/96......... 6.63 0.28 0.12 0.40 (0.28) (0.01) 0.11 6.74
Year ended 9/30/95......... 6.38 0.28 0.31 0.59 (0.28) (0.06) 0.25 6.63
2/1/94*- 9/30/94 .......... 7.13 0.19 (0.75) (0.56) (0.19) -- (0.75) 6.38
FLORIDA SERIES--CLASS A
Year ended 9/30/97......... 7.67 0.36 0.23 0.59 (0.36) (0.10) 0.13 7.80
Year ended 9/30/96......... 7.71 0.38 0.04 0.42 (0.38) (0.08) (0.04) 7.67
Year ended 9/30/95......... 7.34 0.40 0.37 0.77 (0.40) -- 0.37 7.71
Year ended 9/30/94......... 8.20 0.42 (0.74) (0.32) (0.42) (0.12) (0.86) 7.34
Year ended 9/30/93......... 7.56 0.46 0.65 1.11 (0.46) (0.01) 0.64 8.20
Year ended 9/30/92......... 7.37 0.47 0.19 0.66 (0.47) -- 0.19 7.56
Year ended 9/30/91......... 6.90 0.43 0.47 0.90 (0.43) -- 0.47 7.37
Year ended 9/30/90......... 6.99 0.45 (0.09) 0.36 (0.45) -- (0.09) 6.90
Year ended 9/30/89......... 6.71 0.46 0.28 0.74 (0.46) -- 0.28 6.99
Year ended 9/30/88......... 6.02 0.47 0.69 1.16 (0.47) -- 0.69 6.71
FLORIDA SERIES--CLASS D
Year ended 9/30/97......... 7.68 0.30 0.23 0.53 (0.30) (0.10) 0.13 7.81
Year ended 9/30/96......... 7.72 0.32 0.04 0.36 (0.32) (0.08) (0.04) 7.68
Year ended 9/30/95......... 7.34 0.34 0.38 0.72 (0.34) -- 0.38 7.72
2/1/94*- 9/30/94 .......... 8.10 0.24 (0.76) (0.52) (0.24) -- (0.76) 7.34
NORTH CAROLINA SERIES--CLASS A
Year ended 9/30/97........ 7.84 0.37 0.24 0.61 (0.37) (0.03) 0.21 8.05
Year ended 9/30/96........ 7.74 0.37 0.11 0.48 (0.37) (0.01) 0.10 7.84
Year ended 9/30/95........ 7.30 0.39 0.45 0.84 (0.39) (0.01) 0.44 7.74
Year ended 9/30/94........ 8.22 0.41 (0.87) (0.46) (0.41) (0.05) (0.92) 7.30
Year ended 9/30/93........ 7.61 0.43 0.63 1.06 (0.43) (0.02) 0.61 8.22
Year ended 9/30/92........ 7.39 0.44 0.22 0.66 (0.44) -- 0.22 7.61
Year ended 9/30/91........ 7.04 0.45 0.35 0.80 (0.45) -- 0.35 7.39
8/27/90*- 9/30/90......... 7.14 0.03 (0.10) (0.07) (0.03) -- (0.10) 7.04
NORTH CAROLINA SERIES--CLASS D
Year ended 9/30/97........ 7.83 0.31 0.25 0.56 (0.31) (0.03) 0.22 8.05
Year ended 9/30/96........ 7.74 0.31 0.10 0.41 (0.31) (0.01) 0.09 7.83
Year ended 9/30/95........ 7.29 0.33 0.46 0.79 (0.33) (0.01) 0.45 7.74
2/1/94*- 9/30/94 ......... 8.17 0.23 (0.88) (0.65) (0.23) -- (0.88) 7.29

* Commencement of offering of shares.
</TABLE>

16
<PAGE>
<TABLE>
<CAPTION>
ADJUSTED
RATIO OF RATIO OF
NET ADJUSTED ADJUSTED NET
TOTAL RETURN RATIO OF INVESTMENT NET RATIO OF INVESTMENT
BASED ON EXPENSES INCOME NET ASSETS AT INVESTMENT EXPENSES INCOME
PER SHARE OPERATING NET ASSET TO AVERAGE TO AVERAGE PORTFOLIO END OF PERIOD INCOME TO AVERAGE TO AVERAGE
PERFORMANCE: VALUE NET ASSETS@ NET ASSETS@ TURNOVER (000'S OMITTED) PER SHARE@ NET ASSETS@ NET ASSETS@
- ------------------- ------------ ---------- ---------- --------- ------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>

South Carolina Series--Class D
Year ended 9/30/97....... 7.15% 1.75% 4.13% -- $ 3,663
Year ended 9/30/96....... 5.73 1.70 4.25 20.66% 2,714
Year ended 9/30/95....... 9.63 1.85 4.40 4.13 1,704
2/1/94*- 9/30/94 ........ (7.14) 1.74+ 4.29+ 1.81++ 1,478
California High-Yield Series--Class A
Year ended 9/30/97....... 8.74 0.87 5.26 22.42 52,883
Year ended 9/30/96....... 6.49 0.84 5.49 34.75 50,264
Year ended 9/30/95....... 8.85 0.90 5.84 17.64 51,504
Year ended 9/30/94....... 0.41 0.85 5.74 8.36 48,007
Year ended 9/30/93....... 10.66 0.88 5.94 7.70 51,218
Year ended 9/30/92....... 9.00 0.82 6.20 45.50 49,448
Year ended 9/30/91....... 12.53 0.83 6.67 5.13 49,172
Year ended 9/30/90....... 5.57 0.89 6.68 17.66 49,312
Year ended 9/30/89....... 9.61 0.89 6.85 14.70 51,079
Year ended 9/30/88....... 14.72 0.91 7.17 20.79 53,037
California High-Yield Series--Class D
Year ended 9/30/97....... 7.60 1.77 4.36 22.42 3,320
Year ended 9/30/96....... 5.53 1.74 4.59 34.75 1,919
Year ended 9/30/95....... 7.78 1.91 4.84 17.64 1,277
2/1/94*- 9/30/94......... (2.47) 1.74+ 4.73+ 8.36++ 650
California Quality Series--Class A
Year ended 9/30/97....... 8.87 0.82 4.99 12.16 86,992
Year ended 9/30/96....... 7.00 0.79 5.11 12.84 95,560
Year ended 9/30/95....... 10.85 0.89 5.34 11.24 94,947
Year ended 9/30/94....... (5.46) 0.81 5.20 22.16 99,020
Year ended 9/30/93....... 13.92 0.82 5.30 15.67 111,732
Year ended 9/30/92....... 9.56 0.78 5.86 34.25 93,557
Year ended 9/30/91....... 14.35 0.78 6.19 20.11 77,884
Year ended 9/30/90....... 4.22 0.83 6.31 28.61 61,854
Year ended 9/30/89....... 9.86 0.85 6.53 57.85 59,258
Year ended 9/30/88....... 14.37 0.86 6.74 46.47 58,608
California Quality Series--Class D
Year ended 9/30/97....... 7.75 1.72 4.09 12.16 1,677
Year ended 9/30/96....... 6.20 1.69 4.21 12.84 1,645
Year ended 9/30/95....... 9.61 1.88 4.36 11.24 863
2/1/94*- 9/30/94 ........ (8.01) 1.77+ 4.39+ 22.16++ 812
Florida Series--Class A
Year ended 9/30/97....... 8.01 1.04 4.70 33.68 42,024
Year ended 9/30/96....... 5.54 0.97 4.90 18.53 45,200 $0.38 0.97% 4.90%
Year ended 9/30/95....... 10.87 0.72 5.38 11.82 49,030 0.37 1.03 5.07
Year ended 9/30/94....... (3.99) 0.42 5.49 6.17 49,897 0.38 1.00 4.91
Year ended 9/30/93....... 15.21 0.23 5.82 16.42 52,855 0.40 1.03 5.01
Year ended 9/30/92....... 9.24 0.17 6.32 12.62 37,957 0.41 1.02 5.47
Year ended 9/30/91....... 13.41 0.90 6.00 -- 28,173 0.42 1.15 5.75
Year ended 9/30/90....... 5.23 0.65 6.44 13.08 24,025 0.44 0.90 6.20
Year ended 9/30/89....... 11.28 0.69 6.61 2.41 23,062 0.44 0.94 6.36
Year ended 9/30/88....... 19.82 0.67 7.18 1.07 20,457 0.45 0.91 6.93
Florida Series--Class D
Year ended 9/30/97....... 7.18 1.81 3.93 33.68 1,678
Year ended 9/30/96....... 4.74 1.73 4.14 18.53 1,277 0.32 1.73 4.14
Year ended 9/30/95....... 10.07 1.66 4.53 11.82 603 0.31 1.97 4.22
2/1/94*- 9/30/94 ........ (6.64) 1.29+ 4.61+ 6.17++ 244 0.21 1.84+ 4.06+
North Carolina Series--Class A
Year ended 9/30/97....... 8.01 1.09 4.66 13.04 32,684
Year ended 9/30/96....... 6.39 1.05 4.75 15.12 35,934 0.37 1.06 4.74
Year ended 9/30/95....... 11.92 0.82 5.21 4.38 37,446 0.36 1.18 4.85
Year ended 9/30/94....... (5.80) 0.44 5.29 15.61 38,920 0.35 1.13 4.60
Year ended 9/30/93....... 14.46 0.23 5.44 3.13 38,828 0.35 1.22 4.45
Year ended 9/30/92....... 9.23 0.14 5.83 12.51 21,836 0.34 1.40 4.57
Year ended 9/30/91....... 11.97 0.07 6.10 -- 9,255 0.22 3.22 2.96
8/27/90*- 9/30/90........ (1.40) 0.94+ 4.48+ -- 1,377 0.01 4.48+ 1.04+
North Carolina Series--Class D
Year ended 9/30/97....... 7.33 1.85 3.90 13.04 1,217
Year ended 9/30/96....... 5.45 1.81 3.99 15.12 1,232 0.31 1.82 3.98
Year ended 9/30/95....... 11.19 1.64 4.42 4.38 1,257 0.31 2.00 4.06
2/1/94*- 9/30/94 ........ (8.15) 1.27+ 4.49+ 15.61++ 1,282 0.20 1.95+ 3.82

- ----------
+ Annualized.

++ For the year ended 9/30/94.
</TABLE>

<PAGE>

NEW JERSEY--CLASS A
Year ended 9/30/97........ $7.60 $0.36 $0.21 $0.57 $(0.36) $(0.25) $(0.04) $7.56
Year ended 9/30/96........ 7.59 0.39 0.01 0.40 (0.39) -- 0.01 7.60
Year ended 9/30/95........ 7.40 0.39 0.29 0.68 (0.39) (0.10) 0.19 7.59
Year ended 9/30/94........ 8.24 0.41 (0.74) (0.33) (0.41) (0.10) (0.84) 7.40
Year ended 9/30/93........ 7.74 0.42 0.61 1.03 (0.42) (0.11) 0.50 8.24
YEAR ENDED 9/30/92 7.49 0.44 0.27 0.71 (0.44) (0.02) 0.25 7.74
Year ended 9/30/91........ 7.01 0.44 0.51 0.95 (0.44) (0.03) 0.48 7.49
Year ended 9/30/90........ 7.17 0.45 (0.10) 0.35 (0.45) (0.06) (0.16) 7.01
Year ended 9/30/89........ 6.98 0.48 0.19 0.67 (0.48) -- 0.19 7.17
2/16/88*- 9/30/88......... 7.14 0.30 (0.16) 0.14 (0.30) -- (0.16) 6.98
NEW JERSEY--CLASS D
Year ended 9/30/97........ 7.68 0.31 0.21 0.52 (0.31) (0.25) (0.04) 7.64
Year ended 9/30/96........ 7.67 0.33 0.01 0.34 (0.33) -- 0.01 7.68
Year ended 9/30/95........ 7.48 0.33 0.29 0.62 (0.33) (0.10) 0.19 7.67
2/1/94*- 9/30/94.......... 8.14 0.23 (0.66) (0.43) (0.23) -- (0.66) 7.48
PENNSYLVANIA--CLASS A
Year ended 9/30/97........ 7.82 0.36 0.24 0.60 (0.36) (0.10) 0.14 7.96
Year ended 9/30/96........ 7.79 0.38 0.12 0.50 (0.38) (0.09) 0.03 7.82
Year ended 9/30/95........ 7.55 0.38 0.37 0.75 (0.38) (0.13) 0.24 7.79
Year ended 9/30/94........ 8.61 0.39 (0.80) (0.41) (0.39) (0.26) (1.06) 7.55
Year ended 9/30/93........ 8.02 0.42 0.71 1.13 (0.42) (0.12) 0.59 8.61
Year ended 9/30/92........ 7.74 0.46 0.30 0.76 (0.46) (0.02) 0.28 8.02
Year ended 9/30/91........ 7.34 0.47 0.49 0.96 (0.47) (0.09) 0.40 7.74
Year ended 9/30/90........ 7.50 0.47 (0.16) 0.31 (0.47) -- (0.16) 7.34
Year ended 9/30/89........ 7.31 0.49 0.19 0.68 (0.49) -- 0.19 7.50
Year ended 9/30/88........ 6.76 0.50 0.56 1.06 (0.50) (0.01) 0.55 7.31
PENNSYLVANIA--CLASS D
Year ended 9/30/97........ 7.81 0.30 0.24 0.54 (0.30) (0.10) 0.14 7.95
Year ended 9/30/96........ 7.78 0.32 0.12 0.44 (0.32) (0.09) 0.03 7.81
Year ended 9/30/95........ 7.54 0.31 0.37 0.68 (0.31) (0.13) 0.24 7.78
2/1/94*- 9/30/94.......... 8.37 0.22 (0.83) (0.61) (0.22) -- (0.83) 7.54

* Commencement of offering of shares.
</TABLE>

18
<PAGE>

New Jersey--Class A
Year ended 9/30/97....... 7.96% 1.06% 4.90% 20.22% $62,597
Year ended 9/30/96....... 5.37 1.02 5.06 25.65 66,293
Year ended 9/30/95....... 9.77 1.01 5.29 4.66 73,561 $0.39 1.06% 5.24%
Year ended 9/30/94....... (4.25) 0.90 5.24 12.13 73,942 0.40 1.07 5.07
Year ended 9/30/93....... 14.02 0.86 5.37 15.90 82,447 0.40 1.11 5.12
Year ended 9/30/92 9.70 0.85 5.74 27.13 74,256 0.42 1.10 5.49
Year ended 9/30/91....... 13.97 0.81 6.02 14.64 65,044 0.42 1.11 5.72
Year ended 9/30/90....... 5.04 0.81 6.32 37.26 54,287 0.43 1.12 6.01
Year ended 9/30/89....... 9.91 0.57 6.70 16.10 51,015 0.44 1.17 6.10
2/16/88*- 9/30/88........ 1.96 0.40+ 6.92+ 8.20 35,563 0.26 1.36+ 5.96+
New Jersey--Class D
Year ended 9/30/97....... 7.10 1.83 4.13 20.22 1,282
Year ended 9/30/96....... 4.56 1.79 4.29 25.65 1,152
Year ended 9/30/95....... 8.79 1.89 4.45 4.66 1,190 0.33 1.94 4.40
2/1/94*- 9/30/94......... (5.47) 1.75+ 4.37+ 12.13++ 986 0.22 1.87+ 4.25+
Pennsylvania--Class A
Year ended 9/30/97....... 7.89 1.19 4.60 32.99 30,092
Year ended 9/30/96....... 6.57 1.11 4.82 4.56 31,139
Year ended 9/30/95....... 10.55 1.21 5.05 11.78 33,251
Year ended 9/30/94....... (5.00) 1.16 4.91 7.71 34,943
Year ended 9/30/93....... 14.71 1.19 5.14 40.74 41,296
Year ended 9/30/92....... 10.04 1.01 5.79 32.87 39,431 0.45 1.16 5.64
Year ended 9/30/91....... 13.40 0.98 6.16 25.24 37,853 0.45 1.23 5.91
Year ended 9/30/90....... 4.13 0.06 6.24 40.64 35,572 0.45 1.31 5.99
Year ended 9/30/89....... 9.53 0.92 6.56 9.05 41,856 0.47 1.17 6.30
Year ended 9/30/88....... 16.20 0.83 6.96 4.14 30,796 0.48 1.08 6.71
Pennsylvania--Class D
Year ended 9/30/97....... 7.07 1.96 3.83 32.99 816
Year ended 9/30/96....... 5.76 1.88 4.05 4.56 876
Year ended 9/30/95....... 9.53 2.23 4.10 11.78 426
2/1/94*- 9/30/94......... (7.50) 2.00+ 4.20+ 7.71++ 43

- ----------
+ Annualized.

++ For the year ended 9/30/94.
</TABLE>
19

<PAGE>

ALTERNATIVE DISTRIBUTION SYSTEM

Each Series offers two classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing charges. Class D shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and,
with respect to redemptions within one year of purchase, a CDSL. The Alternative
Distribution System allows investors to choose the method of purchasing shares
that is most beneficial in light of the amount of the purchase, the length of
time the shares are expected to be held and other relevant circumstances.
Investors should determine whether under their particular circumstances it is
more advantageous to incur an initial sales load and be subject to lower ongoing
charges, as discussed below, or to have the entire initial purchase price
invested in a Series with the investment thereafter being subject to higher
ongoing charges and, for a one-year period, a CDSL.

Investors who expect to maintain their investment for an extended period of
time might choose to purchase Class A shares because over time the accumulated
continuing distribution fee of Class D shares may exceed the initial sales load
and lower distribution fee of Class A shares. This consideration must be weighed
against the fact that the amount invested in a Series will be reduced by the
initial sales load deducted at the time of purchase. Furthermore, the higher
distribution fees on Class D shares will be offset to the extent any return is
realized on the additional funds initially invested therein that would have been
equal to the amount of the initial sales load on Class A shares.

Investors who qualify for reduced initial sales loads, as described under
"Purchase of Shares" below, might also choose to purchase Class A shares because
the sales load deducted at the time of purchase would be less or waived in full.
However, investors should consider the effect of the 1% CDSL imposed on shares
on which the initial sales load was waived in full because the amount of Class A
shares purchased reached $1,000,000 or more.

Alternatively, some investors might choose to have all of their funds
invested initially by purchasing Class D shares, although remaining subject to a
higher continuing distribution fee and, for a one-year period, a CDSL as
described below. For example, an investor who does not qualify for reduced sales
loads would have to hold Class A shares for more than 6.33 years for the Class D
distribution fee to exceed the initial sales load plus the distribution fee on
Class A shares. This example does not take into account the time value of money
which further reduces the impact of the Class D shares' 1% distribution fee,
fluctuations in net asset value or the effect of the return on the investment
over this period of time.

Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales load and higher distribution
fees with respect to Class D shares in that the sales loads and distribution
fees applicable to a Class provide for the financing of the distribution of the
shares of the Series.

The two classes of shares of a Series represent interests in the same
portfolio of investments, have the same rights and are generally identical in
all respects except that each class bears its separate distribution and,
potentially, certain other class expenses and has exclusive voting rights with
respect to any matter to which a separate vote of any class is required by the
Investment Company Act of 1940, as amended (the "1940 Act"), or applicable state
law. The net income attributable to each class and dividends payable on the
shares of each class will be reduced by the amount of distribution fee of each
class. Class D shares bear higher distribution expenses which will cause the
Class D shares to pay lower dividends than the Class A shares. The two classes
also have separate exchange privileges.

The Directors or Trustees of each Fund believe that no conflict of interest
currently exists between the Class A and Class D shares of each Series. On an
ongoing basis, they, in the exercise of their fiduciary duties under the 1940
Act and applicable state law, will seek to ensure that no such conflict arises.
For this purpose, they will monitor the Funds for the existence of any material
conflict among the classes and will take such action as is reasonably necessary
to eliminate any such conflicts that may develop.

20
<PAGE>

DIFFERENCES BETWEEN CLASSES. The primary differences between Class A and
Class D shares are their sales load structures and ongoing expenses as set forth
below. Each class has advantages and disadvantages for different investors, and
investors should choose the class that best suits their circumstances and their
objectives.

ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- ------------------ -----------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of 4.75% .25%. waived or reduced
of the public for certain
offering price. purchases.
CDSL of 1% on
redemptions within
18 months of
purchase on
shares on which
initial sales load
was waived in full
due to the size of
the purchase.

CLASS D None Service fee of CDSL of 1% on
.25%; Distribution redemptions within
fee of .75%. one year of
purchase.

INVESTMENT OBJECTIVES AND POLICIES

MUNICIPAL SECURITIES

As used in this Prospectus, "municipal securities" refers to short-term
notes, commercial paper and intermediate and long-term bonds issued by or on
behalf of states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions (such as counties,
cities, boroughs, townships, school districts and authorities), agencies, and
instrumentalities, the interest on which is, in the opinion of counsel to the
issuers, exempt from regular federal income taxes and, in certain instances,
applicable state or local income taxes. Such interest may, however, be subject
to the federal alternative minimum tax. Such securities are traded primarily in
the over-the-counter market.

The two principal classifications of municipal bonds are "general obligation
bonds" and "revenue bonds." General obligation bonds are secured by the issuer's
pledge of its faith, credit and taxing power for the payment of principal and
interest. Revenue bonds are payable from the revenues derived from a particular
facility or class of facilities or, in some cases, from the proceeds of a
special excise tax or other specific revenue source, but not from the general
taxing power. In addition, certain types of "industrial development bonds"
issued by or on behalf of public authorities to obtain funds for
privately-operated facilities are eligible for purchase, provided that the
interest paid thereon qualifies as exempt from regular federal income taxes and,
in certain instances, applicable state and/or local taxes. Tax-exempt industrial
development bonds do not generally carry the pledge of the credit of the issuing
municipality. Interest earned from certain municipal securities (including
certain industrial development bonds) that are private activity bonds, as
defined in the Internal Revenue Code of 1986, as amended (the "Code"), is
treated as a preference item for purposes of the alternative minimum tax. Each
Series may invest any portion of its assets in municipal securities the interest
on which is subject to the alternative minimum tax. Under normal circumstances,
each Series will invest at least 80% of its net assets in municipal securities
the interest on which is exempt from regular federal income tax (although such
interest may be subject to the federal alternative minimum tax) and state or
local income tax.

Municipal notes generally are issued to provide for short-term capital needs
and generally have maturities of 5 years or less. They include such securities
as Tax Anticipation Notes, Revenue Anticipation Notes, Bond Anticipation Notes
and Construction Loan Notes.

<PAGE>

Municipal commercial paper are short-term obligations generally having a
maturity of less than nine months.

It should be noted that municipal securities may be adversely affected by
local political and economic conditions and developments within a particular
state. For example, adverse conditions in an industry that is significant to the
state could have a correspondingly adverse effect on specific issuers within the
state or on anticipated revenue of the issuing state; conversely, an improving
economic outlook for a significant industry may have a positive effect on such
issuers or revenue. The value of municipal securities is dependent on a variety
of factors, including general conditions in the money markets or the municipal
bond markets, political and economic factors nationally or within a state, the
size of the particular offering, the supply of municipal bonds, the maturity of
the obligation, the credit quality and rating of the issue and the assistance
provided to the bond issuing authority by the applicable state. Under normal
market conditions, if general market interest rates are increasing, the prices
of bonds will decrease. In a market of decreasing interest rates, the opposite
will generally be true. In either case, the longer the maturity, the greater the
effect. A more detailed description of the municipal securities in which each
Series may invest and special factors relating to them is set forth in each
Series' Statement of Additional Information.

SELIGMAN MUNICIPAL FUND SERIES, INC.

The Municipal Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, incorporated in Maryland on August 8, 1983.
The Municipal Fund consists of a National Series and twelve state Series, as
described below. The Municipal Fund State Series offer investments in the
following states:

Colorado Minnesota
Georgia Missouri
Louisiana New York
Maryland Ohio
Massachusetts Oregon
Michigan South Carolina

NATIONAL SERIES seeks to maximize income exempt from regular federal income
taxes to the extent consistent with preservation of capital and with
consideration given to opportunities for capital gain. Under normal market
conditions, the National Series attempts to invest 100%, and as a matter of
fundamental policy will invest at least 80%, of the value of its net assets in
securities of states, territories and possessions of the United States and the
District of Columbia, and their political subdivisions, agencies and
instrumentalities, the interest on which is exempt from regular federal income
taxes. Such interest, however, may be subject to the federal alternative minimum
tax. There can be no assurance that the National Series will be able to meet its
investment objective.

MUNICIPAL FUND STATE SERIES each seek to maximize income exempt from regular
federal income taxes and from the personal income taxes of its designated state
to the extent consistent with preservation of capital and with consideration
given to opportunities for capital gain. Each Municipal Fund State Series
attempts to invest 100%, and as a matter of fundamental policy invests at least
80%, of the value of its net assets in securities the interest on which is
exempt from regular federal income taxes and from the personal income taxes of
the designated state. Such interest, however, may be subject to the federal
alternative minimum tax. Each Municipal Fund State Series may also invest in
municipal securities of issuers outside its designated state if such securities
bear interest that is exempt from regular federal income taxes and personal
income taxes of the state. If, in abnormal market conditions, in the judgment of
the Manager, municipal securities satisfying the investment objective of any of
the Municipal Fund State Series are not available or for other defensive
purposes, such Municipal Fund State Series may temporarily invest up to 20% of
the value of its net assets in instruments the interest on which is exempt from
regular federal income taxes, but not State personal income taxes. Such
securities would include those set forth under "Municipal Securities" above,
that would otherwise meet the Series' objective. There can be no assurance that
a Municipal Fund State Series will be able to meet its investment objective.

22
<PAGE>

Each Municipal Fund State Series and the National Series are expected to
invest principally, without percentage limitations, in municipal securities that
are rated investment grade on the date of investment. Each Series also may
invest in unrated municipal securities if, based upon credit analysis by the
Manager, it is believed that such securities are of comparable quality to
investment grade securities.

In unusual circumstances, the Municipal Fund may invest up to 20% of the
value of its net assets on a temporary basis in fixed-income securities, the
interest on which is subject to federal, state or local income tax, pending the
investment or reinvestment in municipal securities of proceeds of sales of
shares or sales of portfolio securities or in order to avoid the necessity of
liquidating portfolio investments to meet redemptions of shares by investors or
where market conditions due to rising interest rates or other adverse factors
warrant temporary investing for defensive purposes. Investments in taxable
securities will be substantially in securities issued or guaranteed by the U.S.
Government (such as bills, notes and bonds), its agencies, instrumentalities or
authorities; highly-rated corporate debt securities (rated AA-, or better, by
S&P or Aa3, or better, by Moody's); prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of "Acceptable Banking
Institutions." Acceptable Banking Institutions are defined as the 100 largest
(based on assets) banks that are subject to regulatory supervision by the U.S.
Government or state governments and the 50 largest (based on assets) foreign
banks with branches or agencies in the United States. Investments in
certificates of deposit of foreign banks and foreign branches of U.S. banks may
involve certain risks, including different regulation, use of different
accounting procedures, political or other economic developments, exchange
controls, or possible seizure or nationalization of foreign deposits.

SELIGMAN MUNICIPAL SERIES TRUST

The Municipal Trust is a non-diversified open-end management investment
company, organized as an unincorporated business trust under the laws of
Massachusetts on July 27, 1984. The Municipal Trust consists of Seligman North
Carolina Municipal Series, Seligman Florida Municipal Series, Seligman
California Municipal Quality Series and Seligman California Municipal High-Yield
Series.

SELIGMAN NORTH CAROLINA MUNICIPAL SERIES (the "North Carolina Series") and
SELIGMAN FLORIDA MUNICIPAL SERIES (the "Florida Series") each seek high income
exempt from regular federal income taxes (and with respect to the North Carolina
Series, North Carolina personal income taxes) consistent with preservation of
capital and with consideration given to capital gain by investing in North
Carolina or Florida municipal securities, as applicable, and investment grade
commercial paper rated within the two highest rating categories, on the date of
investment. Each Series also may invest in unrated municipal securities if,
based upon credit analysis by the Manager and under the supervision of the
Trustees, it is believed that such securities are of comparable quality to
investment grade securities. There can be no assurance that a Series will be
able to meet its investment objective.

Each Series will attempt to invest 100%, and as a matter of fundamental
policy will invest at least 80%, of the value of its net assets in North
Carolina or Florida municipal securities, as applicable, the interest on which
is exempt from regular federal taxes and, if applicable, North Carolina personal
taxes. Such interest, however, may be subject to the federal alternative minimum
tax. In abnormal market conditions if, in the judgment of the Manager, North
Carolina or Florida municipal securities satisfying such Series' objective may
not be purchased, the Municipal Trust may make temporary investments in
securities issued by states other than North Carolina or Florida. Moreover,
under such conditions and for defensive purposes, a Series may make temporary
investments in high-quality securities, the interest on which is not exempt from
federal income tax or, if applicable, North Carolina personal taxes. Investments
in taxable securities will be substantially in securities issued or guaranteed
by the U.S. Government (such as bills, notes and bonds), its agencies,
instrumentalities or authorities; highly-rated corporate debt securities (rated
AA-, or better, by S&P or Aa3, or bet-

<PAGE>

ter, by Moody's); prime commercial paper (rated A-1+/A-1 by S&P or P-1 by
Moody's) and certificates of deposit of Acceptable Banking Institutions, as
defined under "Seligman Municipal Fund Series, Inc." Investments in certificates
of deposit of foreign banks and foreign branches of U.S. banks may involve
certain risks, as described above.

Each Series is permitted to purchase project notes and standby commitments;
however, neither Series has any present intention of investing in such
securities.

SELIGMAN CALIFORNIA MUNICIPAL QUALITY SERIES (the "California Quality
Series") seeks high income exempt from regular federal income taxes and from the
personal income taxes of California consistent with preservation of capital and
with consideration given to capital gain by investing in California municipal
securities that on the date of investment are within the three highest ratings
of Moody's (Aaa, Aa, A for bonds; MIG1, MIG2, MIG3, for notes; P-1 for
commercial paper) or S&P (AAA, AA, A for bonds; SP-1, SP-2 for notes; A-1+,
A-1/A-2 for commercial paper). The Series also may invest in unrated California
municipal securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to the rated securities
in which the series may invest. The securities held by the California Quality
Series ordinarily will have maturities in excess of one year. There can be no
assurance that the California Quality Series will be able to meet its investment
objective.

SELIGMAN CALIFORNIA MUNICIPAL HIGH-YIELD SERIES (the "California High-Yield
Series") seeks the maximum income exempt from regular federal income taxes and
from the personal income taxes of California consistent with preservation of
capital and with consideration given to capital gain by investing in California
municipal securities that on the date of investment are rated within the medium
to lower rating categories of Moody's (Baa or lower for bonds; MIG3 or lower for
notes; P-2 or lower for commercial paper) or S&P (BBB or lower for bonds; A-2 or
lower for commercial paper). The Series may invest in unrated California
municipal securities if, based upon credit analysis by the Manager, it is
believed that such securities are of comparable quality to securities with a
medium or low credit rating. The securities held by the Series ordinarily will
have maturities in excess of one year. There can be no assurance that the Series
will be able to meet its investment objective.

The securities in which the California High-Yield Series invests generally
involve greater volatility of price and risk of loss of principal and income
than securities in higher rating categories. Shares of the California High-Yield
Series are appropriate only for those investors who can bear the risk inherent
in seeking the highest tax-exempt yields.

During the fiscal year ended September 30, 1997 the weighted average ratings
of the California municipal long-term securities held by the California High-
Yield Series were as follows:

PERCENTAGE OF TOTAL
S&P/MOODY'S RATINGS INVESTMENTS
----------------------- --------------------
AAA/Aaa ....................................................... 2%
AA/Aa ......................................................... 9%
A/A ........................................................... 50%
BBB/Baa ....................................................... 17%
BB/Ba ......................................................... --
B/B ........................................................... --
CCC/Caa ....................................................... --
Unrated ....................................................... 22%

California municipal securities in the fourth rating category of Moody's and
S&P, although commonly referred to as investment grade, may have some
speculative characteristics that may affect the issuer's ability to pay interest
and repay principal. California municipal securities rated below the fourth
category are subject to greater risk of loss of principal and interest than
higher-rated securities, as they are predominantly speculative with respect to
the issuer's ability to pay interest and repay principal. California municipal
securities rated below BBB by S&P or Baa by Moody's are also more susceptible to
price volatility due to general economic conditions and changes in interest
rates. Since municipal securities are purchased from and sold to dealers, prices
at which these securities are sold will be affected by the degree of interest of
dealers to bid for them. In certain markets, dealers may be unwilling

<PAGE>

to make bids for the securities of certain issuers that the seller considers
reasonable. Furthermore, because the net asset value of the California
High-Yield Series' shares reflects the degree of willingness of dealers to bid
for California municipal securities, the price of the California High-Yield
Series' shares may be subject to greater fluctuation.

Moody's and S&P's ratings are generally accepted measures of credit risk.
They are, however, subject to certain limitations. The rating of an issuer is
based heavily on past developments and does not necessarily reflect probable
future conditions. Ratings also are not updated continuously. For a detailed
description of the ratings, see Appendix A to the Series' Statement of
Additional Information.

The Manager attempts to minimize the risks to the California High-Yield
Series inherent in the investment in lower-rated California municipal securities
through analysis of the particular issuer and security, trends in interest rates
and local and general economic conditions, diversification and when appropriate
by investing a substantial portion of the Series' assets in California municipal
securities rated in the fourth rating category or higher.

Each of the California Quality Series and the California High-Yield Series
will attempt to invest 100%, and as a matter of fundamental policy will invest
at least 80%, of the value of its net assets in securities the interest on which
is exempt from regular federal and California personal income taxes. Such
interest, however, may be subject to the federal alternative minimum tax. In
abnormal market conditions if, in the judgment of the Manager, municipal
securities satisfying a Series' objective may not be purchased, a Series may
make temporary investments in securities the interest on which is exempt only
from regular federal income tax, such as securities issued by states other than
California. Moreover, under such conditions, a Series may make temporary
investments in high-quality securities the interest on which is not exempt from
either federal or California personal income taxes. Investments in taxable
securities will be substantially in securities issued or guaranteed by the U.S.
Government (such as bills, notes and bonds), its agencies, instrumentalities or
authorities; highly-rated corporate debt securities (rated AA-, or better, by
S&P or Aa3, or better, by Moody's); prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of Acceptable Banking
Institutions, as defined above under "Seligman Municipal Fund Series, Inc."
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. banks may involve certain risks, as described above.

Furthermore, when economic or market conditions warrant, the California
High-Yield Series may assume a temporary defensive position and invest up to 25%
of the value of its net assets in California municipal securities rated within
the three highest rating categories of Moody's or S&P. The securities which the
Series will hold under this circumstance may have maturities of less than one
year.

Each of the California Quality Series and the California High-Yield Series
may enter into stand-by commitments. Under a stand-by commitment, a Series
obligates a dealer to repurchase at the Series' option specified securities at a
specified price. The exercise of a stand-by commitment is subject to the ability
of the dealer to make payment on demand. A Series would acquire stand-by
commitments solely to facilitate portfolio liquidity and not for trading
purposes. Prior to investing in stand-by commitments the Municipal Trust, if it
deems necessary based upon the advice of counsel, will apply to the Securities
and Exchange Commission for an exemptive order relating to such commitments and
the valuation thereof. There can be no assurance that the Securities and
Exchange Commission will provide such authorization.

The price which a Series would pay for municipal securities with stand-by
commitments generally would be higher than the price which otherwise would be
paid for the municipal securities alone. A Series will only purchase obligations
with stand-by commitments from sellers the Manager deems creditworthy.

Stand-by commitments with respect to portfolio securities of a Series with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such

<PAGE>

stand-by commitment is carried as an unrealized loss from the time of purchase
until it is exercised or expires. Stand-by commitments with respect to portfolio
securities of a Series with maturities of 60 days or more which are separate
from the underlying portfolio securities and the underlying portfolio securities
are valued at fair value as determined in accordance with procedures established
by the Board of Trustees. The Board of Trustees would, in connection with the
determination of the value of such a stand-by commitment, consider among other
factors the creditworthiness of the writer of the stand-by commitment, the
duration of the stand-by commitment, the dates on which or the periods during
which the stand-by commitment may be exercised and the applicable rules and
regulations of the Securities and Exchange Commission.

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.

The New Jersey Fund is a non-diversified, open-end management investment
company, as defined in the 1940 Act, or mutual fund, incorporated in Maryland on
March 13, 1987.

The New Jersey Fund seeks to maximize income exempt from regular federal
income tax and New Jersey personal income tax consistent with preservation of
capital and with consideration given to opportunities for capital gain by
investing in New Jersey municipal securities that are rated investment grade on
the date of investment. The New Jersey Fund also may invest in New Jersey
municipal securities that, while not rated as investment grade, are not rated
lower than B by S&P or Moody's, or if not rated, are believed, based upon credit
analysis by the Manager, to have at least comparable credit to B rated
securities. There can be no assurance that the New Jersey Fund will be able to
meet its investment objective.

The New Jersey Fund will attempt to invest 100%, and as a matter of
fundamental policy, will invest at least 80%, of the value of its net assets in
securities the interest on which is exempt from regular federal income tax and
New Jersey personal income tax. Such interest may, however, be subject to the
federal alternative minimum tax. In abnormal market conditions if, in the
judgment of the Manager, municipal securities satisfying the New Jersey Fund's
objective may not be purchased or for other temporary defensive purposes, the
New Jersey Fund may make investments in securities the interest on which is
exempt only from regular federal income tax, such as securities issued by states
other than New Jersey, or is exempt only from New Jersey personal income tax,
such as securities issued by the U.S. Government (such as Treasury bills, notes
and bonds), its agencies, instrumentalities or authorities. Moreover, under such
conditions, the New Jersey Fund may also make temporary investments in
fixed-income securities the interest on which is not exempt from either federal
income tax or New Jersey personal income tax. Such investments will be
substantially in highly-rated corporate debt securities (rated AA-, or better,
by S&P or Aa3, or better, by Moody's), prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's), and certificates of deposit of Acceptable Banking
Institutions as defined under "Seligman Municipal Fund Series, Inc." Investments
in certificates of deposit of foreign banks and foreign branches of U.S. banks
may involve certain risks, as described above.

The New Jersey Fund is permitted to purchase project notes and standby
commitments; however, the New Jersey Fund has no present intention of investing
in such securities.

SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES

The Pennsylvania Fund is a non-diversified, open-end management investment
company organized as an unincorporated trust under the laws of the Commonwealth
of Pennsylvania by a Declaration of Trust dated May 13, 1986.

The Pennsylvania Fund seeks high income exempt from regular federal income
tax and Pennsylvania income taxes consistent with preservation of capital by
investing in Pennsylvania municipal securities that are rated investment grade
on the date of investment. The Pennsylvania Fund also may invest in unrated
Pennsylvania municipal securities if, based upon credit analysis by the Manager,
it is believed that such securities are of comparable quality to investment
grade securities. The securities which the Pennsylvania Fund will hold
ordinarily will have maturities in excess of one year. There can be no assurance
that the Fund will be able to meet its investment objective.

<PAGE>

The Pennsylvania Fund will attempt to invest 100%, and as a matter of
fundamental policy will invest at least 80%, of the value of its net assets in
securities the interest on which is exempt from regular federal and Pennsylvania
income taxes. Such interest, however, may be subject to the federal alternative
minimum tax. In abnormal market conditions if, in the judgment of the Manager,
municipal securities satisfying the Pennsylvania Fund's objectives can not be
purchased, the Pennsylvania Fund may make temporary investments in securities
the interest on which is exempt only from regular federal income tax, such as
securities issued by states other than Pennsylvania, or is exempt only from
Pennsylvania income tax, such as securities issued by the U.S. Government (such
as bills, notes and bonds), its agencies, instrumentalities or authorities.
Moreover, under such conditions, the Pennsylvania Fund may make temporary
investments in fixed-income securities the interest on which is not exempt from
either federal or Pennsylvania income taxes. Such investments will be
substantially in highly-rated corporate debt securities (rated AA-, or better,
by S&P or Aa3, or better, by Moody's), prime commercial paper (rated A-1+/A-1 by
S&P or P-1 by Moody's) and certificates of deposit of Acceptable Banking
Institutions, as defined under "Seligman Municipal Fund Series, Inc."
Investments in certificates of deposit of foreign banks and foreign branches of
U.S. banks may involve certain risks, as described above.

Although the underlying value and quality of particular securities will be
considered in selecting investments for the Pennsylvania Fund, capital
appreciation will not be a factor. However, the Pennsylvania Fund may sell
securities held in its portfolio and, as a result, realize capital gain or loss,
in order to eliminate unsafe investments and investments not consistent with the
preservation of the capital or tax status of the Pennsylvania Fund; honor
redemption orders; meet anticipated redemption requirements and negate gains
from discount purchases; reinvest the earnings from portfolio securities in like
securities; or defray normal administration expenses.

The Pennsylvania Fund is authorized to purchase standby commitments;
however, the Pennsylvania Fund has no present intention of investing in such
securities.

GENERAL

Each Fund, as a non-diversified investment company, is not limited by the
1940 Act as to the proportion of its assets that it may invest in the
obligations of a single issuer. However, each Series will comply with the
diversification requirements of the Code, as amended, and has therefore adopted
an investment restriction, which may not be changed without shareholder vote
(except for the New Jersey Fund), prohibiting each Series from purchasing with
respect to 50% of the value of the respective Series' total assets, securities
of any issuer if immediately thereafter more than 5% of such Series' total
assets would be invested in the securities of any single issuer. Furthermore, as
a matter of policy, with respect to 75% of each Series' assets, the respective
Series may not purchase any revenue bonds if thereafter more than 5% of such
Series' assets would be invested in revenue bonds of a single issuer. This
policy is not fundamental and may be changed by the Directors or Trustees, as
applicable, without shareholder approval. In the view of the Manager, the above
restriction and policy reduce the risk that might otherwise be associated with
an investment in a non-diversified investment company.

As a matter of policy, the Directors or Trustees, as applicable, will not
change a Series' investment objective without a vote of a majority of the
outstanding voting security of that Series. Under the 1940 Act, a "vote of a
majority of the outstanding voting securities" of a Series means the affirmative
vote of the lesser of (1) more than 50% of the outstanding shares of the Series
or (2) 67% or more of the shares of the Series present at a shareholder's
meeting if more than 50% of the outstanding shares of the Series are represented
at the meeting in person or by proxy.

A more detailed list of each Series' investment policies, including a list
of those restrictions or investment activities that cannot be changed without a
vote of a majority of the outstanding voting securities of a Series appears in
the Series' Statement of Additional Information.

Investment grade bonds and notes are within the four highest credit rating
categories, and investment grade commercial paper is within the two highest
credit rating categories, of Moody's (Aaa, Aa, A, Baa for bonds;

<PAGE>

MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1--P-2 for commercial paper) or S&P
(AAA, AA, A, BBB for bonds; SP-1--SP-2 for notes; A-1+, A-1/A-2 for commercial
paper). Although bonds and notes rated in the fourth credit rating category are
commonly referred to as investment grade they may have speculative
characteristics. Such characteristics may under certain circumstances lead to a
greater degree of market fluctuations in the value of such securities than do
higher rated municipal securities of similar maturities. A detailed discussion
of such characteristics and circumstances and their effect upon each Series
appears in the Statements of Additional Information under the heading
"Investment Objectives, Policies And Risks." A description of the credit ratings
is contained in Appendix A to the Statements of Additional Information.

ILLIQUID SECURITIES. Each Series may invest up to 15% of its net assets in
illiquid securities including restricted securities, (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable. Each Series
may purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Manager, acting
pursuant to procedures approved by the Funds' Boards of Directors or Trustees,
may determine, when appropriate, that specific Rule 144A securities are liquid
and not subject to the 15% limitation on illiquid securities. Should this
determination be made, the Manager, acting pursuant to such procedures, will
carefully monitor the security (focusing on such factors, amount others, as
trading activity and availability of information) to determine that the Rule
144A security continues to be liquid. It is not possible to predict with
assurance exactly how the market for Rule 144A securities will further evolve.
This investment practice could have the effect of increasing the level of
illiquidity in a Series, if and to the extent that qualified institutional
buyers become for a time uninterested in purchasing Rule 144A securities.

WHEN LSSUED SECURITIES. Each Series may purchase municipal securities on a
"when issued" basis, which means that delivery of and payment for such
securities normally take place within 45 days after the date of the buyer's
purchase commitment. The payment obligation and the interest rate on when-issued
securities are each fixed at the time the purchase commitment is made, although
no interest accrues to a purchaser prior to the settlement of the purchase of
the securities. As a result the yields obtained and the market value on such
securities may be higher or lower on the date when the instruments are actually
delivered to the buyer. A Series will generally purchase a municipal security
sold on a when issued basis with the intention of actually acquiring the
securities on the settlement date. Any gain realized from any such sale of
securities will be subject to federal and state taxes.

A separate account consisting of cash or high-grade liquid debt securities
equal to the amount of outstanding purchase commitments is established with the
Funds' Custodian in connection with any purchase of when issued securities. The
account is marked to market daily, with additional cash or liquid high-grade
debt securities added when necessary. A Series meets its respective obligation
to purchase when-issued securities from outstanding cash balances, sale of
securities held in the separate account, sale of other securities or, although
they would not normally expect to do so, from the sale of the when-issued
securities themselves (which may have a greater or lesser value than the Series'
payment obligations).

VARIABLE AND FLOATING RATE OBLIGATIONS. The interest rates payable on certain
securities in which a Series may invest are not fixed and may fluctuate based
upon changes in market rates. The interest rate on variable rate obligations is
adjusted at predesignated periods and on floating rate obligations whenever
there is a change in the market rate of interest on which the floating rate is
based.

The interest rate is set as a specific percentage of a designated base rate,
such as the rate on a Treasury Bond or Bill or the prime rate at a major
commercial bank. Such a bond generally provides that a Series can demand payment
of the bond upon seven days' notice at an amount equal to par plus accrued
interest,

<PAGE>

which amount, in unusual circumstances, may be more or less than the amount a
Series paid for the bond.

The maturity of floating or variable rate obligations (including
participation interests therein) is deemed to be the longer of (i) the notice
period required before a Series is entitled to receive payment of the obligation
upon demand or (ii) the period remaining until the obligation's next interest
rate adjustment. If not redeemed by a Series through the demand feature, the
obligations mature on a specified date which may range up to thirty years from
the date of issuance.

PARTICIPATION INTERESTS. From time to time, a Series may purchase from banks
participation interests in all or part of specific holdings of municipal
securities. Each participation interest is backed by an irrevocable letter of
credit or guarantee of the selling bank. Participation interests will be
purchased only if, in the opinion of counsel, interest income on such interests
will be tax-exempt when distributed as dividends to shareholders of a Series.

BORROWING. Each Series may borrow money only from banks and only for
temporary or emergency purposes (but not for the purchase of portfolio
securities) in an amount not in excess of 10% of the value of its total assets
at the time the borrowing is made (not including the amount borrowed). Permitted
borrowings may be secured or unsecured. A Series will not purchase additional
portfolio securities if such Series has outstanding borrowings in excess of 5%
of the value of its total assets.

MANAGEMENT SERVICES

THE MANAGER. The Board of Directors or Trustees, as applicable, provides
broad supervision over the affairs of the Funds. Pursuant to Management
Agreements approved by the Directors or Trustees and the shareholders of each
Series, the Manager manages the investment of the assets of each Series and
administers its business and other affairs. The address of the Manager is 100
Park Avenue, New York, NY 10017.

In addition to serving the Funds, the Manager serves as manager of fourteen
other investment companies which, together with the Funds, make up the "Seligman
Group." These companies are Seligman Capital Fund, Inc., Seligman Cash
Management Fund, Inc., Seligman Common Stock Fund, Inc., Seligman Communications
and Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund,
Inc., Seligman Henderson Global Fund Series, Inc., Seligman High Income Fund
Series, Seligman Income Fund, Inc., Seligman Portfolios, Inc., Seligman Quality
Municipal Fund, Inc., Seligman Select Municipal Fund, Inc., Seligman Value Fund
Series, Inc. and Tri-Continental Corporation. The aggregate assets of the
Seligman Group were approximately $18.0 billion at December 31, 1997. The
Manager also provides investment management or advice to institutional and other
accounts having a December 31, 1997 value of approximately $6.3 billion.

Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer of each Fund. Mr. Morris owns a majority of the
outstanding voting securities of the Manager.

The Manager also provides senior management for Seligman Data Corp., a
wholly owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeep-ing functions for each Fund,
maintains the records of shareholder investment accounts and provides related
services.

The Manager is entitled to receive a management fee from each Series for its
services, calculated daily and payable monthly, equal to .50% of the average
daily net assets of each Series on an annual basis. The Manager has from time to
time voluntarily waived a portion of its management fee with respect to one or
more of the Series. Each Fund pays all its expenses other than those assumed by
the Manager; expenses are allocated among the Series of the Municipal Fund and
of the Municipal Trust in a manner determined by the Directors or Trustees to be
fair and equitable. The management fee paid by each Series expressed as a
percentage of average daily net assets of that Series is presented in the
following table for the fiscal year ended September 30,1997. Total expenses for
each Series' Class A and D shares, expressed as an annualized percentage of
average daily net assets, are also presented in the following table for the year
ended September 30, 1997.

29
<PAGE>

- --------------------------------------------------------------------------------
ANNUALIZED EXPENSE
MANAGEMENT FEE RATE RATIOS FOR
FOR THE YEAR ENDED THE YEAR ENDED
SERIES 9/30/97 9/30/97
------ ------- ---------------
CLASS A CLASS D
------- -------
National.................. .50% .84% 1.75%
Colorado.................. .50% .90% 1.81%
Georgia................... .50% .89% 1.79%
Louisiana................. .50% .86% 1.76%
Maryland.................. .50% .90% 1.81%
Massachusetts............. .50% .84% 1.74%
Michigan.................. .50% .81% 1.71%
Minnesota................. .50% .85% 1.75%
Missouri.................. .50% .89% 1.80%
New York.................. .50% .82% 1.73%
Ohio...................... .50% .81% 1.71%
Oregon.................... .50% .90% 1.80%
South Carolina............ .50% .84% 1.75%
California
High-Yield.............. .50% .87% 1.77%
California Quality........ .50% .82% 1.72%
Florida................... .50% 1.04% 1.81%
North Carolina............ .50% 1.09% 1.85%
New Jersey................ .50% 1.06% 1.83%
Pennsylvania.............. .50% 1.19% 1.96%
- --------------------------------------------------------------------------------

PORTFOLIO MANAGEMENT. Thomas G. Moles, Vice President and Senior Portfolio
Manager of each of the Funds, is a Managing Director of J. & W. Seligman & Co.
Incorporated, as well as President and Senior Portfolio Manager of Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal Fund, Inc. He is
responsible for more than $1.8 billion in municipal securities. Mr. Moles, with
more than 25 years of experience, has spearheaded Seligman's municipal
investment efforts since joining the Manager in 1983.

The Manager's discussion of each Series' performance as well as a line graph
illustrating comparative performance information between each Series of a Fund
and the Lehman Brothers Municipal Bond Index is included in the respective
Fund's fiscal 1997 Annual Report to shareholders. Copies of a Fund's Annual
Report may be obtained, without charge, by calling or writing the Funds at the
telephone numbers or address listed on the cover page of this Prospectus.

PORTFOLIO TRANSACTIONS. Fixed income securities are generally traded on the
over-the-counter market on a "net" basis without a stated commission, through
dealers acting for their own account and not as brokers. Prices paid to dealers
will generally include a "spread", i.e., the difference between the prices at
which a dealer is willing to purchase or to sell the security at that time. In
underwritten offerings, securities are purchased at a fixed price which includes
an amount of compensation to the underwriter.

The Management Agreements recognize that in the purchase and sale of
portfolio securities, the Manager will seek the most favorable price and
execution, and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by dealers to the Manager for
its use in connection with its services to the Funds as well as other clients.

Consistent with the Rules of the National Association of Securities Dealers,
Inc. and subject to seeking the most favorable price and execution available and
such other policies as the Directors or Trustees may determine, the Manager may
consider sales of shares of the Funds (and, under applicable laws, of the other
Seligman Mutual Funds) as a factor in the selection of dealers to execute
portfolio transactions for the Funds.

PORTFOLIO TURNOVER. A change in securities held by any Series is known as
"portfolio turnover" and may involve the payment by such Series of dealer
spreads or underwriting commissions and other transactions costs on the sale of
the securities as well as on the reinvestment of the proceeds in other
securities. While it is the policy of each Series to hold securities for
investment, changes will be made from time to time when the Manager believes
such changes will strengthen the Series' portfolio. The portfolio turnover of
any Series is not expected to exceed 100%.

PURCHASE OF SHARES

Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Series' shares. Its address is 100 Park
Avenue, New York, NY 10017.

Each Series issues two classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; and Class D shares are
sold to investors choosing no initial sales load, a higher distribution

<PAGE>

fee and a CDSL on redemptions within one year of purchase. See "Alternative
Distribution System" above.

Shares of the Series may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A shares--Initial Sales Load" below.

THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IS $1,000 FOR EACH SERIES;
SUBSEQUENT INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR
INVESTMENT OF DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUNDS RESERVE THE
RIGHT TO RETURN INVESTMENTS THAT DO NOT SATISFY THESE MINIMUMS. EXCEPTIONS TO
THESE MINIMUMS ARE AVAILABLE FOR ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH
THE INVEST-A-CHECK(R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE
SELIGMAN TIME HORIZON MATRIXSM ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.

The minimum amount for initial investment in each Series is $500 for
investors who purchase shares of the Fund through Merrill Lynch's MFA or MFA
Select Programs.

There is no minimum investment required for investors who purchase shares
of the Series through wrap fee programs.

Orders received by an authorized dealer by the close of regular trading on
the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and
accepted by SFSI before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Series' net asset value determined as of the
close of regular trading on the NYSE on that day plus, in the case of Class A
shares, any applicable sales load. Orders accepted by dealers after the close of
regular trading on the NYSE, or received by SFSI after the close of business,
will be executed at the Series' net asset value next determined plus, in the
case of Class A shares, any applicable sales load. The authorized dealer through
which the shareholder purchases shares is responsible for forwarding the order
to SFSI promptly.

Payment for dealer purchases may be made by check or by wire. To wire
payments, dealer orders must first be placed through SFSI's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C (Name of Fund and
Series) (A or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Funds make no charge for this
service, the transmitting bank may impose a wire service fee.

Current shareholders may purchase additional shares of the Fund at any time
through any authorized dealer or by sending a check payable to "Seligman Group
of Funds" in our postage-paid return envelope or directly to SELIGMAN DATA
CORP., P.O. BOX 3947, NEW YORK, NY 10008-3947. Checks for investment must be in
U.S. dollars drawn on a domestic bank. The checks should be accompanied by an
investment slip (provided on the bottom of shareholder account statements) and
include the shareholder's name, address, account number, Fund or Series name and
class of shares (A or D). IF A SHAREHOLDER DOES NOT PROVIDE THE REQUIRED
INFORMATION, SELIGMAN DATA CORP. WILL SEEK FURTHER CLARIFICATION AND MAY BE
FORCED TO RETURN THE CHECK TO THE SHAREHOLDER. IF ONLY THE CLASS DESIGNATION IS
MISSING, THE INVESTMENT WILL AUTOMATICALLY BE MADE IN CLASS A SHARES. Credit
card convenience checks and third party checks (i.e., checks made payable to
someone other than the "Seligman Group of Funds") may not be used to open a new
fund account or purchase additional shares of the Fund. Orders sent directly to
Seligman Data Corp. will be executed at the net asset value next determined
after the order is accepted plus, in the case of Class A shares, any applicable
sales load.

Seligman Data Corp. may charge a $10.00 processing fee for checks returned
to it as uncollectable. This charge may be deducted from the shareholder's
account. For the protection of the Funds and their shareholders, no redemption
proceeds will be remitted to a shareholder with respect to shares purchased by
check (unless certified) until the Fund receives notice that the check has
cleared, which may be up to 15 days from the credit of such shares to the
shareholder's account.

31
<PAGE>

VALUATION. The net asset value of a Series' shares is determined as of the
close of regular trading on the NYSE (normally, 4:00 p.m. Eastern time), each
day, Monday through Friday, except on days that the NYSE is closed. Net asset
value is calculated separately for each class of a Series. Municipal securities
and short-term holdings maturing in more than 60 days are valued based on
quotations provided by an independent pricing service, approved by the Directors
or Trustees, or in the absence thereof, at fair value as determined in
accordance with procedures approved by the Directors or Trustees. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost.
Taxable securities are valued at market value, or in the absence thereof, fair
value as determined in accordance with procedures approved by the Directors or
Trustees.

Although the legal rights of Class A and Class D shares are substantially
identical, the different expenses borne by each class will result in different
net asset values and dividends. The net asset value of Class D shares will
generally be lower than the net asset value of Class A shares as a result of the
higher distribution fee charged to Class D shares. In addition, net asset value
per share of the two classes will be effected to the extent any other class
expenses differ among classes.

CLASS A SHARES -- INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plans" below.
- --------------------------------------------------------------------------------
CLASS A SHARES -- SALES LOAD SCHEDULE
SALES LOAD AS A
PERCENTAGE OF REGULAR
------------------ DEALER
NET AMOUNT DISCOUNT
INVESTED AS A % OF
OFFERING (NET ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
------------------ -------- ---------- ---------
Less than $ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000- or more* 0 0 0

* Shares acquired at net asset value pursuant to the above schedule will
be subject to a CDSL of 1% if redeemed within 18 months of purchase. See
"Purchase of Shares--Contingent Deferred Sales Load."

- --------------------------------------------------------------------------------

There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if
redeemed within eighteen months of purchase.

SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows; 1.00% NAV of sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales from $5 million and above. The calculation of the fee will be based on
assets held by a "single person" as defined below.

SFSI shall also pay broker/dealers, from its own resources, a fee in respect
of certain investments in Class A shares of the Seligman Mutual Funds by an
"eligible employee benefit plan" (as defined below under "Special Programs")
which are attributable to the particular broker/dealer. The shares eligible for
the fee are those on which an initial front-end sales load was not paid because
either the participating eligible employee benefit plan has at least (i)
$500,000 invested in the Seligman Group of Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. Class A shares representing only
an initial purchase of Seligman Cash Management Fund are not eligible for the
fee. Such shares will become eligible for the fee once they are exchanged for
shares of another Seligman Mutual Fund. The payment is based on cumulative sales
for each Plan during a single calendar year, or portion thereof. The payment
schedule, for each calendar year is as follows: 1.00% of sales up to but not
including $2 million; .80% of sales from $2 million up to but not including $3
million; .50% of sales from $3 million up to but not including $5 million; and
.25% of sales from $5 million and above.

REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class A
shares by a "single person," including an individual, members of a family unit
comprising husband, wife and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.

32
<PAGE>

Shares purchased without an initial sales load in accordance with the sales
load schedule or pursuant to a Volume Discount, Right of Accumulation or Letter
of Intent are subject to a CDSL of 1% on redemptions within eighteen months of
purchase.

O VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of a Series alone, or in any combination of shares of the other
Seligman Mutual Funds that are sold with an initial sales load, reaches levels
indicated in the above sales load schedule.

O THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of any Seligman Mutual Fund sold with an initial sales load
with the total net asset value of shares sold with an initial sales load,
including shares of Seligman Cash Management Fund that were acquired by an
investor through an exchange of shares of another Seligman Mutual Fund on which
there was an initial sales load, to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on
behalf of an investor must indicate if the investor has existing accounts when
making investments or opening new accounts.

O A LETTER OF INTENT allows an investor to purchase Class A shares over a
13-month period at reduced initial sales loads, based upon the total amount the
investor intends to purchase plus the total net asset value of shares of the
other Seligman Mutual Funds already owned that were sold with an initial sales
load and the total net asset value of shares of Seligman Cash Management Fund
that were acquired by the investor through an exchange of shares of another
Seligman Mutual Fund on which there was an initial sales load. An investor or a
dealer purchasing shares on behalf of an investor must indicate if the investor
has existing accounts when making investments or opening new accounts. For more
information concerning terms of Letters of Intent, see "Terms and Conditions."

SPECIAL PROGRAMS. Each Series may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses,
(and family members of the foregoing) of the Funds, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be made to
employee benefit plans and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.

Class A shares also may be issued without an initial sales load in
connection with the acquisition of cash and securities owned by other investment
companies; to any registered unit investment trust which is the issuer of
periodic payment plan certificates, the net proceeds of which are invested in
Series shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with SFSI; to financial
institution trust departments; to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Series
shares, or pursuant to sponsored arrangements with organizations which make
recommendations to or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Series; to other
investment companies in the Seligman Group in connection with a deferred fee
arrangement for outside directors; and to "eligible employee benefit plans"
which have at least (i) $500,000 invested in the Seligman Group of Mutual Funds
or (ii) 50 eligible employees to whom such plan is made available. "Eligible
employee benefit plan" means any plan or arrangement, whether or not tax
qualified, which provides for the purchase of a Series' shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.

Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
ter-

<PAGE>

minations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination. Sales pursuant to a 401(k) alliance
program which has an agreement with SFSI are available at net asset value and
are not subject to a CDSL.

CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25% of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares.

CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on redemptions of
Class D shares which were purchased during the preceding twelve months. The
amount of any CDSL will initially be used by SFSI to defray the expense of the
payment of 1% made by it to Service Organizations (as defined under
"Administration, Shareholder Services and Distribution Plan") at the time of
sale.

A CDSL of 1% will also be imposed on any redemption of Class A shares
purchased during the preceding eighteen months if such shares were acquired at
net asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee Benefit plans eligible for net asset sales
as described above under "Special Programs" may be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination.

The 1% CDSL normally imposed on redemptions of certain Class A shares (i.e.,
those purchased during the preceding eighteen months at net asset value pursuant
to the sales load schedule provided under "Class A Shares--Initial Sales Load")
will be waived on shares that were purchased through Dean Witter Reynolds, Inc.
("Dean Witter") by certain Chilean institutional investors (i.e., pension plans,
insurance companies and mutual funds). Upon redemption of such shares within an
eighteen-month period, Dean Witter will reimburse SFSI a pro rata portion of the
fee it received from SFSI at the time of sale of such shares.

To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and capital gain distributions (which
are not subject to a CDSL) will be redeemed first; followed by shares held for a
period of time longer than the applicable CDSL period. Shares held for the
longest period of time within the applicable CDSL period will then be redeemed.
Additionally, for those shares determined to be subject to a CDSL, the CDSL will
be assessed on the current net asset value or original purchase price, whichever
is less. No CDSL will be imposed on shares acquired through the investment of
dividends or distributions from any Class A or Class D shares of mutual funds in
the Seligman Group.

For example, assume an investor purchased 100 shares in January at a price
of $10.00 per share. During the first year, 5 additional shares were acquired
through investment of dividends and distributions. In January of the following
year, an additional 50 shares were purchased at a price of $12.00 per share. In
March of that year, the investor chooses to redeem $1,500.00 from the account
which now holds 155 shares with a total value of $1,898.75 ($12.25 per share).
The CDSL for this transaction would be calculated as follows:

Total shares to be redeemed
(122.449 @ $12.25) as follows: $ 1,500.00
==========
Dividend/Distribution shares
(5 @ $12.25) $ 61.25
Shares over 1 year old
(100 @ $12.25) 1,225.00
Shares less than 1 year old subject to
CDSL (17.449 @ $12.25) 213.75
----------
Gross proceeds of redemption $1,500.00
Less CDSL (17.449 shares @ $12.00 =
$209.39 x 1% = $2.09) (2.09)
----------
Net proceeds of redemption $ 1,497.91
==========
For federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.

34
<PAGE>

The CDSL will be waived or reduced in the following instances:

(a) on redemptions following the death or disability (as defined in section
72(m)(7) of the Code) of a shareholder or beneficial owner; (b) in connection
with (i) distributions from retirement plans qualified under section 401(a) of
the Code when such redemptions are necessary to make distributions to plan
participants (such payments include, but are not limited to death, disability,
retirement, or separation of service), (ii) distributions from a custodial
account under section 403(b)(7) of the Code or an individual retirement account
(an "IRA") due to death, disability, minimum distribution requirements after
attainment of age 701/2, or, for accounts established prior to January 1, 1998,
attainment of age 591/2, and (iii) a tax-free return of an excess contribution
to an IRA; (c) in whole or in part, in connection with shares sold to current
and retired Directors or Trustees of the Funds; (d) in whole or in part, in
connection with shares sold to any state, county, or city or any
instrumentality, department, authority, or agency thereof, which is prohibited
by applicable investment laws from paying a sales load or commission in
connection with the purchase of shares of any registered investment management
company; (e) in whole or in part, in connection with automatic cash withdrawals;
(f) in connection with participation in the Merrill Lynch Small Market 401(k)
Program; and (g) in connection with the redemption of shares of a Fund if it is
combined with another mutual fund in the Seligman Group, or another similar
reorganization transaction.

If, with respect to a redemption of any Class A or Class D shares sold by a
dealer, the CDSL is waived because the redemption qualifies for a waiver as set
forth above, the dealer shall remit to SFSI promptly upon notice an amount equal
to the payment or a portion of the payment made by SFSI at the time of sale of
such shares.

SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of the Seligman Mutual Funds. SFSI may from time to time pay a bonus or
other incentive to dealers that sell shares of the Seligman Mutual Funds. In
some instances, these bonuses or incentives may be offered only to certain
dealers which employ a registered representative who has sold or may sell a
significant amount of shares of a Fund and/or certain other mutual funds managed
by the Manager during a specified period of time. Such bonus or other incentive
may take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States. The cost to
SFSI of such promotional activities and payments shall be consistent with the
Rules of the National Association of Securities Dealers, Inc., as then in
effect.

TELEPHONE TRANSACTIONS

A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, has the ability to effect the following
transactions via telephone: (i) redemption of Series shares with proceeds sent
to address or record, (ii) exchange of Series shares for shares of the same
class of another Seligman Mutual Fund, (iii) change of a dividend and/or capital
gain distribution option, and (iv) change of address. All telephone transactions
are effected through Seligman Data Corp. at (800) 221-2450.

Unless an election is made otherwise on the Account Application, a
shareholder and the shareholder's broker/dealer of record, as designated on the
Account Application, will automatically receive telephone services.

FOR INVESTORS WHO PURCHASE SHARES THROUGH A BROKER/DEALER: Telephone
services for a shareholder and the shareholder's representative may be elected
by completing a supplemental election application available from the
broker/dealer of record.

35
<PAGE>

FOR CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone services are not
permitted.

All Seligman Mutual Funds with the same account number (i.e., registered
exactly the same) as an existing account, including any new fund in which the
shareholder invests in the future, will automatically include telephone services
if the existing account has telephone services. Telephone services may also be
elected at any time on a supplemental telephone services election form.

For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone transaction services, authorizes each of the other owners to effect
telephone transactions on his or her behalf.

During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Series shares via telephone.
In these circumstances, the shareholder should consider using other redemption
or exchange procedures. (See "Redemption of Shares.") Use of these other
redemption or exchange procedures may result in the request being processed at a
later time than if a telephone transaction had been used, and a Series' net
asset value may fluctuate during such periods.

Each Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include: recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
each Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where a Fund
or Seligman Data Corp. is not reasonably satisfied that instructions received by
telephone are genuine, the requested transaction will not be executed, and
neither they nor any of their affiliates will be liable for any losses which may
occur due to a delay in implementing the transaction. If a Fund or Seligman Data
Corp. does not follow the procedures described above, such Fund or Seligman Data
Corp. may be liable for any losses due to unauthorized or fraudulent
instructions. Telephone transactions must be effected through a representative
of Seligman Data Corp., i.e., requests may not be communicated via Seligman Data
Corp.'s automated telephone answering system. Shareholders, of course, may
refuse or cancel telephone transaction services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. Written acknowledgment of the addition of telephone services to an
existing account or termination of telephone services will be sent to the
shareholder at the address of record.

REDEMPTION OF SHARES

A shareholder may redeem shares held in book credit ("uncertificated") form
without charge, except a CDSL, if applicable, at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 3947, New York, NY 10008-3947; or if
request is being sent by overnight delivery service to 100 Park Avenue, New
York, NY 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge, except a CDSL, if applicable, by surrendering
certificates in proper form to the same address. Certificates should be sent
certified or registered mail, return receipt is advisable (may increase mailing
time). Share certificates must be endorsed for transfer or accompanied by an
endorsed stock power signed by all shareowners exactly as their name(s)
appear(s) on the account registration. The shareholder's letter of instruction
or endorsed stock power should specify the name of the Series, the account
number, class of shares (A or D) and number of shares or dollar amount to be
redeemed. The Funds cannot accept conditional redemption requests (i.e.,
requests to sell shares at a specific price or on a future date).

36
<PAGE>

If the redemption proceeds are (i) $50,000 or more, (ii) to be paid to
someone other than the shareholder of record (regardless of the amount) or (iii)
to be mailed to other than the address of record (regardless of the amount), the
signature(s) of the shareholder(s) must be guaranteed by an eligible financial
institution including, but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the New York
Stock Exchange Medallion Signature Program (MSP). A Fund reserves the right to
reject a signature guarantee where it is believed that the Fund will be placed
at risk by accepting such guarantee. A signature guarantee is also necessary in
order to change the account registration. Notarization by a notary public is not
an acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY ALSO BE REQUIRED
BY SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR,
ADMINISTRATOR, TRUSTEE, CUSTODIAN OR RETIREMENT PLAN. FOR FURTHER INFORMATION
WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERVICES
DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.

In the case of Class A shares (except for shares purchased without an
initial sales load due to the size of the purchase), and in the case of Class D
shares redeemed after one year, a shareholder will receive the net asset value
per share next determined after receipt of a request in good order. If Class A
shares which were purchased without an initial sales load because the purchase
amount was $1,000,000 or more are redeemed within eighteen months of purchase, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order, less a CDSL of 1% as described under
"Purchase of Shares--Class A Shares--Initial Sales Load" above. If Class D
shares are redeemed within one year of purchase, a shareholder will receive the
net asset value per share next determined after receipt of a request in good
order, less a CDSL of 1% as described under "Purchase of Shares -- Class D
Shares" above.

A shareholder may also "sell" shares to a Fund through an investment dealer
and, in that way, be certain, providing the order is timely, of receiving the
net asset value established at the end of the day on which the dealer is given
the repurchase order (less any applicable CDSL). The Funds make no charge for
this transaction, but the dealer may charge a service fee. "Sell" or repurchase
orders received from an authorized dealer before the close of regular trading on
the NYSE (normally 4:00 p.m. Eastern Time) and received by SFSI, the repurchase
agent, before the close of business on the same day will be executed at the net
asset value per share determined at the close of the NYSE on that day, less any
applicable CDSL. Repurchase orders received from authorized dealers after the
close of the NYSE or not received by SFSI prior to the close of business, will
be executed at the net asset value determined as of the close of the NYSE on the
next trading day, less any applicable CDSL. Shares held in a "street name"
account with a broker/dealer may be sold to a Fund only through a broker/dealer.

TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may be
made once per day, in an amount of up to $50,000 per fund account. Proceeds will
be sent to the address of record. Telephone redemption requests received by
Seligman Data Corp. at (800) 221-2450 by the close of regular trading on the
NYSE (normally 4:00 p.m. Eastern Time) will be processed at the Fund's net asset
value determined as of the close of business on that day. Redemption requests by
telephone will not be accepted within 30 days following an address change. IRAs,
group retirement plans, corporations and trusts for which the name of the
current trustee does not appear in the account registration are not eligible for
telephone redemptions. Each Fund reserves the right to suspend or terminate its
telephone redemption service at any time without notice.

For more information about telephone redemptions, and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.

CHECK REDEMPTION SERVICE. The Check Redemption Service allows a shareholder
who owns or purchases

<PAGE>

shares in a Series worth $25,000 or more to request Seligman Data Corp. to
provide redemption checks to be drawn on the account associated with the Series
in which the shareholder is invested, in amounts of $500 or more. The
shareholder may elect to use this Service on the Account Application or by later
written request to Seligman Data Corp. Shares for which certificates have been
issued will not be available for redemption under this Service. Holders of Class
A shares should bear in mind that check redemptions of Class A shares acquired
at net asset value due to the size of the purchase may be subject to a CDSL.
Holder of Class D shares may use this Service with respect to shares that have
been held for at least one year. Dividends continue to be earned through the
date preceding the date the check clears for payment. Use of this Service is
subject to Mellon Bank, N.A. rules and regulations covering checking accounts.
Separate checkbooks will be furnished for each Series.

There is no charge for use of checks. When honoring a check that was
processed for payment, Mellon Bank, N.A. will cause a Series to redeem exactly
enough full and fractional shares from an account to cover the amount of the
check and any applicable CDSL. If shares are owned jointly, redemption checks
will need to be signed by all persons, unless otherwise elected under Section 6
of the Account Application, in which case a single signature will be acceptable.

In view of daily fluctuations in share value, the shareholder should be
certain that the amount of shares in the account is sufficient in a Series to
cover the amount of checks written on that Series. If insufficient shares are in
the account, the check will be returned marked "insufficient funds." THE FUNDS
WILL NOT REDEEM SHARES OF ONE SERIES TO COVER A CHECK WRITTEN ON ANOTHER SERIES.
SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK REDEMPTION
DRAFT RETURNED AS UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE
SHAREHOLDER'S ACCOUNT.

Check Redemption books cannot be reordered unless the shareholder's account
has a value of $25,000 or more and Seligman Data Corp. has a certified Tax
Identification Number on file.

Cancelled checks will be returned to a shareholder under separate cover the
month after they clear. The Check Redemption Service may be terminated at any
time by a Fund or Mellon Bank, N.A. See "Terms and Conditions."

FOR THE PROTECTION OF THE FUNDS AND THEIR SHAREHOLDERS, NO PROCEEDS OF A
CHECK REDEMPTION WILL BE REMITTED TO A SHAREHOLDER WITH RESPECT TO SHARES
PURCHASED BY CHECK (UNLESS CERTIFIED) UNTIL SELIGMAN DATA CORP. HAS RECEIVED
NOTICE THAT THE CHECK HAS CLEARED, WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF
SUCH SHARES TO THE SHAREHOLDER'S ACCOUNT.

GENERAL. With respect to shares redeemed, a check for the proceeds, less any
applicable CDSL, will be sent to the shareholder's address of record within
seven calendar days after acceptance of the redemption order and will be made
payable to all of the registered owners on the account. With respect to shares
repurchased, a check for the proceeds will be sent to the investment dealer
within seven calendar days after acceptance of the repurchase order and will be
made payable to the investment dealer. Payment of redemption proceeds will be
delayed on redemptions of shares purchased by check (unless certified) until
Seligman Data Corp. receives notice that the check has cleared, which may be up
to 15 days from the credit of such shares to the shareholder's account. No
interest is paid on the redemption proceeds after the redemption but before the
funds are paid. The proceeds of a redemption or repurchase may be more or less
than the shareholder's cost.

The Funds reserve the right to redeem shares owned by a shareholder whose
investment in a Series has a value of less than minimum amount specified by the
Funds' Directors or Trustees, which is presently $500. Shareholders would be
sent a notice before such redemption is processed stating that the value of
their investment in a Series is less than the specified minimum and that they
have sixty days to make an additional investment.

REINSTATEMENT PRIVILEGE

If a shareholder redeems Class A shares and then decides to reinvest them,
or to shift the investment to one of the other Seligman Mutual Funds, the
shareholder may, within 120 calendar days of the date of redemption, use all or
any part of the proceeds of the

<PAGE>

redemption to reinstate, free of an initial sales load, all or any part of the
investment in Class A shares of the Series or any of the other Seligman Mutual
Funds. If a shareholder redeems shares and the redemption was subject to a CDSL,
the shareholder may reinstate the investment in shares of the same class of the
Series or any of the other Seligman Mutual Funds within 120 calendar days of the
date of redemption and receive a credit for the applicable CDSL paid. Such
investment will be reinstated at the net asset value per share established as of
the close of the NYSE on the day the request is accepted. Seligman Data Corp.
must be informed that the purchase is a reinstated investment. REINSTATED SHARES
MUST BE REGISTERED EXACTLY AND BE OF THE SAME CLASS AS THE SHARES PREVIOUSLY
RE-DEEMED; AND THE FUND'S MINIMUM INITIAL INVESTMENT AMOUNT MUST BE MET AT THE
TIME OF REINSTATEMENT.

Generally, exercise of the Reinstatement Privilege does not alter the
federal income tax status of any capital gain realized on a sale of a Series'
shares, but to the extent that any shares are sold at a loss and the proceeds
are reinvested in shares of the same Series, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.

ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLANS

Under each Fund's Administration, Shareholder Services and Distribution Plan
(the "Plan"), each Series may pay to SFSI an administration, shareholder
services and distribution fee in respect of each Series' Class A and Class D
shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in a Series, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to
Series' shareholders, and (iii) otherwise promoting the sale of shares of each
Series, including paying for the preparation of advertising and sales literature
and the printing and distribution of such promotional materials and prospectuses
to prospective investors and defraying SFSl's costs incurred in connection with
its marketing efforts with respect to shares of a Series. The Manager, in its
sole discretion, may also make similar payments to SFSI from its own resources,
which may include the management fee that the Manager receives from each Series.

Under its Plan, each Series reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value of a Series' Class A shares. It is expected that the proceeds from the fee
in respect of Class A shares will be used primarily to compensate Service
Organizations which enter into agreements with SFSI. Such Service Organizations
will receive from SFSI a continuing fee of up to .25% on an annual basis,
payable quarterly, of the average daily net assets of a Series' Class A shares
attributable to the particular Service Organization for providing personal
service and/or the maintenance of shareholder accounts. The fee payable from
time to time is, within such limit, determined by the Directors or Trustees of
the Funds.

The Plan, as it relates to Class A shares of the Municipal Fund, was first
approved by the Directors on July 21, 1992 and by the shareholders of each
Series on November 23, 1992. The Plan, as it relates to the Class A shares of
the California High-Yield Series and the California Quality Series, was first
approved by the Trustees on July 21, 1992 and by the shareholders on November
23, 1992. The Plan, as it relates to the Class A shares of the Florida Series,
was first approved by the Trustees on June 21, 1990 and by the shareholders on
December 7, 1990. The Plan, as it relates to Class A shares of the North
Carolina Series, was first approved by the Trustees on June 21, 1990 and by the
shareholders on April 11, 1991. The Plan, as it relates to the Class A shares of
the New Jersey Fund, was first approved by the Directors on January 12, 1988 and
by the shareholders on December 16, 1988. The Plan, as it relates to the Class A
shares of the Pennsylvania Fund, was first approved by the Trustees on June 10,
1986 and by the shareholders on April 23, 1987. The total amounts paid for the
year ended September 30, 1997 in respect of each Series' Class A shares' average
daily net assets pursuant to the Plan were as follows:

39
<PAGE>

% OF
AVERAGE
SERIES NET ASSETS
------ ----------
National.................................................... .09%
Colorado.................................................... .09
Georgia..................................................... .10
Louisiana................................................... .10
Maryland.................................................... .09
Massachusetts............................................... .10
Michigan.................................................... .10
Minnesota................................................... .10
Missouri.................................................... .09
New York.................................................... .09
Ohio........................................................ .10
Oregon...................................................... .10
South Carolina.............................................. .09
California High-Yield....................................... .10
California Quality.......................................... .10
Florida..................................................... .23
North Carolina.............................................. .24
New Jersey.................................................. .23
Pennsylvania................................................ .23

Under its Plan, each Series reimburses SFSI for its expenses with respect to
Class D shares at an annual rate of up to 1% of the average daily net asset
value of the Class D shares. Proceeds from a Series' Class D distribution fee
are used primarily to compensate Service Organizations for administration,
shareholder services and distribution assistance (including a continuing fee of
up to .25% on an annual basis of the average daily net asset value of a Series'
Class D shares attributable to particular Service Organizations for providing
personal services and/or the maintenance of shareholder accounts) and will
initially be used by SFSI to defray the expense of the 1% payment to be made by
it to Service Organizations at the time of the sale of Class D shares. The
amounts expended by SFSI in any one year upon the initial purchase of Class D
shares may exceed the amounts received by it from Plan payments retained.
Expenses of administration, shareholder services and distribution of a Series'
Class D shares in one fiscal year may be paid from a Series' Class D Plan fees
received in any other fiscal year. Each Plan, as it relates to Class D shares,
was approved by the Directors or Trustees on November 18, 1993 and became
effective February 1, 1994. The total amount paid for the year ended September
30, 1997, in respect of each Series' Class D shares pursuant to the Plan was
1.00% per annum of each Series' Class D shares' average daily net assets. Each
Plan is reviewed by the Directors or Trustees annually.

Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as broker/dealer of record for shareholder
accounts that do not have a designated broker/dealer of record and receives
compensation from a Series pursuant to its Plan for providing personal service
and account maintenance to such accounts and other distribution services.

EXCHANGE PRIVILEGE

A shareholder may, without charge, exchange at net asset value any part or
all of an investment in a Series for shares of another Series or for shares of
the other mutual funds in the Seligman Group. Exchanges may be made by mail or
by telephone if the shareholder has telephone services.

Class A and Class D shares may be exchanged only for Class A and Class D
shares, respectively, of another Seligman Mutual Fund on the basis of relative
net asset value.

If shares that are subject to a CDSL are exchanged for shares of another
Seligman Mutual Fund, then for purposes of assessing the CDSL payable upon
disposition of the exchanged shares, the applicable holding period shall be
reduced by the period for which the original shares were held.

Aside from the Series described in this Prospectus, the Seligman Mutual
Funds available under the Exchange Privilege are:

O SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation. Current
income is not an objective.

O SELIGMAN CASH MANAGEMENT FUND, INC. invests in high quality money market
instruments. Shares are sold at net asset value.

O SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both

<PAGE>

income and capital value without exposing capital to undue risk.

O SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.

O SELIGMAN FRONTIER FUND, INC. seeks to produce growth in capital value,
income may be considered but will only be incidental to the fund's investment
objective.

O SELIGMAN GROWTH FUND, INC. seeks longer-term growth in capital value and
an increase in future income.

O SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson Emerging Markets Growth Fund, the Seligman Henderson Global Growth
Opportunities Fund, the Seligman Henderson Global Smaller Companies Fund, the
Seligman Henderson Global Technology Fund and the Seligman Henderson
International Fund all of which seek long-term capital appreciation primarily
through investing in companies either globally or internationally.

O SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing in
debt securities. The Fund consists of the Seligman U.S. Government Securities
Series and the Seligman High-Yield Bond Series.

O SELIGMAN INCOME FUND, INC. seeks high current income and the possibility
of improvement of future income and capital value.

O SELIGMAN VALUE FUND SERIES, INC. consists of the Seligman Large-Cap Value
Fund and the Seligman Small-Cap Value Fund, each of which seeks long-term
capital appreciation by investing in equity securities of value companies
primarily located in the U.S.

All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges received by the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern Time) by Seligman Data Corp. at (800) 221-2450 will
be processed as of the close of business on that day. Requests received after
the close of regular trading on the NYSE will be processed at the net asset
value per share calculated the following business day. The registration of an
account into which an exchange is made must be identical to the registration of
the account from which shares are exchanged. When establishing a new account by
an exchange of shares, the shares being exchanged must have a value of at least
the minimum initial investment required by the fund into which the exchange is
being made. THE METHOD OF RECEIVING DISTRIBUTIONS, UNLESS OTHERWISE INDICATED,
WILL BE CARRIED OVER TO THE NEW FUND ACCOUNT, AS WILL TELEPHONE SERVICES.
ACCOUNT SERVICES, SUCH AS INVEST-A-CHECK(R) SERVICE, DIRECTED DIVIDENDS AND
AUTOMATIC CASH WITHDRAWAL SERVICE, WILL NOT BE CARRIED OVER TO THE NEW FUND
ACCOUNT UNLESS SPECIFICALLY REQUESTED AND PERMITTED BY THE NEW FUND. Exchange
orders may be placed to effect an exchange of a specific number of shares, an
exchange of shares equal to a specific dollar amount or an exchange of all
shares held. Shares for which certificates have been issued may not be exchanged
via telephone and may be exchanged only upon receipt of an exchange request
together with certificates representing shares to be exchanged in proper form.

The terms of the exchange offer described herein may be modified at any
time; and not all of the mutual funds in the Seligman Group are available to
residents of all states. Before making any exchange, contact your authorized
investment dealer or Seligman Data Corp. to obtain prospectuses of any of the
Seligman Mutual Funds.

A broker/dealer representative will be able to effect exchanges on behalf of
a shareholder only if the shareholder has telephone services or if the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Group of Mutual
Funds from any loss or liability incurred as a result of acceptance of telephone
exchange orders. Written confirmation of all exchanges will be forwarded to the
shareholder to whom the exchanged shares are registered and a duplicate
confirmation will be sent to the broker/dealer of record listed on the account.

SFSI reserves the right to reject any telephone exchange request. Any
rejected telephone exchange or-

<PAGE>

der may be processed by mail. For more information about telephone exchange
privileges, which, unless objected to, are assigned to certain shareholders
automatically, and the circumstances under which shareholders may bear the risk
of loss for a fraudulent transaction, see "Telephone Transactions" above.

Exchanges of shares are sales and may result in a gain or loss for federal
and state income tax purposes.

FURTHER INFORMATION ABOUT
TRANSACTIONS IN THE FUNDS

Because excessive trading (including short-term, "market timing" trading)
can hurt a Series' performance, a Fund, on behalf of a Series, may refuse any
exchange (1) from any shareholder account from which there have been two
exchanges in the preceding three month period, or (2) where the exchanged shares
equal in value the lesser of $1,000,000 or 1% of the Series' net assets. A Fund
may also refuse any exchange or purchase order from any shareholder account if
the shareholder or the shareholder's broker/dealer has been advised that
previous patterns of purchases and redemptions or exchanges have been considered
excessive. Accounts under common ownership or control, including those with the
same taxpayer ID number and those administered so as to redeem or purchase
shares based upon certain predetermined market indicators, will be considered
one account for this purpose. Additionally, each Fund reserves the right to
refuse any order for the purchase of shares.

DIVIDENDS AND GAIN DISTRIBUTIONS

Each Series intends to declare dividends of net investment income daily.
Dividends are paid on the 17th day of each month. If the 17th day of the month
falls on a weekend or holiday on which the NYSE is closed, the dividend will be
distributed on the previous business day. Payments vary in amount depending on
income received from portfolio securities, expenses of operation and the number
of days in the period.

Shares will begin earning dividends on the day on which a Series receives
payment and shares are issued. Shares continue to earn dividends through the
date preceding the date they are redeemed or delivered subsequent to repurchase.

Each Series distributes substantially all of any taxable net long-term and
short-term gain realized on investments to shareholders at least annually in
accordance with requirements under the Internal Revenue Code of 1986, as
amended, and other applicable statutory and regulatory requirements.

Shareholders may elect: (1) to receive both dividends and gain distributions
in shares; (2) to receive dividends in cash and gain distributions in shares;
(3) to receive both dividends and gain distributions in cash. Cash dividends and
gain distributions are paid by check. In the case of prototype retirement plans,
dividends and gain distributions are reinvested in additional shares. Unless
another election is made, dividends and gain distributions will be credited to
shareholder accounts in additional shares. Shares acquired through a dividend or
gain distribution and credited to a shareholder's account are not subject to an
initial sales load or a CDSL. Dividends and gain distributions paid in shares
are invested on the payable date using the net asset value of the ex-dividend
date. Shareholders may elect to change their dividend and gain distribution
options by writing Seligman Data Corp. at the address listed below. If the
shareholder has telephone services, changes may also be telephoned to Seligman
Data Corp. between 8:30 a.m. and 6:00 p.m. Eastern time, by either the
shareholder or the broker/dealer of record on the account. For information about
telephone services, see "Telephone Transactions." These elections must be
received by Seligman Data Corp. before the record date for the dividend or
distribution in order to be effective for such dividend or gain distribution.

The per share dividends from net investment income on a Series' Class D
shares will be lower than the per share dividends on a Series' Class A shares as
a result of the higher distribution fee applicable with respect to a Series'
Class D shares. Per share dividends of the two classes may also differ as a
result of differing class expenses, if any. Distributions of net capital gains,
if any, will be paid in the same amount for Class A and Class D shares.

42
<PAGE>

Shareholders exchanging shares for shares of another Seligman Mutual Fund
will continue to receive dividends and gains as elected prior to such exchange
unless otherwise specified. In the event that a shareholder redeems all shares
in an account between the record date and the payable date, the value of any
dividends or gain distributions declared will be paid in cash regardless of the
existing election. A transfer or exchange of all shares (closing an account),
between the record date and payable date, will result in the value of dividends
or gain distributions being paid to the new fund account in accordance with the
option on the closed account, unless Seligman Data Corp. is instructed
otherwise.

TAXES

FEDERAL INCOME TAXES

Each Series intends to continue to qualify as a regulated investment company
under the Code. Thus qualified, each Series will be relieved of regular federal
income tax on income distributed to shareholders provided that it distributes
each year to its shareholders at least 90% of its net investment income and net
short-term capital gains, if any.

If, at the close of each quarter of its taxable year, at least 50% of each
Series' total assets is invested in obligations exempt from regular federal
income tax the Series will be eligible to pay dividends that are excludable by
shareholders from gross income for regular federal income tax purposes ("exempt
interest dividends"). The total amount of exempt interest dividends paid by a
Series to shareholders with respect to any taxable year cannot exceed the amount
of federally tax-exempt interest received by a Series during the year less any
expenses allocable to such interest.

Distributions of net capital gain (i.e., the excess of net long-term capital
gains over net short-term capital losses ("capital gain distributions")) are
taxable to shareholders as long-term capital gain, whether received in shares or
cash, regardless of how long a shareholder has held shares in the Series, except
that the portion of net capital gains representing accrued market discount on
tax-exempt obligations acquired after April 30, 1993 will be taxable as ordinary
income. Individual shareholders will be subject to federal income tax on
distributions of net capital gains at a maximum rate of 28% if designated as
derived from the Series' capital gains from property held for more than one year
and at a maximum rate of 20% if designated as derived from the Series' capital
gains from property held for more than eighteen months. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income.
Distributions from a Series' other investment income (other than exempt interest
dividends) or from net realized short-term gain will be taxable to shareholders
as ordinary income, whether received in cash or in additional shares.
Distributions will not, generally, be eligible for the dividends-received
deduction for corporations. Shareholders receiving distributions in the form of
additional shares issued by a Series will be treated for federal income tax
purposes as having received a distribution in an amount equal to the fair market
value on the date of distribution of the shares received.

Interest on indebtedness incurred or continued to purchase or carry shares
of any Series will not be deductible for federal income tax purposes to the
extent that the Series' distributions are exempt from federal income tax.

Any gain or loss realized upon a sale or redemption of shares of a Series by
a shareholder who is not a dealer in securities generally will be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise as a short-term capital gain or loss. However, if shares on
which a long-term capital gain distribution has been received are subsequently
sold or redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. Moreover, any loss realized by a
shareholder upon the sale of shares of a Series held six months or less will be
disallowed to the extent of any exempt-interest dividends received by the
shareholders with respect to such shares. In addition, no loss will be allowed
on the sale or other disposition of shares of a Series if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (such as through dividend reinvestment)
securities that are substantially identical to the shares of the Series.
Individual shareholders will be subject to federal income tax as long-term
capital gains at a maximum rate of 28% in respect of shares held for more than
one year and at a maximum rate of 20% in respect of shares held for more than
eighteen months.

<PAGE>

In determining gain or loss on shares of a Series that are sold or exchanged
within 90 days after acquisition, a shareholder generally will not be permitted
to include in the tax basis attributable to such shares the sales load incurred
in acquiring such shares to the extent of any subsequent reduction of the sales
load by reason of the Exchange or Reinstatement Privilege offered by a Fund. Any
sales load not taken into account in determining the tax basis of shares sold or
exchanged within 90 days after acquisition will be added to the shareholder's
tax basis in the shares acquired pursuant to the Exchange or Reinstatement
Privilege.

Shareholders are urged to consult their tax advisors concerning the effect
of federal income taxes in their individual circumstances. In particular,
persons who may be "substantial users" (or "related persons" of substantial
users) of facilities financed by industrial development bonds or private
activity bonds should consult their tax advisors before purchasing shares of any
Series.

UNLESS A SHAREHOLDER INCLUDES A TAXPAYER IDENTIFICATION NUMBER (SOCIAL
SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND CERTIFIES THAT
SUCH SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, EACH FUND IS REQUIRED TO
WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF NON-EXEMPT DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, A FUND MAY BE FINED UP TO $50 ANNUALLY FOR EACH
ACCOUNT FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN
THE EVENT THAT SUCH A FINE IS IMPOSED, A FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. EACH FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER WITH RESPECT TO ANY UNCERTIFIED ACCOUNT IN ANY YEAR, A
CORRESPONDING CHARGE MAY BE MADE AGAINST THAT ACCOUNT.

CALIFORNIA TAXES

In the opinion of Sullivan & Cromwell, counsel to the Funds, provided that
at the end of each quarter of its taxable year at least 50% of the total assets
of the California Quality or California High-Yield Series consist of federally
tax-exempt obligations of the State of California and its political subdivisions
("California Municipal Securities"), shareholders of each such Series who are
subject to California State taxation on dividends will not be subject to
California personal income taxes on dividends from that Series attributable to
interest received by each such Series on California Municipal Securities as well
as on certain other federally tax-exempt obligations the interest on which is
exempt from California personal income taxes. To the extent that the
distributions are derived from other income, including long- or short-term
capital gains, such distributions will not be exempt from California personal
income taxation, and, further to the extent that they constitute long-term
capital gain dividends they will be taxed as long-term gain to a shareholder.

Interest on indebtedness incurred or continued to purchase or carry shares
of the California Quality or California High-Yield Series will not be deductible
for California personal income tax purposes to the extent such Series'
distributions are exempt from California personal income tax.

Prospective investors should be aware that an investment in these Series may
not be suitable for persons who are not residents of the State of California or
who do not receive income subject to income taxes of the State.

COLORADO TAXES

In the opinion of Ireland, Stapleton, Pryor & Pascoe, P.C., Colorado tax
counsel to the Municipal Fund, individuals, trusts, estates and corporations who
are holders of the Colorado Series and who are subject to the Colorado income
tax will not be subject to Colorado income tax or the Colorado alternative
minimum tax on Colorado Series dividends to the extent that such dividends
qualify as exempt-interest dividends of a regulated investment company under
Section 852(b)(5) of the Code, which are derived from interest income received
by the Colorado Series on (a) obligations of the State of Colorado or its
political subdivisions which are issued on or after May 1,1980, or if issued
before May 1,1980, to the extent such interest is specifically exempt from
income taxation un-

<PAGE>

der the laws of the State of Colorado authorizing the issuance of such
obligations, (b) obligations of the United States or its possessions to the
extent included in federal taxable income, or (c) obligations of territories or
possessions of the United States to the extent federal law exempts interest on
such obligations from taxation by the states. To the extent that Colorado Series
distributions are attributable to sources not described in the preceding
sentence, such as long or short-term capital gains, such distributions will not
be exempt from Colorado income tax and may be subject to Colorado's alternative
minimum tax. There are no municipal income taxes in Colorado. As intangibles,
shares in the Colorado Series are exempt from Colorado property taxes.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Colorado Series, at least 80% of the value of the net assets
of the Colorado Series will be maintained in debt obligations which are exempt
from regular federal income tax and Colorado income tax.

The Colorado Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Colorado obligations and
exempt from the Colorado income tax.

FLORIDA TAXES

Florida does not presently impose an income tax on individuals and thus
individual shareholders of the Florida Series will not be subject to any Florida
state income tax on distributions received from the Florida Series. However,
Florida imposes an intangible personal property tax on shares of the Florida
Series owned by a Florida resident on January 1 of each year unless such shares
qualify for an exemption from that tax. The Municipal Trust has received a
Technical Assistance Advisement from the State of Florida, Department of
Revenue, to the effect that shares of the Florida Series owned by a Florida
resident will be exempt from the Florida Intangible Personal Property Tax so
long as the Florida Series' portfolio includes on January 1 of each year only
assets, such as Florida tax-exempt securities and United States Government
securities, that are exempt from the Florida Intangible Personal Property Tax.
Corporate shareholders may be subject to Florida income taxes depending on the
portion of the income related to the Florida Series that is allocable to Florida
under applicable Florida law.

GEORGIA TAXES

In the opinion of King & Spalding, Georgia tax counsel to the Municipal
Fund, under existing Georgia law, shareholders of the Georgia Series will not be
subject to Georgia income taxes on dividends with respect to shares of the
Georgia Series to the extent that such distributions represent "exempt-interest
dividends" for federal income tax purposes that are attributable to
interest-bearing obligations issued by or on behalf of the State of Georgia or
its political subdivisions, or by the governments of Puerto Rico, the Virgin
Islands or Guam (collectively, "Georgia Obligations"), which are held by the
Georgia Series. Dividends, if any, derived from capital gains or other sources
generally will be taxable to shareholders of the Georgia Series for Georgia
income tax purposes.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Georgia Series, at least 80% of the value of the net assets
of the Georgia Series will be maintained in debt obligations which are exempt
from regular federal income tax and Georgia income taxes.

The Georgia Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Georgia Obligations and exempt
from Georgia income taxes.

LOUISIANA TAXES

In the opinion of Liskow & Lewis, Louisiana tax counsel to the Municipal
Fund, based upon a private ruling obtained from the Louisiana Department of
Revenue and Taxation (the "Department"), and subject to the current policies of
the Department, shareholders of the Louisiana Series who are corporations;
individuals and residents of the State of Louisiana; and, for taxable periods
beginning after December 31, 1996, trusts or estates; all of whom are otherwise
subject to Louisiana income tax, will not be subject to Louisiana income tax on
Louisiana Series dividends to the extent that such dividends are attributable to
interest on tax-exempt obligations of the State of Louisiana or its political or
governmental subdivisions, or its

<PAGE>

governmental agencies or instrumentalities. To the extent that distributions on
the Louisiana Series are attributable to sources other than those described in
the preceding sentence, such distributions, including but not limited to,
long-term or short-term capital gains, will not be exempt from Louisiana income
tax.

Non-resident individuals maintaining their domicile other than in the State
of Louisiana will not be subject to Louisiana income tax on their Louisiana
Series dividends.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Louisiana Series, the Municipal Fund will maintain at least
80% of the value of the net assets of the Louisiana Series in debt obligations
which are exempt from federal income tax and exempt from Louisiana income tax.

The Louisiana Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Louisiana obligations and
exempt from Louisiana income tax.

MARYLAND TAXES

In the opinion of Venable, Baetjer and Howard, LLP, Maryland tax counsel to
the Municipal Fund, as long as dividends paid by the Maryland Series qualify as
interest excludable under Section 103 of the Code and the Maryland Series
qualifies as a "regulated investment company" under the Code, the portion of
exempt-interest dividends that represents interest received by the Maryland
Series on obligations (a) of Maryland or its political subdivisions and
authorities, or (b) of the United States or an authority, commission,
instrumentality, possession or territory of the United States, will be exempt
from Maryland state and local income taxes when allocated or distributed to a
shareholder of the Maryland Series.

Gain realized by the Maryland Series from the sale or exchange of a bond
issued by Maryland or a political subdivision of Maryland, or of the United
States or an authority, commission or instrumentality of the United States will
not be subject to Maryland state and local income taxes.

To the extent that distributions of the Maryland Series are attributable to
sources other than those described in the preceding sentences, such as interest
received by the Maryland Series on obligations issued by states other than
Maryland, income earned on repurchase contracts, or gains realized by a
shareholder upon a redemption or exchange of Maryland Series shares, such
distributions will be subject to Maryland state and local income taxes.

Interest on indebtedness incurred or continued (directly or indirectly) by a
shareholder of the Maryland Series to purchase or carry shares of the Maryland
Series will not be deductible for Maryland state and local income tax purposes
to the extent such interest is allocable to exempt-interest dividends.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Maryland Series, at least 80% of the value of the net assets
of the Maryland Series will be maintained in debt obligations which are exempt
from regular federal income tax and are exempt from Maryland state and local
income taxes.

The Maryland Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Maryland obligations and
exempt from Maryland state and local income taxes.

MASSACHUSETTS TAXES

In the opinion of Palmer & Dodge, Massachusetts tax counsel to the Municipal
Fund, assuming that the Municipal Fund gives the notices described at the end of
this section, holders of the Massachusetts Series who are subject to the
Massachusetts personal income tax will not be subject to tax on distributions
from the Massachusetts Series to the extent that these distributions qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code which are directly attributable to interest on obligations
issued by the Commonwealth of Massachusetts, its instrumentalities or its
political subdivisions or by the government of Puerto Rico or by its authority,
by the

<PAGE>

government of Guam or by its authority, or by the government of the Virgin
Islands or its authority (collectively, "Massachusetts Obligations"). Except to
the extent excluded as capital gain, distributions of income to Massachusetts
holders of the Massachusetts Series that are attributable to sources other than
those described in the preceding sentence will be includable in the
Massachusetts income of the holders of the Massachusetts Series. Distributions
will not be subject to tax to the extent that they qualify as capital gain
dividends which are attributable to obligations issued by the Commonwealth of
Massachusetts, its instrumentalities or political subdivisions under any
provision of law which exempts capital gain on the obligation from Massachusetts
income taxation. Distributions which qualify as capital gain dividends under
Section 852(b)(3)(C) of the Code and which are includable in Federal gross
income will be includable in the Massachusetts income of a holder of the
Massachusetts Series as capital gain.

Massachusetts Series dividends are not excluded in determining the
Massachusetts excise tax on corporations.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Massachusetts Series, the Municipal Fund will maintain at
least 80% of the value of the net assets of the Massachusetts Series in debt
obligations which are exempt from regular federal income tax and Massachusetts
personal income tax.

The Massachusetts Series will notify its shareholders within 60 days after
the close of the year as to the interest and capital gains derived from
Massachusetts Obligations and exempt from Massachusetts personal income tax.

MICHIGAN TAXES

In the opinion of Dickinson, Wright, Moon, Van Dusen & Freeman, Michigan tax
counsel to the Municipal Fund, holders of the Michigan Series who are subject to
the Michigan income tax or single business tax will not be subject to the
Michigan income tax or single business tax on Michigan Series dividends to the
extent that such distributions qualify as exempt-interest dividends of a
regulated investment company under Section 852(b)(5) of the Code which are
attributable to interest on tax-exempt obligations of the State of Michigan, or
its political or governmental subdivisions, its governmental agencies or
instrumentalities (as well as certain other federally tax-exempt obligations,
the interest on which is exempt from Michigan tax, such as, for example, certain
obligations of Puerto Rico) (collectively, "Michigan Obligations"). To the
extent that distributions on the Michigan Series are attributable to sources
other than those described in the preceding sentence, such distributions,
including, but not limited to, long or short-term capital gains, will not be
exempt from Michigan income tax or single business tax. The Michigan Department
of Treasury has issued a bulletin stating that holders of interests in regulated
investment companies who are subject to the Michigan intangibles tax will be
exempt from the tax to the extent that the investment portfolio consists of U.S.
obligations and obligations of the State of Michigan or of its political
subdivisions. In addition, Michigan Series shares owned by certain financial
institutions or by certain other persons subject to the Michigan single business
tax are not subject to the Michigan intangibles tax. To the extent the
distributions on the Michigan Series are not subject to Michigan income tax,
they are not subject to the uniform city income tax imposed by certain Michigan
cities.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Michigan Series, at least 80% of the value of the net assets
of the Michigan Series will be maintained in debt obligations which are exempt
from regular federal income tax and Michigan income and single business taxes.

The Michigan Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Michigan Obligations and
exempt from Michigan income tax.

MINNESOTA TAXES

In the opinion of Faegre & Benson LLP, Minnesota tax counsel to the
Municipal Fund, provided that the Minnesota Series qualifies as a "regulated
investment company" under the Code, and subject to the discussion

<PAGE>

in the paragraph below, shareholders of the Minnesota Series who are
individuals, estates, or trusts and who are subject to the regular Minnesota
personal income tax will not be subject to such regular Minnesota tax on
Minnesota Series dividends to the extent that such distributions qualify as
exempt-interest dividends of a regulated investment company under Section
852(b)(5) of the Code which are derived from interest income on tax-exempt
obligations of the State of Minnesota, or its political or governmental
subdivisions, municipalities, governmental agencies or instrumentalities
("Minnesota Sources"). The foregoing will apply, however, only if the portion of
the exempt-interest dividends from such Minnesota Sources that is paid to all
shareholders represents 95% or more of the exempt-interest dividends that are
paid by the Minnesota Series. If the 95% test is not met, all exempt-interest
dividends that are paid by the Minnesota Series will be subject to the regular
Minnesota personal income tax. Even if the 95% test is met, to the extent that
exempt-interest dividends that are paid by the Minnesota Series are not derived
from the Minnesota Sources described in the first sentence of this paragraph,
such dividends will be subject to the regular Minnesota personal income tax.
Other distributions of the Minnesota Series, including distributions from net
short-term and long-term capital gains, are generally not exempt from the
regular Minnesota personal income tax.

Legislation enacted in 1995 provides that it is the intent of the Minnesota
legislature that interest income on obligations of Minnesota governmental units,
including obligations of the Minnesota Sources described above, and
exempt-interest dividends that are derived from interest income on such
obligations, be included in the net income of individuals, estates, and trusts
for Minnesota income tax purposes if it is judicially determined that the
exemption by Minnesota of such interest or such exempt-interest dividends
unlawfully discriminates against interstate commerce because interest income on
obligations of governmental issuers located in other states, or exempt-interest
dividends derived from such obligations, is so included. This provision applies
to taxable years that begin during or after the calendar year in which such
judicial decision becomes final, regardless of the date on which the obligations
were issued, and other remedies apply for previous taxable years. The United
States Supreme Court in 1995 denied certiorari in a case in which an Ohio state
court upheld an exemption for interest income on obligations of Ohio
governmental issuers, even though interest income on obligations of non-Ohio
governmental issuers, was subject to tax. In 1997, the United States Supreme
Court denied certiorari in a subsequent case from Ohio, involving the same
taxpayer and the same issue, in which the Ohio Supreme Court refused to
reconsider the merits of the case on the ground that the previous final state
court judgment barred any claim arising out of the transaction that was the
subject of the previous action. It cannot be predicted whether a similar case
will be brought in Minnesota or elsewhere, or what the outcome of such case
would be.

Minnesota presently imposes an alternative minimum tax on individuals,
estates, and trusts that is based, in part, on such taxpayers' federal
alternative minimum taxable income, which includes federal tax preference items.
The Code provides that interest on specified private activity bonds is a federal
tax preference item, and that an exempt-interest dividend of a regulated
investment company constitutes a federal tax preference item to the extent of
its proportionate share of the interest on such private activity bonds.
Accordingly, exempt-interest dividends that are attributable to such private
activity bond interest, even though they are derived from the Minnesota Sources
described above, will be included in the base upon which such Minnesota
alternative minimum tax is computed. In addition, the entire portion of
exempt-interest dividends that is received by such shareholders and that is
derived from sources other than the Minnesota Sources described above is also
subject to the Minnesota alternative minimum tax. Further, should the 95% test
that is described above fail to be met, all of the exempt-interest dividends
that are paid by the Minnesota Series, including all of those that are derived
from the Minnesota Sources described above, will be subject to the Minnesota
alternative minimum tax, in the case of shareholders of the Minnesota Series who
are individuals, estates or trusts.

<PAGE>

Subject to certain limitations that are set forth in the Minnesota rules,
Minnesota Series dividends, if any, that are derived from interest on certain
United States obligations are not subject to the regular Minnesota personal
income tax or the Minnesota alternative minimum tax, in the case of shareholders
of the Minnesota Series who are individuals, estates, or trusts.

Minnesota Series distributions, including exempt-interest dividends, are not
excluded in determining the Minnesota franchise tax on corporations that is
measured by taxable income and alternative minimum taxable income. Minnesota
Series distributions may also be taken into account in certain cases in
determining the minimum fee that is imposed on corporations, S corporations, and
partnerships.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Minnesota Series, at least 80% of the value of the net assets
of the Minnesota Series will be maintained in debt obligations which are exempt
from the regular federal income tax. Such debt obligations may, however, be
subject to the federal alternative minimum tax. A similar percentage will
generally also apply with respect to the regular Minnesota personal income tax,
and such debt obligations may likewise be subject to the Minnesota alternative
minimum tax, in each case subject to the entire discussion above. The Minnesota
Series will invest so that the 95% test described above is met.

The Minnesota Series will notify its shareholders within 30 days after the
close of the year as to the interest derived from Minnesota obligations and
exempt from the Minnesota personal income tax, subject to the discussion above.

MISSOURI TAXES

In the opinion of Bryan Cave LLP, Missouri tax counsel to the Municipal
Fund, dividends distributed to individual shareholders of the Missouri Series
will be exempt from the Missouri personal income tax imposed by Chapter 143 of
the Missouri Revised Statutes to the extent that such dividends qualify as
exempt interest dividends of a regulated investment company under Section
852(b)(5) of the Code and are derived from interest on obligations of the State
of Missouri or any of its political subdivisions or authorities or obligations
issued by the government of Puerto Rico or its authority (collectively,
"Missouri Obligations"). Capital gain dividends, as defined in Section 852(b)(3)
of the Code, distributable by the Fund to individual resident shareholders of
the Missouri Series, to the extent includable in federal adjusted gross income,
will be subject to Missouri income taxation. Shares in the Missouri Series are
not subject to Missouri personal property taxes.

Dividends paid by the Missouri Series, if any, that do not qualify as tax
exempt dividends under Section 852 (b)(5) of the Code, will be exempt from
Missouri income tax only to the extent that such dividends are derived from
interest on certain U.S. obligations that the State of Missouri is expressly
prohibited from taxing under the laws of the United States. The portion of such
dividends that is not subject to taxation by the State of Missouri may be
reduced by interest, or other expenses, in excess of $500 paid or incurred by a
shareholder in any taxable year to purchase or carry shares of the Missouri
Series of the Municipal Fund or other investments producing income that is
includable in federal gross income, but exempt from Missouri income tax.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Missouri Series, at least 80% of the value of the net assets
of the Missouri Series will be maintained in debt obligations which are exempt
from regular federal income tax and Missouri personal income tax.

The Missouri Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Missouri Obligations and
exempt from the Missouri personal income tax.

NEW JERSEY TAXES

In the opinion of McCarter & English, New Jersey counsel to the New Jersey
Fund, income distributions paid from a "qualified investment fund" are exempt
from the New Jersey personal income tax, to the extent attributable to
tax-exempt obligations specified by New Jersey law. As defined in N.J.S.A.
54A:6-14.1, a "qualified investment fund" is any investment or trust company, or
series of such investment company or trust registered with the Securities and
Exchange Commission,

<PAGE>

which for the calendar year in which a distribution is paid, has (i) no
investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial options,
futures, forward contracts, or other similar financial instruments related to
interest-bearing obligations, obligations issued at a discount or bond indices
related thereto (such financial options, etc. being referred to herein as
"Financial Instruments"), and (ii) which has at least 80% of the aggregate
principal amount of all its investments, excluding Financial Instruments, to the
extent such instruments are authorized by section 851(b) of the Code, cash and
cash items, including receivables, invested in obligations issued by New Jersey,
or in obligations that are free from state or local taxation under New Jersey
and federal laws such as obligations issued by the governments of Puerto Rico,
Guam or the Virgin Islands ("Municipal Securities"). Interest income and gains
realized by the New Jersey Fund upon disposition of obligations and distributed
to the shareholders are exempt from the New Jersey personal income tax to the
extent attributable to Municipal Securities. Gains resulting from the redemption
or sale of shares of the New Jersey Fund would also be exempt from the New
Jersey personal income tax.

The New Jersey personal income tax is not applicable to corporations. For
all corporations subject to the New Jersey Corporation Business Tax, interest on
Municipal Securities is included in the net income tax base for purposes of
computing the corporation business tax. Furthermore, any gain upon the
redemption or sale of shares by a corporate shareholder is also included in the
net income tax base for purposes of computing the Corporation Business Tax.

The New Jersey Fund will notify shareholders by February 15 of each calendar
year as to the amounts of all such dividends and distributions which are exempt
from federal income taxes and New Jersey personal income tax and the amounts, if
any, which are subject to such taxes. Shareholders are, however, urged to
consult with their own tax advisors as to the federal, state or local tax
consequences in their specific circumstances.

Prospective investors should be aware that an investment in a state
municipal fund may not be suitable for persons who do not receive income subject
to income taxes of such state.

NEW YORK STATE AND CITY TAXES

In the opinion of Sullivan & Cromwell, counsel to the Funds, holders of
shares of the New York Series who are subject to New York State and City tax on
dividends will not be subject to New York State and City personal income taxes
on New York Series dividends to the extent that such distributions qualify as
exempt-interest dividends under Section 852(b)(5) of the Code and represent
interest income attributable to federally tax-exempt obligations of the State of
New York and its political subdivisions (as well as certain other federally
tax-exempt obligations the interest on which is exempt from New York State and
City personal income taxes such as, for example, certain obligations of Puerto
Rico) (collectively, "New York Obligations"). To the extent that distributions
on the New York Series are derived from other income, including long or
short-term capital gains, such distributions will not be exempt from State or
City personal income taxes.

Dividends on the New York Series are not excluded in determining New York
State or City franchise taxes on corporations and financial institutions.

Except during temporary defensive periods or when acceptable investments are
unavailable to the New York Series, the Municipal Fund will maintain at least
80% of the value of the net assets of the New York Series in debt obligations
which are exempt from regular federal income tax and New York State and City
personal income taxes.

The Series will notify its shareholders within 45 days after the close of
the year as to the interest derived from New York Obligations and exempt from
New York State and City personal income taxes.

NORTH CAROLINA TAXES

In the opinion of Horack, Talley, Pharr & Lowndes, P.A., tax counsel to the
North Carolina Series, distributions from the North Carolina Series to
shareholders subject

<PAGE>

to North Carolina income taxes will not be taxable for North Carolina income tax
purposes to the extent the distributions either (i) qualify as exempt-interest
dividends of a regulated investment company under the Code and are attributable
to interest on obligations issued by the State of North Carolina and its
political subdivisions or (ii) are dividends attributable to interest on direct
obligations of the U.S. government and agencies and possessions of the United
States, so long as in both cases the North Carolina Series provides a supporting
statement to the shareholders designating the portion of the dividends of the
North Carolina Series attributable to interest on obligations issued by the
State of North Carolina and its political subdivisions or direct obligations of
the U.S. government and agencies and possessions of the United States. In the
absence of such a statement, the total amount of the dividends will be taxable
for North Carolina income tax purposes. Distributions attributable to other
sources, including exempt-interest dividends attributable to interest on
obligations of states other than North Carolina and the political subdivisions
of such other states as well as capital gains, will be taxable for North
Carolina income tax purposes.

The North Carolina Series will notify its shareholders within 60 days after
the close of its taxable year as to the amount of dividends and distributions to
the shareholders of the North Carolina Series which are exempt from North
Carolina income taxes and the dollar amount, if any, which is subject to North
Carolina income taxes.

OHIO TAXES

In the opinion of Squire, Sanders & Dempsey L.L.P., Ohio tax counsel to the
Municipal Fund, holders of the Ohio Series who are subject to the Ohio personal
income tax, the net income base of the Ohio corporation franchise tax, or
municipal income or school district taxes in Ohio will not be subject to such
taxes on dividend distributions with respect to shares of the Ohio Series
("Distributions") to the extent that such distributions are properly
attributable to interest (including accrued original issue discount) on
obligations issued by or on behalf of the State of Ohio, political subdivisions
thereof, or agencies or instrumentalities thereof ("Ohio Obligations"), provided
that the Ohio Series qualifies as a "regulated investment company" for federal
income tax purposes and that at all times at least 50% of the value of the total
assets of the Ohio Series consists of Ohio Obligations or similar obligations of
other states or their subdivisions. It is assumed for purposes of this
discussion of Ohio taxes that these requirements are satisfied. Shares of the
Ohio Series will be included in a corporation's tax base for purposes of
computing the Ohio corporation franchise tax on the net worth basis.

Distributions that are properly attributable to gain from the sale, exchange
or other disposition of Ohio Obligations held by the Ohio Series are not subject
to the Ohio personal income tax, the net income base of the Ohio corporation
franchise tax, or municipal income or school district taxes in Ohio.

Distributions properly attributable to interest on obligations of Puerto
Rico, the Virgin Islands or Guam, the interest on which is exempt from state
income taxes under the laws of the United States are exempt from the Ohio
personal income tax and municipal income and school district taxes in Ohio, and,
provided such interest is excluded from gross income for Federal income tax
purposes, are excluded from the net income base of the Ohio Corporation
franchise tax.

The Ohio Series is not subject to the Ohio personal income tax or municipal
income or school district taxes in Ohio. The Ohio Series is not subject to
corporation franchise tax or the Ohio dealers in intangibles tax, provided that,
if the Ohio Series has a significant nexus to the State of Ohio to be subject to
Ohio taxation, then such entity shall be exempt from taxes only if it complies
with certain reporting requirements.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Ohio Series, the Municipal Fund will maintain at least 80% of
the value of the net assets of the Ohio Series in debt obligations which are
exempt from regular federal income tax and the Ohio personal income tax and the
net income base of the Ohio corporation franchise tax.

The Ohio Series will notify its shareholders within 60 days after the close
of the year as to the status for Ohio tax purposes of distributions with respect
to shares of the Ohio Series.

<PAGE>

OREGON TAXES

In the opinion of Schwabe, Williamson & Wyatt, Oregon tax counsel to the
Municipal Fund, under present law, individual shareholders of the Oregon Series
will not be subject to Oregon personal income taxes on distributions received
from the Oregon Series to the extent that such distributions (1) qualify as
"exempt-interest dividends" under Section 852 (b)(5) of the Code and (2) are
derived from interest on obligations of the State of Oregon or any of its
political subdivisions or authorities or from interest on obligations of the
governments of Puerto Rico, Guam, the Virgin Islands or the Northern Mariana
Islands (collectively, "Oregon Obligations"). Other distributions, including any
long-term and short-term capital gains, will generally not be exempt from
personal income taxes in Oregon.

No portion of distributions from the Oregon Series are exempt from Oregon
excise tax on corporations. However, shares of the Oregon Series are not subject
to Oregon property tax.

Except during temporary defensive periods or when acceptable investments are
unavailable to the Oregon Series, at least 80% of the value of the net assets of
the Oregon Series will be maintained in debt obligations, the interest payments
of which are exempt from regular federal income tax and Oregon personal income
taxes.

The Oregon Series will notify its shareholders within 60 days after the
close of the year as to the interest derived from Oregon Obligations and exempt
from Oregon personal income taxes.

PENNSYLVANIA TAXES

In the opinion of Ballard Spahr Andrews & Ingersoll, Pennsylvania tax
counsel to the Pennsylvania Fund, individual shareholders of the Pennsylvania
Fund who are subject to the Pennsylvania personal income tax will not be subject
to Pennsylvania personal income tax on distributions from the Pennsylvania Fund
to the extent that such distributions are attributable to interest paid on
Pennsylvania Municipal Securities or U.S. Government obligations. Distributions
attributable to most other sources, including distributions attributable to gain
on the sale of such instruments, will not be exempt from Pennsylvania personal
income tax.

The same rules apply under the tax imposed by the Philadelphia School
District on the unearned income of Philadelphia residents, except that all
capital gain distributions are exempt from the School District tax regardless of
the source from which they are paid.

Corporate shareholders who are subject to the Pennsylvania corporate net
income tax will not be subject to corporate net income tax on distributions from
the Pennsylvania Fund that qualify as "exempt-interest dividends" for federal
income tax purposes or are derived from interest on U.S. Government obligations.

Individual shareholders of the Pennsylvania Fund who are subject to the
Pennsylvania personal property tax will be exempt from Pennsylvania personal
property tax on their shares of the Pennsylvania Fund to the extent that the
Pennsylvania Fund portfolio consists of Pennsylvania Municipal Securities and
U.S. Government obligations on the annual assessment date. Corporations are not
subject to Pennsylvania personal property taxes.

Shareholders will receive an annual Statement of Account and information
regarding the federal and Pennsylvania income tax status of all distributions
made during the year. Information will also be provided to individual
Pennsylvania shareholders regarding the portion of the value of their shares, if
any, subject to Pennsylvania personal property tax.

Prospective investors should be aware that an investment in the Pennsylvania
Fund may not be suitable for persons who are not residents of the State of
Pennsylvania or who do not receive income subject to income taxes of the State.
Investors should also be aware that there is litigation in progress in the
Pennsylvania courts that may result in the personal property tax being declared
unconstitutional in whole or in part.

SOUTH CAROLINA TAXES

In the opinion of Sinkler & Boyd, South Carolina tax counsel to the
Municipal Fund, shareholders of the South Carolina Series who are subject to
South Carolina individual or corporate income taxes will not be subject to such
taxes on South Carolina Series' dividends to the extent that such dividends
qualify as either (1) exempt-interest dividends of a regulated

<PAGE>

investment company under Section 852(b)(5) of the Code, which are derived from
interest on tax-exempt obligations of the State of South Carolina or any of its
political subdivisions or on obligations of the Government of Puerto Rico that
are exempt from federal income tax; or (2) dividends derived from interest or
dividends on obligations of the United States and its possessions or on
obligations or securities of any authority or commission exempt from state
income taxes under the laws of the United States (collectively, "South Carolina
Obligations"). To the extent that South Carolina Series' distributions are
attributable to other sources, such as long or short-term capital gains, such
distributions will not be exempt from South Carolina taxes.

Except during temporary defensive periods or when acceptable investments are
unavailable to the South Carolina Series, at least 80% of the value of the net
assets of the South Carolina Series will be maintained in debt obligations which
are exempt from regular federal income tax and South Carolina income tax.

The South Carolina Series will notify its shareholders within 60-days after
the close of the year as to the interest derived from South Carolina Obligations
and exempt from South Carolina income taxes.

OTHER STATE AND LOCAL TAXES

The exemption of interest on municipal securities for federal income tax
purposes does not necessarily result in exemption under the income tax laws of
any state or city. Except as noted above with respect to a particular state,
distributions from a Series may be taxable to investors under state and local
law even though all or a part of such distributions may be derived from
federally tax-exempt sources or from obligations which, if received directly,
would be exempt from such income tax. In some states, shareholders of the
National Series may be afforded tax-exempt treatment on distributions to the
extent they are derived from municipal securities issued by that state or its
localities. Prospective investors should be aware that an investment in a
certain Series may not be suitable for persons who are not residents of the
designated state or who do not receive income subject to income taxes in that
state. Shareholders should consult their own tax advisors.

SHAREHOLDER INFORMATION

Shareholders will be sent semi-annual reports regarding their Fund. General
information about the Funds may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or telephoning the Corporate
Communications/ Investor Relations Department toll-free by dialing (800)
221-7844 from all continental United States, except New York, or (212) 850-1864
in New York State and the Greater New York City area. Information about
shareholder accounts may be requested by writing Shareholder Services, Seligman
Data Corp., at the same address or by toll-free telephone by dialing (800)
221-2450 from all continental United States. Seligman Data Corp. may be
telephoned Monday through Friday (except holidays), between the hours of 8:30
a.m. and 6:00 p.m. Eastern time and calls will be answered by a service
representative. 24-HOUR AUTOMATED TELEPHONE ACCESS IS AVAILABLE BY DIALING (800)
622-4597 ON A TOUCHTONE PHONE WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD,
ACCOUNT BALANCE, MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION,
ACCOUNT STATEMENTS AND FORM 1099-DIV CAN BE ORDERED. TO INSURE PROMPT DELIVERY
OF DISTRIBUTION CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA
CORP., SHOULD BE NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS
CHANGES MAY BE TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS
TELEPHONE SERVICES. FOR MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE
"TELEPHONE TRANSACTIONS" ABOVE.

ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions.

Other investor services are available. These include:

O INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically by electronic funds transfer from the
shareholder'S saving or checking account, if the bank that maintains the
account is a member of the Automated Clearing House ("ACH"), or by
preauthorized checks to be drawn on the shareholder's checking account at
regu-

<PAGE>

lar monthly intervals in fixed amounts of $100 or more per fund, or
regular quarterly intervals in fixed amounts of $250 or more per fund, to
purchase shares. Accounts may be established concurrently with the
Invest-A-Check(R) Service only if accompanied by a check for at least $100
iN conjunction with the monthly investment option, or a check for at least
$250 in conjunction with the quarterly investment option. For investments
into the Seligman Time Horizon MatrixSM Asset Allocation Program, the
minimum amount is $500 at regular monthly intervals or $1,000 at regular
quarterly intervals. By utilizing the Invest-A-Check(R) Service to establish
an account, you are agreeing to continue the Service until the Fund's
minimum investment amount is met. If yoU elect to cancel the Service prior
to meeting the minimum, your account may be subject to closure. (See "Terms
and Conditions.")

O AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of shares of
Seligman Cash Management Fund to exchange a specified amount, at regular
monthly intervals in fixed amounts of $100 or more per fund, or regular
quarterly intervals of $250 or more per fund, from shares of any class of
the Cash Management Fund into shares of the same class of any other Seligman
Mutual Fund, registered in the same name. For exchanges into the Seligman
Time Horizon MatrixSM Asset Allocation Program, the minimum amount is $500
at regular monthly intervals or $1,000 at regular quarterly intervals. The
shareholder's Cash Management Fund account must have a dollar value of at
least $5,000 at the initiation of the service and all shares must be in
"book credit" form. Exchanges will be made at the public offering price.

O DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in
additional shares of the Series or another Seligman Mutual Fund. (Dividend
checks must include the shareholder's name, the name of the Series and the
class of shares in which the investment is to be made and the shareholder's
account number.) If the dividends are to be invested in a new fund account,
the first investment must meet the required minimum purchase amount for such
fund.

O AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in
shares of any designated Seligman Mutual Fund. Shareholders who wish to use
this service, should contact Seligman Data Corp. or a broker to obtain the
necessary documentation. Banks may charge a penalty on CD assets withdrawn
prior to maturity. Accordingly, it will not normally be advisable to
liquidate a CD before its maturity.

O AUTOMATIC CASH WITHDRAWAL SERVICE permits payments in fixed amounts of $50
or more at regular intervals to be made to a shareholder who owns or
purchases shares worth $5,000 or more held as book credits. Holders of Class
A shares purchased at net asset value because the purchase amount was
$1,000,000 or more should bear in mind that withdrawals may be subject to a
1% CDSL if made within eighteen months of purchase of such shares. Holders
of Class D shares may elect to use this service, although certain
withdrawals may be subject to a CDSL. (See "Terms and Conditions.")

O DIRECTED DIVIDENDS allows a shareholder to pay dividends to another person
or to direct the payment of such dividends to another Seligman Mutual Fund
for purchase at net asset value. Dividends on Class A and Class D shares may
be directed only to shares of the same class of another Seligman Mutual
Fund.

O OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which will be deducted from a shareholder's account,if requested.

O COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years are available for a fee of $10.00 per year, per
account, with a maximum charge of $150 per account. Statement requests
should be forwarded, along with a check, to Seligman Data Corp.

ADVERTISING A SERIES' PERFORMANCE

From time to time, a Series advertises its "yield," "tax equivalent yield,"
"average annual total return" and "total

<PAGE>

return," each of which is calculated separately for each Series' Class A and
Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "yield" of a Series' class refers
to the income generated by an investment in the Series over a 30-day period.
This income is then "annualized." That is, the amount of income generated by the
investment during that 30-day period is assumed to be generated each 30-day
period for twelve periods and is shown as a percentage of the investment. The
"tax equivalent yield" is calculated similarly to the "yield," except that the
yield is increased using a stated income tax rate to demonstrate the taxable
yield necessary to produce an after-tax yield equivalent to the Series. The
"average annual total return" is the annual rate required for the initial
payment to grow to the amount which would be received at the end of the
specified period (one year, five years, and ten years or since the inception of
the Series), i.e., the average annual compound rate of return, assuming the
payment of the maximum sales load, if any, when the investment was first made
and that all distributions and dividends by the Series were reinvested on the
reinvestment dates during the period. "Total return" is calculated with these
same assumptions and shows the aggregate return on an investment in a class over
a specified period (one year, five years and ten years or since the inception of
the Series). Class A total return and average annual total return quoted from
time to time are not adjusted for periods prior to commencement dates, December
27, 1990, in the case of the Florida Series, and January 1, 1993, in the case of
the California High-Yield Series, California Quality Series, and each Series of
the Municipal Fund, for the annual administration, shareholder services and
distribution fee. Such fee, if reflected, would reduce the performance quoted.
The waiver by the Manager of its fees and reimbursement of certain expenses
during certain periods (as set forth under "Financial Highlights" herein) would
positively affect the performance results quoted.

From time to time, reference may be made in advertising or promotional
material to mutual fund rankings prepared by Lipper Analytical Service, Inc.
("Lipper"), an independent reporting service that monitors the performance of
mutual funds. Lipper ranks funds in various categories by making comparative
calculations using total return. Each Series may quote its Lipper ranking in the
Municipal Bond Fund category or the Single State Municipal Bond Fund category or
its Lipper ranking for all municipal bond funds monitored by Lipper. In
addition, each class of a Series may compare its total return over a certain
period with the average performance of all funds in these Lipper categories for
the same period. In calculating the total return of a Series' Class A and Class
D shares, the Lipper analysis assumes investment of all dividends and
distributions paid but does not take into account applicable sales loads. A
Series may also refer in advertisements, or in other promotional material to
articles, comments, listings and columns in the financial and other press
pertaining to a Series' performance. Examples of such financial and other press
publications include BARRON'S, BUSINESS WEEK, CDA/WIESENBERGER MUTUAL FUNDS
INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR, FINANCIAL PLANNING, FINANCIAL
TIMES, FINANCIAL WORLD, FORBES, FORTUNE, INDIVIDUAL INVESTOR, INVESTMENT
ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S, LOS ANGELES TIMES, MONEY
MAGAZINE, MORNINGSTAR, INC., PENSIONS AND INVESTMENTS, SMART MONEY, THE NEW YORK
TIMES, THE WALL STREET JOURNAL, USA TODAY, U.S. NEWS AND WORLD REPORT,
WASHINGTON POST, WORTH MAGAZINE and YOUR MONEY.

ORGANIZATION AND CAPITALIZATION

Each Fund is a non-diversified, open-end management investment company, as
defined in the 1940 Act. The Municipal Fund was incorporated in Maryland on
August 8, 1983. The Municipal Trust was established under the laws of the
Commonwealth of Massachusetts by a Declaration of Trust dated July 27, 1984. The
New Jersey Fund was incorporated in Maryland on March 13, 1987. The Pennsylvania
Fund was organized as an unincorporated trust under the laws of the Commonwealth
of Pennsylvania by a Declaration of Trust dated May 13, 1986.

The Directors or Trustees of the Funds have authority to create and classify
shares of capital stock or beneficial interest in separate Series, without
further action by shareholders. The Declarations of Trust of the Penn-

<PAGE>

sylvania Fund and the Municipal Trust permit the Trustees to issue an unlimited
number of full and fractional shares of beneficial interest in separate Series.
To date, shares of thirteen Series of the Municipal Fund, four Series of the
Municipal Trust, one Series of the New Jersey Fund and one Series of the
Pennsylvania Fund have been authorized, which shares constitute the interests in
the Series described herein. Further series may be added in the future. Each of
the Series' capital stock or shares of beneficial interest has a par value of
$.001 per share and is divided into two classes. Each share of each Series'
Class A and Class D common stock or beneficial interest, as applicable, is equal
as to earnings, assets and voting privileges, except that each class bears its
own separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or applicable state law. Each Fund has
adopted a plan (the "Multiclass Plan") pursuant to Rule 18f-3 under the 1940 Act
permitting the issuance and sales of multiple classes of common stock, or
beneficial interest. In accordance with the Articles of Incorporation or
Declaration of Trust of each Fund, the Board of Directors or Trustees may
authorize the creation of additional classes of common stock or beneficial
interest with such characteristics as are permitted by the Multiclass Plan and
Rule 18f-3. The 1940 Act requires that where more than one class exists, each
class must be preferred over all other classes in respect of assets specifically
allocated to such class. All shares have noncumulative voting rights for the
election of directors or trustees, as applicable. Each outstanding share is
fully paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion or preemptive rights.

It is the intention of the Funds not to hold Annual Meetings of
Shareholders. The Directors or Trustees may call Special Meetings of
Shareholders for action by shareholder vote as may be required by the 1940 Act,
or a Fund's Articles of Incorporation or Declaration of Trust. Pursuant to the
1940 Act, shareholders have to approve the adoption of any management contract,
distribution plan and any changes in fundamental investment policies.
Shareholders also have the right to call a meeting of shareholders for the
purpose of voting on the removal of one or more Directors or Trustees.

The shareholders of a Massachusetts business trust (the Municipal Trust) or
a Pennsylvania trust (the Pennsylvania Fund), could, under certain
circumstances, be held personally liable as partners of its obligations.
However, the Declaration of Trust of each of the Municipal Trust and the
Pennsylvania Fund, contains an express disclaimer of shareholder liability for
acts or obligations of the Trusts and also provides for indemnification and
reimbursement of expenses out of the Trusts, or Series thereof, for any
shareholder held personally liable for obligations of the Trust, or Series
thereof.

THERE IS A POSSIBILITY THAT ONE FUND MIGHT BE LIABLE FOR ANY MISSTATEMENT,
INACCURACY, OR INCOMPLETE DISCLOSURE IN THIS PROSPECTUS CONCERNING ANY OTHER
FUND CONTAINED HEREIN. BASED ON THE ADVICE OF COUNSEL, HOWEVER, THE FUNDS
BELIEVE THAT THE POTENTIAL LIABILITY OF EACH FUND WITH RESPECT TO THE DISCLOSURE
IN THIS PROSPECTUS EXTENDS ONLY TO THE DISCLOSURE RELATING TO SUCH FUND.

56
<PAGE>

TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares of a Series, including
fractions to the third decimal place, as can be purchased at the net asset value
plus a sales load, if applicable, at the close of business on the day payment is
received. If your check received in payment of a purchase of shares is
dishonored for any reason, Seligman Data Corp. may cancel the purchase and may
also redeem additional shares, if any, held in the shareholder's account in an
amount sufficient to reimburse the Fund for any loss it may have incurred and
charge a $10.00 return check fee. Shareholders will receive dividends from
investment income and any distributions from gain realized on investments in
shares or in cash according to the option elected. Dividend and gain options may
be changed by notifying Seligman Data Corp. in writing at least five business
days prior to the payable date. Stock certificates will not be issued unless
requested. Replacement stock certificates and certain waiver of probate
procedures will be subject to a surety fee.

INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. CheckS in the amount specified will be drawn automatically on the
shareholder's bank on the fifth day of each month unless otherwise specified (or
on the prior business day if such day of the month falls on a weekend or
holiday) in which an investment is scheduled and invested at the close of
business on the same date. By utilizing the Invest-A-Check(R) Service to
establish an account, you are agreeing to continue the Service until the Fund's
minimum investment amount is met. If you elect to canceL the Service prior to
meeting the minimum, your account may be subject to closure. If a check is not
honored by the shareholder's bank, or if the value of shares held falls below
the required minimum, the Service will be suspended. In the event that a check
is returned marked "unpaid," Seligman Data Corp. will cancel the purchase,
redeem shares held in your account for an amount sufficient to reimburse a
Series for any loss it may have incurred as a result, and charge a $10.00 return
check fee. This fee will be deducted from the shareholder's account. Service
will be reinstated upon written request indicating that the cause of
interruption has been corrected. The Service may be terminated by the
shareholder or Seligman Data Corp. at any time by written notice. The
shareholder agrees to hold the Funds and their agents free from all liability
which may result from acts done in good faith and pursuant to these terms.
Instructions for establishing Invest-A-Check(R) Service are given on thE Account
Application. In the event the shareholder exchanges all of the shares from one
Seligman Mutual Fund to another, the shareholder must re-apply for the
Invest-A-Check(R) Service in the Seligman Mutual Fund into which the exchange
was made. In the event of a partial exchange, the Invest-A-Check(R) Service will
be continued, subject to the above conditions, in the Seligman Fund from which
the exchange was made. Accounts established in conjunction with the
Invest-A-Check(R) servicE must be accompanied by a check for at least $100 in
connection with the monthly investment option or a check for at least $250 in
connection with the quarterly investment option.

AUTOMATIC CASH WITHDRAWAL SERVICE
A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment and any applicable CDSL.
Redemptions will be made at the asset value at the close of business on the
specific day designated by the shareholder of each month (or on the prior
business day if the day specified falls on a weekend or holiday) less, in the
case of Class D shares, any applicable CDSL. Automatic withdrawals of Class A
shares which were purchased at net asset value because the purchase amount was
$1,000,000 or more may be subject to a CDSL if made within 18 months of purchase
of such shares. Under this Service, a Class D shareholder who requests both
dividends and capital gain distributions in additional shares may withdraw up to
10% of the value of the shareholder's fund account (at the time of election) per
annum, without the imposition of a CDSL. A minimum payment amount of $50 per
cycle is needed to establish this Service. The shareholder may change the amount
of scheduled payments or may suspend payments by written notice to Seligman Data
Corp. at least ten days prior to the effective date of such a change or
suspension. The Service may be terminated by the shareholder or Seligman Data
Corp. at any time by written notice. It will be terminated upon proper
notification of the death or legal incapacity of the shareholder. Continued
payments in excess of dividend income invested will reduce and ultimately
exhaust capital. Withdrawals, concurrent with purchases of shares of this or any
other investment company, will be disadvantageous to you because of the payment
of duplicative sales loads, if applicable. For this reason, additional purchases
of Fund shares are discouraged when the Withdrawal Service is in effect.

LETTER OF INTENT -- CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5%
of the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to the shareholder's
account. Upon completion of the specified minimum purchase within the
thirteen-month period, all shares held in escrow will be deposited into the
shareholder's account or delivered to the shareholder. The shareholder may
include the total asset value of shares of the Seligman Mutual Funds (on which
an initial sales load was paid) owned as of the date of a Letter of Intent
toward the completion of the Letter. If the total amount invested within the
thirteen-month period does not equal or exceed the specified minimum purchase,
you will be requested to pay the difference between the amount of the sales load
paid and the amount of the sales load applicable to the total purchase made. If,
within 20 days following the mailing of a written request, the shareholder has
not paid this additional sales load to Seligman Financial Services, Inc.,
sufficient escrowed shares will be redeemed for payment of the additional sales
load. Shares remaining in escrow after this payment will be released to the
shareholder's account. The intended purchase amount may be increased at any time
during the thirteen-month period by filing a revised Agreement for the same
period, provided that your Dealer furnishes evidence that an amount representing
the reduction in sales load under the new Agreement, which becomes applicable on
purchases already made under the original Agreement, will be refunded to the
shareholder and that the required additional escrowed shares are being furnished
by the shareholder.

Shares of Seligman Cash Management Fund, Inc. which have been acquired by
an exchange of shares of another Seligman Mutual Fund on which there is a sales
load may be taken into account in completing a Letter of Intent, or for Right of
Accumulation. However, shares of the Cash Management Fund which have been
purchased directly may not be used for purposes of determining reduced sales
loads on additional purchases of the other Seligman Mutual Funds.

CHECK REDEMPTION SERVICE
The Check Redemption Service is available to Class A shareholders and to
Class D shareholders with respect to Class D shares held for one year or more.
For Class A shares which were purchased at net asset value because the purchase
amount was $1,000,000 or more, check redemption within 18 months of purchase may
be subject to a CDSL. If shares are held in joint names, all shareholders must
sign the Check Redemption section of the Account Application. All checks will
require all signatures unless a lesser number is indicated in the Check
Redemption section. Accounts in the names of corporations, trusts, partnerships,
etc. must list all authorized signatories. In all cases, each signature
guarantees the genuineness of the other signatures. Checks may not be drawn for
less than $500.

The shareholder hereby authorizes Mellon Bank, N.A. to honor checks drawn
by the shareholder and to effect a redemption of sufficient shares in the
shareholder's account to cover payment of the check and any applicable CDSL.
Shares in one Series cannot be redeemed to cover a check written on another
Series.

Mellon Bank, N.A. shall be liable only for its own negligence. A Fund will
not be liable for any loss, expense or cost arising out of check redemptions.
Each Fund reserves the right to change, modify or terminate this service at any
time upon notification mailed to the address of record of the shareholder(s).

SELIGMAN DATA CORP. WILL CHARGE A $10.00 PROCESSING FEE FOR ANY CHECK
REDEMPTION DRAFT RETURNED AS UNCOLLECTABLE. THIS CHARGE MAY BE DEDUCTED FROM THE
ACCOUNT AGAINST WHICH THE CHECK WAS DRAWN. NO REDEMPTION OF SHARES PURCHASED BY
CHECK (UNLESS CERTIFIED) WILL BE PERMITTED UNTIL THE FUND RECEIVES NOTICE THAT
THE CHECK HAS CLEARED WHICH MAY BE UP TO 15 DAYS FROM THE CREDIT OF THOSE SHARES
TO A SHAREHOLDER'S ACCOUNT.

57
2/98
<PAGE>

STATEMENT OF ADDITIONAL INFORMATION
February 1, 1998
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
100 Park Avenue
New York, New York 10017
New York City Telephone (212) 850-1864
Toll-Free Telephone:
(800) 221-2450 - all continental United States

This Statement of Additional Information expands upon and supplements
the information contained in the current Prospectus of Seligman New Jersey
Municipal Fund, Inc. (the "Fund"), dated February 1, 1998. It should be read in
conjunction with the Prospectus, which may be obtained by writing or calling the
Fund at the above address or telephone numbers. This Statement of Additional
Information, although not in itself a Prospectus, is incorporated by reference
into the Prospectus in its entirety.

The Fund offers two classes of shares. Class A shares may be purchased
at net asset value plus a sales load of up to 4.75%. Class A shares purchased in
an amount of $1,000,000 or more are sold without an initial sales load but are
subject to a contingent deferred sales load ("CDSL") of 1% (of the current net
asset value or the original purchase price, whichever is less) if such shares
are redeemed within eighteen months of purchase. Class D shares may be purchased
at net asset value and are subject to a CDSL of 1% if redeemed within one year.

Each share of Class A and Class D represents an identical legal
interest in the investment portfolio of the Fund and has the same rights except
for certain class expenses and except that Class D shares bear a higher
distribution fee, that generally will cause the Class D shares to have a higher
expense ratio and pay lower dividends than Class A shares. Each Class has
exclusive voting rights with respect to its distribution plan. Although holders
of Class A and Class D shares have identical legal rights, the different
expenses borne by each Class will result in different dividends. The two classes
also have different exchange privileges.

TABLE OF CONTENTS

Page

Investment Objective, Policies and Risks.... 2
Investment Limitations...................... 5
Directors and Officers...................... 6
Management and Expenses..................... 10
Administration, Shareholder Services
and Distribution Plan..................... 12
Portfolio Transactions...................... 12
Purchase and Redemption of Fund Shares...... 12
Distribution Services....................... 15
Taxes....................................... 15

TEC1A

Page

Valuation................................... 16
Performance Information..................... 16
General Information......................... 18
Special Considerations Regarding
Investments In New Jersey
Municipal Securities..................... 18
Financial Statements........................ 31
Appendix A.................................. 33
Appendix B.................................. 36

-1-

<PAGE>

INVESTMENT OBJECTIVE, POLICIES AND RISKS

The Fund is a non-diversified, open-end management investment company or
mutual fund, incorporated in Maryland on March 13, 1987. The Fund seeks to
maximize income exempt from regular federal income tax and New Jersey personal
income tax consistent with preservation of capital and with consideration given
to opportunities for capital gain by investing in investment-grade New Jersey
Municipal Securities. Throughout this Statement of Additional Information, 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 investment are within the four
highest ratings of Moody's Investors Service, Inc. ("Moody's") (Aaa, Aa, A, Baa
for bonds; MIG 1, MIG 2, MIG 3, MIG 4 for notes; P-1 for commercial paper) or
Standard & Poor's Corporation ("S&P") (AAA, AA, A, BBB for bonds; SP-1 - SP-2,
for notes; A-1+, A-1/A-2 for commercial paper). Municipal Securities rated in
these categories are commonly referred to as investment grade. The Fund may
invest in municipal securities which are not rated, or which do not fall into
the credit ratings noted above if, based upon credit analysis by the Manager, it
is believed that such securities are of comparable quality. In determining
suitability of investment in a lower rated or unrated security, the Manager will
take into consideration asset and debt service coverage, the purpose of the
financing, history of the issuer, existence of other rated securities of the
issuer and other considerations as may be relevant, including comparability to
other issuers.

Although securities rated in the fourth rating category are commonly
referred to as investment grade, investment in such securities could involve
risks not usually associated with bonds rated in the first three categories.
Bonds rated BBB by S&P are more likely as a result of adverse economic
conditions or changing circumstance to exhibit a weakened capacity to pay
interest and re-pay principal than bonds in higher rating categories and bonds
rated Baa by Moody's lack outstanding investment characteristics and in fact
have speculative characteristics according to Moody's. Municipal securities in
the fourth rating category of S&P or Moody's will generally provide a higher
yield than do higher rated municipal securities of similar maturities; however,
they are subject to a greater degree of fluctuation in value as a result of
changing interest rates and economic conditions. The market value of the
municipal securities will also be affected by the degree of interest of dealers
to bid for them, and in certain markets dealers may be more unwilling to trade
municipal securities rated in the fourth rating categories than in the higher
rating categories.

A description of the credit rating categories is contained in Appendix A to
this Statement.

From time to time, proposals have been introduced before Congress for the
purpose of restricting or eliminating the federal income tax exemption for
interest on municipal securities and for providing state and local governments
with federal credit assistance. Reevaluation of the Fund's investment objectives
and structure might be necessary in the future due to market conditions which
may result from future changes in the tax laws.

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, without percentage limitations, in certain private activity
bonds, the interest on which is treated as a preference item for purposes of the
alternative minimum tax. See "New Jersey Municipal Securities" in the
Prospectus.

Under the Investment Company Act of 1940 (the "1940 Act"), the
identification of the issuer of municipal bonds, notes or commercial paper
generally depends on the terms and conditions of the obligation. If the assets
and revenues of an agency, authority, instrumentality or other political
subdivision are separate from those of the government creating the subdivision
and the obligation is backed only by the assets and revenues of the subdivision,
such subdivision is regarded as the sole issuer. Similarly, in the case of an
industrial development bond or private activity bond, if the bond is backed only
by the assets and revenues of the non-governmental user, 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.

-2-
<PAGE>

Municipal bonds are issued to obtain funds for various public purposes,
including the construction of a wide range of public facilities such as
airports, bridges, highways, housing, hospitals, mass transportation, schools,
streets, water and sewer works, and gas and electric utilities. Municipal bonds
also may be issued in connection with the refunding of outstanding obligations,
obtaining funds to lend to other public institutions, and for general operating
expenses. Industrial development bonds, which are considered municipal bonds if
the interest paid thereon is exempt from regular federal income tax (such
interest, however, may be subject to the federal alternative minimum tax), are
issued by or on behalf of public authorities to obtain funds to provide various
privately-operated facilities for business and manufacturing, housing, sports,
pollution control, and for airport, mass transit, port and parking facilities.

The two principal classifications of municipal bonds are "general
obligation" and "revenue." General obligation bonds are secured by the issuer's
pledge of its full faith, credit and taxing power for the payment of principal
and interest. Revenue bonds are payable only from the revenues derived from a
particular facility or class of facilities or, in some cases, from the proceeds
of a special excise tax or other specific revenue source. Although industrial
development bonds ("IDBs") are issued by municipal authorities, they are
generally secured by the revenues derived from payments of the industrial user.
The payment of principal and interest on IDBs is dependent solely on the ability
of the user of the facilities financed by the bonds to meet its financial
obligations and the pledge, if any, of real and personal property so financed as
security for such payment.

Municipal Notes generally are used to provide for short-term capital needs
and generally have maturities of five years or less. Municipal Notes include:

1. TAX ANTICIPATION NOTES AND REVENUE ANTICIPATION NOTES. Tax Anticipation
Notes and Revenue Anticipation Notes are issued to finance short-term working
capital needs of political subdivisions. Generally, Tax Anticipation Notes are
issued in anticipation of various tax revenues, such as income, sales and real
property taxes, and are payable from these specific future taxes. Revenue
Anticipation Notes are issued in expectation of receipt of other kinds of
revenue, such as grant or project revenues. Usually political subdivisions issue
notes combining the qualities of both Tax and Revenue Anticipation Notes.

2. BOND ANTICIPATION NOTES. Bond Anticipation Notes are issued to provide
interim financing until long-term financing can be arranged. In most cases, the
long-term bonds then provide the money for the repayment of the Notes.

3. CONSTRUCTION LOAN NOTES. Construction Loan Notes are sold to provide
construction financing. Permanent financing, the proceeds of which are applied
to the payment of Construction Loan Notes, is sometimes provided by a commitment
by the Government National Mortgage Association ("GNMA") to purchase such loan
notes accompanied by a commitment by the Federal Housing Administration to
insure mortgage advances thereunder. In other instances, permanent financing is
provided by commitments of banks to purchase the loan notes.

Issues of Municipal COMMERCIAL PAPER typically represent short-term,
unsecured, negotiable promissory notes. In most cases, Municipal Commercial
Paper is backed by letters of credit, lending agreements, note repurchase
agreements or other credit facility agreements offered by banks or other
institutions.

WHEN-ISSUED SECURITIES. The Fund may purchase municipal securities on a
when-issued basis, in which case delivery and payment normally take place within
45 days after the date of the commitment to purchase. The payment obligation and
the interest rate that will be received on the municipal securities are each
fixed at the time the buyer enters into the commitment. Although the Fund will
only purchase a municipal security on a when-issued basis with the intention of
actually acquiring the securities, the Fund may sell these securities before the
settlement date if it is deemed advisable.

Municipal securities purchased on a when-issued basis and the securities
held in the Fund are subject to changes in market value based upon the public's
perception of the creditworthiness of the issuer and changes, real or
anticipated, in the level of interest rates (which will generally result in
similar changes in value, I.E., both experiencing appreciation when interest
rates decline and depreciation when interest rates rise). Therefore, to the
extent the Fund remains substantially fully invested at the same time that it
has purchased securities on a when-issued basis, there will be a greater
possibility that the market value of the Fund's assets will vary. Purchasing a
municipal security on a when-issued basis can involve a risk that the yields
available in the market when the delivery takes place may be higher than those
obtained on the security so purchased.

-3-

<PAGE>

To the extent that the Fund purchases securities on a when-issued basis, a
segregated account consisting of cash or liquid debt securities equal to the
amount of the when-issued commitments will be established with the Custodian and
marked to market daily, with additional cash or liquid debt securities added
when necessary. When the time comes to pay for when-issued securities, the Fund
will meet its respective obligations from then available cash, the sale of
securities held in the segregated account, the sale of other securities or,
although it would not normally expect to do so, the sale of the when-issued
securities themselves (which may have a value greater or lesser than the Fund's
payment obligations). Sale of securities to meet such obligations carries with
it a potential for the realization of capital gain. As noted elsewhere in the
Prospectus and Statement of Additional Information, such gain is exempt from New
Jersey personal income tax; any such capital gain is not exempt from federal
income tax.

FLOATING RATE AND VARIABLE RATE SECURITIES. The Fund may purchase floating rate
and variable rate securities, including participation interests therein.
Investments in floating or variable rate securities normally will involve
industrial development or revenue bonds which provide that the rate of interest
is set as a specific percentage of a designated base rate, such as of rates on
Treasury Bonds or Bills or the prime rate of a major commercial bank, and that
the Fund can demand payment of the obligations on short notice at par plus
accrued interest, which amount may be more or less than the amount the Fund paid
for them. Variable rate securities provide for a specified periodic adjustment
in the interest rate, while floating rate securities have an interest rate which
changes whenever there is a change in the designated base interest rate.
Frequently such securities are secured by letters of credit or other credit
support arrangements provided by banks. The quality of the underlying creditor
or of the bank, as the case may be, must be equivalent to the standards set
forth with respect to taxable investments below.

STAND-BY COMMITMENTS. The Fund is authorized to acquire standby commitments
issued by banks with respect to securities they hold although the Manager has no
present intention of investing the assets of the Fund in standby commitments.
These commitments would obligate the seller of the standby commitment to
repurchase, at the Fund's option, specified securities at a specified price.

The price which the Fund would pay for municipal securities with 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, the Fund is presently authorized to acquire standby commitments
solely from banks the Manager deems creditworthy. The Directors may, in the
future, consider whether the Fund should be permitted to acquire standby
commitments from dealers. Prior to investing in standby commitments of dealers
the Fund, if it deems necessary based upon the advice of counsel, will apply to
the Securities and Exchange Commission for an exemptive order relating to such
commitments and the valuation thereof. There can be no assurance that the
Securities and Exchange Commission will issue such an order.

Standby commitments with respect to portfolio securities of the Fund with
maturities of less than 60 days which are separate from the underlying portfolio
securities are not assigned a value. The cost of any such 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 the Fund
with maturities of 60 days or more which are separate from the underlying
portfolio securities are valued at fair value as determined in accordance with
procedures established by the Board of 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.

TAXABLE INVESTMENTS. Under normal market conditions, the Fund will attempt to
invest 100% and as a matter of fundamental policy will invest at least 80% of
the value of its net assets in securities the interest on which is exempt from
regular federal income tax and New Jersey personal income tax. Such interest,
however, may be subject to the federal alternative minimum tax. In abnormal
market conditions, if, in the judgment of the Manager, the municipal securities
satisfying the Fund's investment objectives may not be purchased or for
temporary defensive purposes, the Fund may temporarily invest in instruments the
interest on which is exempt from regular federal income tax, but not New Jersey
personal income tax. Such securities

-4-

<PAGE>

would include instruments issued by stats other than New Jersey and having the
same general characteristics as those described under "New Jersey Municipal
Securities above

Also, in abnormal market conditions, the Fund may invest on a temporary
basis in fixed-income securities, the interest on which is only exempt from New
Jersey personal income tax or is not exempt from either federal income tax or
New Jersey personal income tax, pending the investment or reinvestment in
municipal securities of proceeds of sales of shares or sales of portfolio
securities, in order to avoid the necessity of liquidating portfolio investments
to meet redemption of shares by investors or where market conditions due to
rising interest rates or other adverse factors warrant temporary investing for
defensive purposes. Such securities may include securities issued or guaranteed
by the U.S. Government (such as bills, notes and bonds), its agencies,
instrumentalities or authorities; highly-rated corporate debt securities (rated
AA, or better, by Standard & Poor's or Aa3, or better, by Moody's); prime
commercial paper (rated A-1+/A-1 by Standard & Poor's or P-1 by Moody's); and
certificates of deposit of the 100 largest domestic banks in terms of assets
which are subject to regulatory supervision by the U.S. Government or state
governments and the 50 largest foreign banks in terms of assets with branches or
agencies in the United States. Investments in certificates of deposit of foreign
banks and foreign branches of U.S. banks may involve certain risks, including
different regulation, use of different accounting procedures, political or other
economic developments, exchange controls, or possible seizure or nationalization
of foreign deposits.

PORTFOLIO TURNOVER. A change in securities held by the Fund is known as
"portfolio turnover" and may involve the payment by the Fund of dealer spreads
or underwriting commissions, and other transaction costs, on the sale of
securities, as well as on the reinvestment of the proceeds in other securities
and may also result in the realization of short-term capital gains or losses.
Portfolio turnover rate for a fiscal year is the ratio of the lesser of
purchases or sales of portfolio securities to the monthly average of the value
of portfolio securities. Securities whose maturity or expiration date at the
time of acquisition were one year or less are excluded from the calculation.
Long-term U.S. Government securities are not excluded from the calculation. For
the years ended September 30, 1997 and 1996, the portfolio turnover rates were
20.22% and 25.65%, respectively. It is estimated that the portfolio turnover
rate of the Fund will not exceed 100%. The Fund's portfolio turnover rate will
not be a limiting factor when the Fund deems it desirable to sell or purchase
securities.

INVESTMENT LIMITATIONS

Under the Fund's fundamental policies, which cannot be changed except by
vote of a majority of the outstanding voting securities of the Fund, the Fund
may not:

- - Borrow money, except from banks for temporary purposes (such as meeting
redemption requests or for extraordinary or emergency purposes but not for
the purchase of portfolio securities) in an amount not to exceed 10% of the
value of its total assets at the time the borrowing is made (not including
the amount borrowed). The Fund will not purchase additional portfolio
securities if the Fund has outstanding borrowings in excess of 5% of the
value of its total assets;

- - Mortgage or pledge any of its assets, except to secure permitted borrowings
noted above;

- - Invest more than 25% of total assets at market value in any one industry;
except that municipal securities and securities of the U.S. Government, its
agencies and instrumentalities are not considered an industry for purposes of
this limitation.

- - 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;

-5-
<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.

As a matter of policy, (i) 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
U.S. Government or its agencies or instrumentalities) at the close of each
quarter of its taxable year and (ii) with respect to 75% of the Fund's assets,
no revenue bond will be purchased by the Fund if as a result of such purchase
more than 5% of the Fund's assets would be invested in the revenue bonds of a
single issuer. These policies are not fundamental and may be changed by the
Directors without shareholder approval.

Under the 1940 Act a "vote of a majority of the outstanding voting
securities" of the Fund means the affirmative vote of the lesser of (1) more
than 50% of the outstanding shares of the Fund or (2) 67% or more of the shares
of the Fund present at a shareholders' meeting if more than 50% of the
outstanding shares of the Fund are represented at the meeting in person or by
proxy.

DIRECTORS AND OFFICERS

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.

WILLIAM C. MORRIS* Director, Chairman of the Board, Chief Executive Officer and
(59) Chairman of the Executive Committee

Chairman, J. & W. Seligman & Co. Incorporated, investment
managers and advisers; Chairman and Chief Executive Officer,
the Seligman Group of Investment Companies; Chairman,
Seligman Financial Services, Inc., broker/dealer; Seligman
Services, Inc., broker/dealer; and Carbo Ceramics Inc.,
ceramic proppants for oil and gas industry; Director,
Seligman Data Corp., shareholder service agent; Kerr-McGee
Corporation, diversified energy company; and Sarah Lawrence
College; and a Member of the Board of Governors of the
Investment Company Institute; formerly, President, J. & W.
Seligman & Co. Incorporated, Chairman, Seligman Advisors,
Inc., advisers; Seligman Holdings, Inc., holding company;
Seligman Securities, Inc., broker/dealer and J. & W.
Seligman Trust Company, trust company; and Director, Daniel
Industries, Inc., manufacturer of oil and gas metering
equipment.

-6-

<PAGE>

BRIAN T. ZINO* Director, President and Member of the Executive Committee
(45)
Director and President, J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Director or Trustee, the
Seligman Group of Investment Companies; President (with the
exception of Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc.) and Director or
Trustee, the Seligman Group of Investment Companies;
Chairman and President, Seligman Data Corp., shareholder
service agent; Director, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer; and
Seligman Henderson Co., advisers; formerly, Director,
Seligman Advisors, Inc., advisers; Seligman Securities,
Inc., broker/dealer; and J. & W. Seligman Trust Company,
trust company.

RICHARD R. SCHMALTZ Director and Member of the Executive Committee
(57)
Managing Director, Director of Investments, J. & W. Seligman
& Co. Incorporated; Director of Seligman Henderson Co. and
Trustee Emeritus of Colby College; formerly, Director,
Investment Research at Neuberger & Berman from May 1993 to
September 1996 and Executive Vice President of McGlinn
Capital from July 1987 to May 1993.

JOHN R. GALVIN Director
(68)

Dean, Fletcher School of Law and Diplomacy at Tufts
University; Director or Trustee, the Seligman Group of
Investment Companies; Chairman, American Council on Germany;
a Governor of the Center for Creative Leadership; Director,
USLIFE Corporation, life insurance; Raytheon Co.,
electronics; National Defense University; and the Institute
for Defense Analysis; formerly, Ambassador, U.S. State
Department for negotiations in Bosnia; Distinguished Policy
Analyst at Ohio State University and Olin Distinguished
Professor of National Security Studies at the United States
Military Academy. From June, 1987 to June, 1992, he was the
Supreme Allied Commander, Europe and the Commander-in-Chief,
United States European Command. Tufts University, Packard
Avenue, Medford, MA 02155

ALICE S. ILCHMAN Director
(62)
President, Sarah Lawrence College; Director or Trustee, the
Seligman Group of Investment Companies; and the Committee
for Economic Development; and Chairman, The Rockefeller
Foundation, charitable foundation; formerly, Trustee, The
Markle Foundation, philanthropic organization; and Director,
NYNEX, telephone company; and International Research and
Exchange Board, intellectual exchanges. Sarah Lawrence
College, Bronxville, New York 10708

FRANK A. McPHERSON Director
(64)
Director, various corporations; Director or Trustee, the
Seligman Group of Investment Companies; Director of
Kimberly-Clark Corporation, consumer products; Bank of
Oklahoma Holding Company; Oklahoma City Chamber of Commerce;
Baptist Medical Center; Oklahoma Chapter of the Nature
Conservancy; Oklahoma Medical Research Foundation; and
National Boys and Girls Clubs of America; Chairman of
Oklahoma City Public Schools Foundation; and Member of the
Business Roundtable and National Petroleum Council;
formerly, Chairman of the Board and Chief Executive Officer,
Kerr-McGee Corporation, energy and chemicals. 123 Robert S.
Kerr Avenue, Oklahoma City, OK 73102

-7-

<PAGE>

JOHN E. MEROW Director
(68)
Retired Chairman and Senior Partner, Sullivan & Cromwell,
law firm; Director or Trustee, the Seligman Group of
Investment Companies; Director, Commonwealth Industries,
Inc.; the Foreign Policy Association; Municipal Art Society
of New York; the U.S. Council for International Business;
and The New York and Presbyterian Hospital; Chairman,
American Australian Association; The New York and
Presbyterian Hospital Care Network, Inc.; Vice-Chairman, the
U.S.-New Zealand Council; and Member of the American Law
Institute and Council on Foreign Relations. 125 Broad
Street, New York, NY 10004

BETSY S. MICHEL Director
(55)
Attorney; Director or Trustee, the Seligman Group of
Investment Companies; Trustee, Geraldine R. Dodge
Foundation, charitable foundation; Chairman of the Board of
Trustees of St. George's School (Newport, RI); formerly,
Director, the National Association of Independent Schools
(Washington, DC), education. St. Bernard's Road, P.O. Box
449, Gladstone, NJ 07934

JAMES C. PITNEY Director
(71)
Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm;
Director or Trustee, the Seligman Group of Investment
Companies; formerly, Director, Public Service Enterprise
Group, public utility. Park Avenue at Morris County, P.O.
Box 1945, Morristown, NJ 07962-1945

JAMES Q. RIORDAN Director
(70)
Director, various corporations; Director or Trustee, the
Seligman Group of Investment Companies; The Houston
Exploration Company; The Brooklyn Museum; The Brooklyn Union
Gas Company; The Committee for Economic Development; Dow
Jones & Co. Inc. and Public Broadcasting Service; formerly,
Co-Chairman of the Policy Council of the Tax Foundation;
Director, Tesoro Petroleum Companies, Inc.; and Director and
President, Bekaert Corporation. 675 Third Avenue, Suite
3004, New York, NY 10017

ROBERT L. SHAFER Director
(65)

Director, various corporations; Director or Trustee, the
Seligman Group of Investment Companies; and USLIFE
Corporation, life insurance; formerly, Vice President,
Pfizer Inc., pharmaceuticals. 235 East 42nd Street, New
York, NY 10017

JAMES N. WHITSON Director
(62)
Executive Vice President, Chief Operating Officer and
Director, Sammons Enterprises, Inc.; Director or Trustee,
the Seligman Group of Investment Companies; C-SPAN; and
Commscope, manufacturer of coaxial cables; formerly,
Director, Red Man Pipe and Supply Company, piping and other
materials. 300 Crescent Court, Suite 700, Dallas, TX 75202

-8-

<PAGE>

THOMAS G. MOLES Vice President and Senior Portfolio Manager
(54)
Director, Managing Director, (formerly, Vice President and
Portfolio Manager), J. & W. Seligman & Co. Incorporated,
investment managers and advisers; Vice President and
Portfolio Manager, three other open-end investment companies
in the Seligman Family of Mutual Funds; President and
Portfolio Manager, Seligman Quality Municipal Fund, Inc. and
Seligman Select Municipal Fund, Inc., closed-end investment
companies; Director, Seligman Financial Services, Inc.,
broker/dealer; Seligman Services, Inc., broker/dealer;
formerly, Director, Seligman Securities, Inc., broker/dealer
and J. & W. Seligman Trust Company, trust company.

LAWRENCE P. VOGEL Vice President
(41)

Senior Vice President, Finance, J. & W. Seligman & Co.
Incorporated, investment managers and advisers; Seligman
Financial Services, Inc., broker/dealer; and Seligman Data
Corp., shareholder service agent; Vice President, the
Seligman Group of Investment Companies and Seligman
Services, Inc., broker/dealer; and Treasurer, Seligman
Henderson Co., advisers; formerly, Senior Vice President,
Finance, Seligman Advisors, Inc., advisers; and Treasurer,
Seligman Holdings, Inc., holding company.

FRANK J. NASTA Secretary
(33)

Senior Vice President, Law and Regulation and Corporate
Secretary, J. & W. Seligman & Co. Incorporated, investment
managers and advisers; Secretary, the Seligman Group of
Investment Companies; Seligman Financial Services, Inc.,
broker/dealer; Seligman Henderson Co., advisers; Seligman
Services, Inc., broker/dealer; and Seligman Data Corp.,
shareholder service agent; formerly, Senior Vice President,
Law and Regulation and Corporate Secretary, Seligman
Advisors, Inc., advisers; and an attorney at Seward &
Kissel, law firm.

THOMAS G. ROSE Treasurer
(40)

Treasurer, the Seligman Group of Investment Companies and
Seligman Data Corp., shareholder service agent.

The Executive Committee of the Board acts on behalf of the Board between
meetings to determine the value of securities and assets owned by the Fund for
which no market valuation is available and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.

Compensation Table

Pension or Total Compensation
Aggregate Retirement Benefits from Fund 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
Ronald T. Schroeder, Director** N/A N/A N/A
Fred E. Brown, Director Emeritus*** N/A N/A N/A
John R. Galvin, Director $1,586.48 N/A $67,000.00

-9-

<PAGE>

<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Fund 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>
Alice S. Ilchman, Director $1,540.13 N/A $65,000.00
Frank A. McPherson, Director 1,550.77 N/A 66,000.00
John E. Merow, Director 1,540.13 N/A 65,000.00
Betsy S. Michel, Director 1,586.48 N/A 67,000.00
James C. Pitney, Director 1,529.49 N/A 64,000.00
James Q. Riordan, Director 1,575.84 N/A 66,000.00
Robert L. Shafer, Director 1,575.84 N/A 66,000.00
James N. Whitson, Director 1,561.41(d) N/A 67,000.00(d)

</TABLE>

(1) For the Fund's fiscal year ended September 30, 1997. 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) As defined in the Fund's Prospectus, the Seligman Group of Investment
Companies consists of eighteen investment companies.

** Retired May 15, 1997.

*** Retired as Director and designated Director Emeritus on March 20, 1997.

(d) Deferred.

The Fund has a compensation arrangement under which outside directors may
elect to defer receiving their fees. Under this arrangement, interest is accrued
on the deferred balances. The annual cost of such fees and interest is included
in the director's fees and expenses, and the accumulated balance thereof is
included in "Liabilities" in the Fund's financial statements. The total amount
of deferred compensation (including interest) in respect of the Fund payable to
Mr. Whitson as of September 30, 1997 was $10,850. Messrs. Merow and Pitney no
longer defer current compensation; however, they have accrued deferred
compensation in the amounts of $20,536 and $9,844 as of September 30, 1997. The
Fund has applied for and received exemptive relief that would permit a director
who has elected deferral of his or her fees to choose a rate of return equal to
either (i) the interest rate on short-term Treasury bills, or (ii) the rate of
return on the shares of any of the investment companies advised by the manager,
as designated by the director. The Fund may, but is not obligated to, purchase
shares of such investment companies to hedge its obligations in connection with
this deferral arrangement.

Directors and officers of the Fund are also trustees, directors and officers
of some or all of the other investment companies in the Seligman Group.

Directors and officers of the Fund as a group owned less than 1% of the
Class A shares of the Fund at January 2, 1998. No Directors or officers owned
Class D shares of the Fund at that date.

As of January 2, 1998, 1,099,456 Class A shares, or 13.37% of the Fund's
Class A capital stock then outstanding, were registered in the name of MLPF&S
For The Benefit Of Its Customers, 4800 Deer Lake Drive East, Jacksonville, FL
32246.

MANAGEMENT AND EXPENSES

Under the Management Agreement, dated December 29, 1988, subject to the
control of the Directors, the Manager manages the investment of the assets of
the Fund, including making purchases and sales of portfolio securities
consistent with the Fund's investment objectives and policies, and administers
its business and other affairs. The Manager provides the Fund with such office
space, administrative and other services and executive and other personnel as
are necessary for Fund operations. The Manager pays all of the compensation of
Directors of the Fund who are employees or consultants of the Manager

-10-
<PAGE>

and the officers and employees of the Fund. The Manager also provides senior
management for Seligman Data Corp., the Fund's shareholder service agent. The
Manager is entitled to receive a management fee from the Fund, calculated daily
and payable monthly, equal to 0.50% of the Fund's average daily net assets on an
annual basis. During the fiscal year ended September 30, 1995 the Manager, in
its discretion, waived a portion of its fees for the Fund. For the fiscal years
ended September 30, 1997, 1996 and 1995, the management fees amounted to
$325,747, $356,576 and $331,962, respectively, which represents .50%, .50% and
.45%, respectively, of the average daily net assets of the Fund.

The Fund pays all its expenses other than those specifically assumed by the
Manager. These expenses include brokerage commissions, if any, interest charges,
fees and expenses of independent attorneys and auditors, taxes and governmental
fees including fees and expenses of qualifying the Fund and its shares under
federal and state securities laws, cost of stock certificates and expenses of
issue, sale, repurchase or redemption of shares, expenses of printing and
distributing reports, notices and proxy materials to existing shareholders,
expenses of printing and filing reports and other documents filed with
governmental agencies, expenses of shareholders' meetings, expenses of corporate
data processing and related services, shareholder recordkeeping and shareholder
account services, fees and disbursements of transfer agents and custodians,
expenses of disbursing dividends and distributions, fees payable under the
Administration, Shareholder Services and Distribution Plan described below, fees
and expenses of Directors of the Fund not employed by or serving as a Director
of the Manager or its affiliates, membership dues in the Investment Company
Institute, insurance premiums and extraordinary expenses such as litigation
expenses.

The Management Agreement was unanimously approved by the 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) the Manager 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 the Manager and will terminate
automatically in the event of its assignment. The Fund has agreed to change its
name upon termination of its Management Agreement if continued use of the name
would cause confusion in the context of the Manager's business.

The Manager is a successor firm to an investment banking business founded in
1864 which has thereafter provided investment services to individuals, families,
institutions and corporations. On December 29, 1988 a majority of the
outstanding voting securities of the Manager was purchased by Mr. William C.
Morris and a simultaneous recapitalization of the Manager occurred. See Appendix
B for further history of the Manager.

Officers, directors and employees of the Manager are permitted to engage in
personal securities transactions, subject to the Manager's Code of Ethics (the
"Ethics Code"). The Ethics Code proscribes certain practices with regard to
personal securities transactions and personal dealings, provides a framework for
the reporting and monitoring of personal securities transactions by the
Manager's Compliance Officer, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Ethics Code. The Ethics
Code prohibits each of the officers, directors and employees (including all
portfolio managers) of the Manager from purchasing or selling any security that
the officer, director or employee knows or believes (i) was recommended by the
Manager for purchase or sale by any client, including the Fund, within the
preceding two weeks, (ii) has been reviewed by the Manager for possible purchase
or sale within the preceding two weeks, (iii) is being purchased or sold by any
client, (iv) is being considered by a research analyst, (v) is being acquired in
a private placement, unless prior approval has been obtained from the Manager's
Compliance Officer, or (vi) is being acquired during an initial or secondary
public offering. The Ethics Code also imposes a strict standard of
confidentiality and requires portfolio managers to disclose any interest they
may have in the securities or issuers that they recommend for purchase by any
client.

The Ethics Code also prohibits (i) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages and (ii) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.

-11-

<PAGE>

Officers, directors and employees are required, except under very limited
circumstances, to engage in personal securities transactions through the
Manager's order desk. The order desk maintains a list of securities that may not
be purchased due to a possible conflict with clients. All officers, directors
and employees are also required to disclose all securities beneficially owned by
them on December 31 of each year.

ADMINISTRATION, SHAREHOLDER SERVICES AND DISTRIBUTION PLAN

An Administration, Shareholder Services and Distribution Plan (the "Plan")
for the Fund under Section 12(b) of the 1940 Act and Rule 12b-1 thereunder has
been in effect since the inception of the Fund.

The 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 Plan or in any agreement related to the Plan (the
"Qualified Directors") and on December 16, 1988 by the shareholders of the Fund.
Amendments to the Plan were approved in respect of the Class D shares on
November 18, 1993 by the Directors, including a majority of the Qualified
Directors, and became effective with respect to the Class D shares on February
1, 1994. The Plan will continue in effect until December 31 of each year so long
as such continuance is approved annually by vote of both the Directors of the
Fund and the Qualified Directors, cast in person at a meeting called for the
purpose of voting on such approval. The Plan may not be amended to increase
materially the amounts payable under the terms of the Plan without the approval
of a majority of the outstanding voting securities of the Fund and no material
amendment to the Plan may be made except with the approval of a majority of both
the Directors and the Qualified Directors in accordance with the applicable
provisions of the 1940 Act and the rules thereunder.

The 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) under the 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.

PORTFOLIO TRANSACTIONS

No brokerage commissions were paid by the Fund during the fiscal years ended
September 30, 1997, 1996 or 1995. When the Fund or two or more of the investment
companies in the Seligman Group or other investment advisory clients of the
Manager desire to buy or sell the same security at the same time, the securities
purchased or sold are allocated by the Manager in a manner believed to be
equitable to each. There may be possible advantages or disadvantages of such
transactions with respect to price or the size of positions already obtainable
or saleable.

PURCHASE AND REDEMPTION OF FUND SHARES

The Fund issues two classes of shares: Class A shares may be purchased at a
price equal to the next determined net asset value per share, plus a sales load.
Class A shares purchased at net asset value without an initial sales load due to
the size of the purchase are subject to a CDSL of 1% if such shares are redeemed
within eighteen months of purchase. Class D shares may be purchased at a price
equal to the next determined net asset value without an initial sales load, but
a CDSL may be charged on certain redemptions within one year of purchase. See
"Alternative Distribution System," "Purchase of Shares," and "Redemption of
Shares" in the Fund's Prospectus.

SPECIMEN PRICE MAKE-UP

Under the current distribution arrangements between the Fund and the
Distributor, Class A shares are sold at a maximum sales load of 4.75% and Class
D shares are sold at net asset value.* Using the Fund's net asset value at
September 30, 1997, the maximum offering price of the Fund's shares is as
follows:

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<PAGE>

CLASS A

Net asset value per share.......................................... $ 7.56

Maximum sales load (4.75% of offering price)........................ .38
------

Maximum offering price per share................................... $ 7.94
======

CLASS D

Net asset value and maximum offering price per share*.............. $ 7.64
======

- ----------------
* Class D shares are subject to a CDSL of 1% on redemptions within one year
of purchase. Class A shares purchased at net asset value due to the size of
the purchase are subject to a CDSL of 1% on redemption within eighteen
months of purchase of such shares. See "Redemption of Shares" in the
Prospectus.

CLASS A SHARES - REDUCED INITIAL SALES LOADS

REDUCTIONS AVAILABLE. Shares of any Seligman Mutual Fund sold with an initial
sales load in a continuous offering will be eligible for the following
reductions:

VOLUME DISCOUNTS are provided if the total amount being invested in Class A
shares of the Fund alone, or in any combination of shares of the other mutual
funds in the Seligman Group which are sold with an initial sales load, reaches
levels indicated in the sales load schedule set forth in the Prospectuses.

THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in Class A shares of the Fund and shares of other Seligman Mutual Funds
sold with an initial sales load with the total net asset value of shares of
those Seligman Mutual Funds already owned that were sold with an initial sales
load and the total net asset value of shares of Seligman Cash Management Fund
which were acquired through an exchange of shares of another Seligman Mutual
Fund on which there was an initial sales load at the time of purchase to
determine reduced sales loads in accordance with the schedule in the
Prospectuses. The value of the shares owned, including the value of shares of
Seligman Cash Management Fund acquired in an exchange of shares of another
Seligman Mutual Fund on which there is an initial sales load at the time of
purchase will be taken into account in orders placed through a dealer, however,
only if Seligman Financial Services, Inc. ("SFSI") is notified by the investor
or a dealer of the amount owned at the time a purchase is made and is furnished
sufficient information to permit confirmation.

A LETTER OF INTENT allows an investor to purchase Class A shares of the
Fund over a 13-month period at reduced initial sales loads in accordance with
the schedule in the Prospectuses, based on the total amount of Class A shares
that the letter states the investor intends to purchase plus the total net asset
value of shares that were sold with an initial sales load of the other Seligman
Mutual Funds already owned and the total net asset value of shares of Seligman
Cash Management Fund which were acquired through an exchange of shares of
another Seligman Mutual Fund on which there was an initial sales load at the
time of purchase. Reduced initial sales loads also may apply to purchases made
within a 13-month period starting up to 90 days before the date of execution of
a letter of intent. For more information concerning the terms of the letter of
intent, see "Terms and Conditions - Letter of Intent" in the Fund's Prospectus.

Class A shares purchased without an initial sales load in accordance with
the sales load schedule in the Fund's Prospectus, or pursuant to a Volume
Discount, Right of Accumulation or Letter of Intent are subject to a CDSL of 1%
on redemptions of such shares within eighteen months of purchase.

PERSONS ENTITLED TO REDUCTIONS. Reductions in initial sales loads apply to
purchases of Class A shares of the Fund by a "single person," including an
individual; members of a family unit comprising husband, wife and minor
children; or a trustee or other fiduciary purchasing for a single fiduciary
account. Employee benefit plans qualified under Section 401 of the

-13-

<PAGE>

Internal Revenue Code of 1986, as amended (the "Code"), municipal organizations
under Section 501 (c)(3) or (13) of the Code, and non-qualified employee benefit
plans that satisfy uniform criteria are considered "single persons" for this
purpose. The uniform criteria are as follows:

1. Employees must authorize the employer, if requested by the Fund, to receive
in bulk and to distribute to each participant on a timely basis the Fund
prospectuses, reports and other shareholder communications.

2. Employees participating in a plan will be expected to make regular periodic
investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12
months and 30 days after the last regular investment in his account. In such
event, the dropped participant would lose the discount on share purchases to
which the plan might then be entitled.

3. The employer must solicit its employees for participation in such an
employee benefit plan or authorize and assist an investment dealer in making
enrollment solicitations.

ELIGIBLE EMPLOYEE BENEFIT PLANS. The table of sales loads in the Prospectus
applies to sales to "eligible employee benefit plans" (as defined in the
Prospectus) except that the Fund may sell shares at net asset value to "eligible
employee benefit plans," which have at least (i) $500,000 invested in the
Seligman Mutual Funds or (ii) 50 eligible employees to whom such plan is made
available. Such sales must be made in connection with a payroll deduction system
of plan funding or other systems acceptable to Seligman Data Corp., the Fund's
shareholder service agent. Such sales are believed to require limited sales
effort and sales related expenses and therefore are made at net asset value.
Contributions or account information for plan participation also should be
transmitted to Seligman Data Corp. by methods which it accepts. Additional
information about "eligible employee benefit plans" is available from investment
dealers or SFSI.

FURTHER TYPES OF REDUCTIONS. Class A shares may be issued without an initial
sales load in connection with the acquisition of cash and securities owned by
other investment companies and personal holding companies to financial
institution trust departments, to registered investment advisers exercising
investment discretionary authority with respect to the purchase of Fund shares,
or pursuant to sponsored arrangements with organizations which make
recommendations to, or permit group solicitation of, its employees, members or
participants in connection with the purchase of shares of the Fund, to separate
accounts established and maintained by an insurance company which are exempt
from registration under Section 3(c)(11) of the 1940 Act, to registered
representatives and employees (and their spouses and minor children) of any
dealer that has a sales agreement with SFSI; to financial institution trust
departments; to registered investment advisers exercising discretionary
investment authority with respect to the purchase of Fund shares; to accounts of
financial institutions or broker/dealers that charge account management fees,
provided the manager or one of its affiliates has entered into an agreement with
respect to such accounts; pursuant to sponsored arrangements with organizations
which make recommendations to or permit group solicitations of, its employees,
members or participants in connection with the purchase of shares of the Fund;
to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors; and to "eligible employee
benefit plans" which have at least (i) $500,000 invested in the Seligman Mutual
Funds or (ii) 50 eligible employees to whom such plan is made available.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.

Class A shares may be sold at net asset value to present and retired
trustees, directors, officers, employees (and family members, as defined in the
Prospectus) of the Fund, the other investment companies in the Seligman Group,
the Manager and other companies affiliated with the Manager. Such sales also may
be made to employee benefit plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate. These sales may be made for investment purposes only,
and shares may be resold only to the Fund.

Class A shares may be sold at net asset value to these persons since such
sales require less sales effort and lower sales related expenses as compared
with sales to the general public.

PAYMENT IN SECURITIES. In addition to cash, the Fund may accept securities in
payment for Fund shares sold at the applicable public offering price. Generally,
the Fund will only consider accepting securities (1) to increase its holdings in
a portfolio se-

-14-

<PAGE>

curity of the Fund, or (2) if the Manager determines that the offered securities
are a suitable investment in a sufficient amount for efficient management.
Although no minimum has been established, it is expected that the Fund would not
accept securities with a value of less than $100,000 per issue in payment for
shares. The Fund may reject in whole or in part offers to pay for shares with
securities, may require partial payment in cash for applicable sales loads, and
may discontinue accepting securities as payment for shares at any time without
notice. The Fund has no present intention of accepting securities in payment for
shares.

MORE ABOUT REDEMPTIONS. The procedures for redemption of Fund shares under
ordinary circumstances are set forth in the Prospectus. Payment may be made in
securities or may be postponed, or the right of redemption suspended for more
than seven days, if the orderly liquidation of portfolio securities is prevented
by the closing of, or restricted trading in, the over-the-counter markets in
which New Jersey Municipal Securities are primarily traded due to an emergency
or order of the Securities and Exchange Commission. If payment were to be made
in securities, shareholders receiving securities could incur certain transaction
costs in receiving these securities.

DISTRIBUTION SERVICES

SFSI, an affiliate of the Manager, acts as general distributor of the shares
of the Fund and of the other mutual funds in the Seligman Group. As general
distributor of the Fund's capital stock, SFSI allows commissions to all dealers
of up to 4.25% on purchases of Class A shares of the Fund to which the 4.75%
sales load applies. SFSI receives the balance of sales loads and any CDSL, if
applicable, paid by investors. The Fund and SFSI are parties to a Distributing
Agreement dated January 1, 1993.

The total sales loads paid by shareholders of the Fund for the fiscal years
ended September 30, 1997, 1996 and 1995 amounted to $96,284, $110,566 and
$154,232, respectively, of which $84,854, $97,644 and $135,667, respectively,
was paid as commissions to dealers. For the years ended September 30, 1997, 1996
and 1995, SFSI retained CDSL charges amounting to $260, $91 and $1,586,
respectively.

Effective April 1, 1995, Seligman Services, Inc. ("SSI"), an affiliate of the
Manager, became eligible to receive commissions from certain sales of Fund
shares as well as distribution and service fees pursuant to the Plan. For the
years ended September 30, 1997 and 1996 and for the period ended September 30,
1995, SSI received commissions of $2,451, $611 and $135, respectively, from
sales of Fund shares. SSI also received distribution and service fees of $9,787,
$8,659 and $4,199, respectively, pursuant to the Plan.

TAXES

The Fund intends to qualify and elect to be treated as a regulated investment
company under the Code and thus to be relieved of federal income tax on amounts
distributed to shareholders; provided that it distributes at least 90% of its
net investment income and net short-term capital gains, if any.

Qualification as a regulated investment company under the Code requires among
other things, that (a) at least 90% of the annual gross income of the Fund be
derived from dividends, interest, payments with respect to securities loans and
gains from the sale or other disposition of stocks, securities or currencies, or
other income (including but not limited to gains from options, futures, as
forward contracts) derived with respect to its business of investing in such
stocks, securities or currencies; and (b) the Fund diversify its holdings so
that, at the end of each quarter of the taxable year, (i) at least 50% of the
market value of the Fund's assets is represented by cash, United States
Government securities and other securities limited in respect of any one issuer
to an amount not greater than 5% of the Fund's assets and 10% of the outstanding
voting securities of such issuer, and (ii) not more than 25% of the value of its
assets is invested in the securities of any one issuer (other than U.S.
Government securities).

As a qualified investment fund under New Jersey law, the Fund will not be
subject to New Jersey corporate taxes with respect to any taxable income
currently distributed to its shareholders. Shareholders who are subject to New
Jersey personal income tax will be exempt from New Jersey personal income tax
with respect to distributions paid by the Fund so long as it qualifies as such a
qualified investment fund.

-15-

<PAGE>

VALUATION

The net asset value per share of each class of the Fund is determined as of
the close of regular trading on the New York Stock Exchange ("NYSE") (normally,
4:00 p.m., Eastern time, on each day that the NYSE is open for 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 net asset
value for each class on each day in which there is a sufficient degree of
trading in the Fund's portfolio securities that the net asset value of Fund
shares might be materially affected. Net asset value per share for a class is
computed by dividing such class' share of the value of the net assets of the
Fund (i.e., the value of its assets less liabilities) by the total number of
outstanding shares of such class. All expenses of the Fund, including the
Manager's fee, are accrued daily and taken into account for the purpose of
determining net asset value. The net asset value of Class D shares will
generally be lower than the net asset value of Class A shares as a result of the
higher distribution fee with respect to Class D shares. It is expected, however,
that the net asset value per share of the two classes will tend to converge
immediately after the recording of dividends, which will differ by approximately
the amount of the distribution and other class expenses accrual differential
between the classes.

Municipal securities will be valued on the basis of quotations provided by an
independent pricing service, approved by the Directors, 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 Directors.
Short-term notes having remaining maturities of 60 days or less are generally
valued at amortized cost.

Generally, trading in certain securities such as municipal securities,
corporate bonds, U.S. Government securities, and money market instruments is
substantially completed each day at various times prior to the close of the
NYSE. The values of such securities used in determining the net asset value of
the Fund's shares are computed as of such times. Occasionally, events affecting
the value of such securities may occur between such times and the close of the
NYSE which will not be reflected in the computation of the Fund's net asset
value. If events materially affecting the value of such securities occur during
such period, then these securities and other assets will be valued at their fair
market value as determined in good faith by the Board of Directors.

PERFORMANCE INFORMATION

The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class A shares was 4.15%. 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, 1997, which was
the last day of this period. The average number of Class A shares of the Fund
was 8,315,861 which was the average daily number of shares outstanding during
the 30-day period that were eligible to receive dividends. Income was computed
by totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period (which includes fees charged pursuant to the Fund's 12b-1
plan). The 30-day yield was then annualized on a bond-equivalent basis assuming
semi-annual reinvestment and compounding of net investment income, as described
in the Prospectus.

The tax equivalent annualized yield for the 30-day period ended September 30,
1997 for the Fund's Class A shares was 7.34%. 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 regular federal and state income tax purposes was determined. This
portion of the yield was then divided by one minus 43.45% (43.45% being the
assumed maximum combined federal and state income tax rate for individual
taxpayers subject to New Jersey personal income taxes. Then the small portion of
the yield attributable to securities, the income of which was exempt only for
federal income tax purposes was determined. This portion of the yield was then
divided by one minus 39.6% (39.6% being the maximum federal income tax rate).
These two calculations were then added to the portion of the yield, if any, that
was not attributable to securities, the income of which was NOT tax exempt.

The average annual total return for the one-year period ended September 30,
1997 for the Fund's Class A shares was 2.82%; for the five-year period ended
September 30, 1997 was 5.35%; and since inception through the period ended on

-16-

<PAGE>

September 30, 1997 was 6.95%. These returns were computed by assuming a
hypothetical initial payment of $1,000. From this $1,000, the maximum sales load
of $47.50 (4.75% of public offering price) was deducted. It was then assumed
that all of the dividends and distributions paid by the Fund over the relevant
time period were reinvested. It was then assumed that at the end of each of
these periods, the entire amount was redeemed. The average annual total return
was then calculated by calculating the annual rate required for the initial
payment to grow to the amount which would have been received upon redemption
(i.e., the average annual compound rate of return).

The annualized yield for the 30-day period ended September 30, 1997 for the
Fund's Class D shares was 3.61%. The annualized yield was computed as for Class
A shares by dividing the net investment income per share earned during this
30-day period by the maximum offering price per share (i.e., the net asset
value) on September 30, 1997, which was the last day of this period. The average
number of Class D shares were 168,372 which was the average daily number of
shares outstanding during the 30-day period that were eligible to receive
dividends.

The tax equivalent annualized yield for the 30-day period ended September
30, 1997 for the Fund's Class D shares was 6.38%. The tax equivalent annualized
yield was computed as discussed above for Class A shares.

The average annual total return for the one-year period ended September 30,
1997 for the Fund's Class D shares was 6.11%, and since inception through the
period ended September 30, 1997 was 3.93%. These returns were computed by
assuming a hypothetical initial payment of $1,000 in Class D shares and that all
of the dividends and distributions by the Fund's Class D shares over the
relevant time period were reinvested. It was then assumed that at the end of
each period, the entire amount was redeemed, subtracting the 1% CDSL, if
applicable.

The tables below illustrate the total returns on a $1,000 investment in Class
A and Class D shares of the Fund from the commencement of their operations
through September 30, 1997, assuming investment of all dividends and capital
gain distributions.

<TABLE>
<CAPTION>
CLASS A SHARES

VALUE OF CAPITAL VALUE TOTAL VALUE
YEAR/PERIOD INITIAL GAIN OF OF TOTAL
ENDED 1 INVESTMENT 2 DISTRIBUTIONS DIVIDENDS INVESTMENT2 RETURN1,3
- ------- ------------ ------------- --------- ----------- ---------
<S> <C> <C> <C> <C>
9/30/88 $ 931 $ -- $ 40 $ 971
9/30/89 956 -- 111 1,067
9/30/90 935 9 177 1,121
9/30/91 999 15 263 1,277
9/30/92 1,032 19 350 1,401
9/30/93 1,099 42 457 1,598
9/30/94 987 55 488 1,530
9/30/95 1,012 80 587 1,679
9/30/96 1,013 81 675 1,769
9/30/97 1,008 140 762 1,910 91.00%

CLASS D SHARES
<CAPTION>

</TABLE>

-17-

<PAGE>

1 From commencement of operations of Class A shares on February 16, 1988; and
from commencement of operations of Class D shares on February 1, 1994.

2 The "Value of Initial Investment" as of the date indicated reflects the
effect of the maximum sales load and CDSL, if applicable, assumes that all
dividends and capital gain distributions were taken in cash and reflects
changes in the net asset value of the shares purchased with the
hypothetical initial investment. "Total Value of Investment" reflects the
effect of the CDSL, if applicable, and assumes investment of all dividends
and capital gain distributions.

3 Total return for the Fund is calculated by assuming a hypothetical initial
investment of $1,000 at the beginning of the period specified, subtracting
the maximum sales load or CDSL, if applicable; determining total value of
all dividends and distributions that would have been paid during the period
on such shares assuming that each dividend or distribution was invested in
additional shares at net asset value; calculating the total value of the
investment at the end of the period; and finally, by dividing the
difference between the amount of the hypothetical initial investment at the
beginning of the period and its value at the end of the period by the
amount of the hypothetical initial investment.

The waiver by the Manager of all or a portion of its fee and the
reimbursement of certain Fund expenses during certain periods (as set forth
under "Management and Expenses" herein and under "Management Services" in the
Prospectus) positively affected the performance results provided in this
section.

GENERAL INFORMATION

The Directors are authorized to classify or reclassify and issue any shares
of common stock of the Fund into any number of other classes without further
action by shareholders. The 1940 Act requires that where more than one class
exists, each class must be preferred over all other classes in respect of assets
specifically allocated to such class.

CUSTODIAN. Investors Fiduciary Trust Company, 801 Pennsylvania, Kansas City,
Missouri 64105, serves as custodian for the Fund. It also maintains, under the
general supervision of the Manager, the accounting records and determines the
net asset value for the Fund.

AUDITORS. Deloitte & Touche LLP, independent auditors, have been selected as
auditors of the Fund. Their address is Two World Financial Center, New York, NY
10281.

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.

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<PAGE>

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
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

-19-

<PAGE>

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.

"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 136,385,000.00 23,155,400.00
--------------- --------------
Authority
$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

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<PAGE>

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.

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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<PAGE>

SUMMARY OF OTHER NEW JERSEY RELATED OBLIGATIONS
AS OF JUNE 30, 1997

<TABLE>

Type of Issue Outstanding
<S> <C> <C>

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
TTFA1 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

NJBA2 224,630,000.00 9/17/97
Higher Education
Assistance Authority 10,000,000.00 10/6/97

</TABLE>

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 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

- --------
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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<PAGE>

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
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.

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<PAGE>

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.

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

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<PAGE>

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.

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.

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<PAGE>

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 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).

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<PAGE>

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 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 Park. Under the
"citizen suit" provisions of these federal

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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 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

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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.

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

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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; 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.

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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 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.

FINANCIAL STATEMENTS

The Annual Report to Shareholders for the fiscal year ended September 30,
1997 contains a schedule of the investments of the Fund as of September 30,
1997, as well as certain other financial information as of that date. The
financial statements and notes included in the Annual Report, and the
Independent Auditor's Report thereon, are incorporated herein by reference. The
Annual Report will be furnished without charge, to investors who request copies
of this Statement of Additional Information.

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APPENDIX A

Moody's Investors Service, Inc. ("Moody's")
MUNICIPAL BONDS

Aaa: Municipal bonds which are rated Aaa are judged to be of the best
quality. They carry the smallest degree of investment risk. Interest payments
are protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.

Aa: Municipal bonds which are rated Aa are judged to be of high quality by
all standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than Aaa bonds because margins
of protection may not be as large or fluctuation of protective elements may be
of greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.

A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.

Baa: MUNICIPAL bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.

Ba: Municipal bonds which are rated Ba are judged to have speculative
elements; their future cannot be considered as well-assured. Often the
protection of interest and principal payments may be very moderate, and thereby
not well safeguarded during other good and bad times over the future.
Uncertainty of position characterizes bonds in this class.

B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.

Caa: Municipal bonds which are rated Caa are of poor standing. Such issues
may be in default or there may be present elements of danger with respect to
principal or interest.

Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.

C: Municipal bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.

Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.

MUNICIPAL NOTES

Moody's ratings for municipal notes and other short-term loans are designated
Moody's Investment Grade (MIG). This distinction is in recognition of the
differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades.

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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.

BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.

C: The rating C is reserved for income bonds on which no interest is being
paid.

D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.

NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.

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MUNICIPAL NOTES

SP-1: Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given a
plus (+) designation.

SP-2: Satisfactory capacity to pay principal and interest.

COMMERCIAL PAPER

S&P Commercial Paper ratings are current assessments of the likelihood of
timely payment of debts having an original maturity of no more than 365 days.

A-1: The A-1 designation indicates that the degree of safety regarding timely
payment is very strong.

A-2: Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".

A-3: Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.

B: Issues rated "B" are regarded as having only a speculative capacity for
timely payment.

C: This rating is assigned to short-term debt obligations with a doubtful
capacity of payment.

D: Debt rated "D" is in payment default.

NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.

The ratings assigned by S&P may be modified by the addition of a plus (+) or
minus (-) sign to show relative standing within its major rating categories.

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APPENDIX B

HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED

Seligman's beginnings date back to 1837, when Joseph Seligman, the
oldest of eight brothers, arrived in the United States from Germany. He earned
his living as a pack peddler in Pennsylvania, and began sending for his
brothers. The Seligmans became successful merchants, establishing businesses in
the South and East.

Backed by nearly thirty years of business success - culminating in the
sale of government securities to help finance the Civil War - Joseph Seligman,
with his brothers, established the international banking and investment firm of
J. & W. Seligman & Co. In the years that followed, the Seligman Complex played a
major role in the geographical expansion and industrial development of the
United States.

THE SELIGMAN COMPLEX:

...Prior to 1900

o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New
York Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.

...1900-1910

o Helps Congress finance the building of the Panama Canal.

...1910s

o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.

...1920s

o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine
Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.

...1930s

o Assumes management of Broad Street Investing Co. Inc., its first
mutual fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.

...1940s

o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.

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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.

-36-

<PAGE>

- -------------------------------------------------------------------------------
Portfolio of Investments
September 30, 1997

FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
- ------ ------------------ ------------ -------
<S> <C> <C> <C>
$2,500,000 Brick Township Municipal Utilities Authority, NJ Rev.,
6-1/2% due 12/1/2012 ................................................. Aaa/AAA $2,766,625
1,000,000 Delran Sewerage Authority, NJ Subordinated Sewer Rev.,
7-1/2% due 3/1/2013 .................................................. Aaa/AAA 1,045,180
3,000,000 Howell Township, NJ GOs, 6.80% due 1/1/2014 ............................. Aaa/AAA 3,312,510
3,000,000 Middletown, NJ Board of Education School GOs, 5.80% due 8/1/2019 ........ Aaa/AAA 3,118,260
1,000,000 New Jersey Building Authority State Building Rev., 7.20% due 6/15/2013... Aa2/AA- 1,036,820
1,500,000 New Jersey Building Authority State Building Rev., 5% due 6/15/2018 ..... Aa2/AA- 1,434,630
2,000,000 New Jersey Economic Development Authority Rev. (The Trustees
of the Lawrenceville School Project), 5-3/4% due 7/1/2016 ........... Aa2/NR 2,077,180
3,000,000 New Jersey Economic Development Authority Gas Facilities Rev.
(NUI Corporation Project), 5.70% due 6/1/2032* ....................... Aaa/AAA 3,043,170
2,900,000 New Jersey Economic Development Authority Sewage Facilities Rev.
(Anheuser-Busch Project), 5.85% due 12/1/2030* ....................... A1/A+ 2,996,251
1,000,000 New Jersey Economic Development Authority Water Facilities Rev.
(Middlesex Water Co. Project), 5.20% due 10/1/2022 ................... Aaa/AAA 971,400
3,500,000 New Jersey Economic Development Authority Water Facilities Rev.
(New Jersey-American Water Co., Inc. Project), 5-1/2% due 6/1/2023* .. Aaa/AAA 3,424,365
2,500,000 New Jersey Educational Facilities Financing Authority Rev.
(Princeton University), 6% due 7/1/2024 .............................. Aaa/AAA 2,619,675
1,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Chilton Memorial Hospital), 5% due 7/1/2013 ......................... A2/A 968,140
2,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(St. Clare's Riverside Medical Center), 5-3/4% due 7/1/2014 .......... Aaa/AAA 2,086,380
2,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Hackensack Medical Center), 6-5/8% due 7/1/2017 .................... Aaa/AAA 2,172,760
2,500,000 New Jersey Health Care Facilities Financing Authority Rev.
(The Medical Center at Princeton), 7% due 7/1/2022 ................... Aaa/AAA 2,709,550
3,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Holy Name Hospital), 6% due 7/1/2025 ................................ NR/BBB+ 3,072,660
1,500,000 New Jersey Health Care Facilities Financing Authority Rev. (AHS
Hospital Corporation), 5% due 7/1/2027 ............................... Aaa/AAA 1,417,890
</TABLE>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
6

<PAGE>

- -------------------------------------------------------------------------------
Portfolio of Investments
September 30, 1997
<TABLE>
<CAPTION>

FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
- ------ ------------------ ------------ -------
<S> <C> <C> <C>
$890,000 New Jersey Housing & Mortgage Finance Agency (Home Mortgage
Purchase Rev.), 7-7/8% due 10/1/2016 ................................. Aaa/AAA $ 910,336
220,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
7.65% due 10/1/2016 ................................................... Aaa/AAA 229,764
1,500,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
6% due 10/1/2021* ..................................................... Aaa/AAA 1,547,805
1,000,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
5-3/8% due 4/1/2025* .................................................. Aaa/AAA 968,620
345,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
7.70% due 10/1/2029* .................................................. Aaa/AAA 361,643
3,000,000 New Jersey State GOs, 5-5/8% due 7/15/2015 ............................... Aa1/AA+ 3,143,490
340,000 New Jersey Wastewater Treatment Trust Loan Rev., 7-1/4% due 5/15/2006 .... Aa3/AA 353,647
420,000 New Jersey Wastewater Treatment Trust Loan Rev., 7-1/4% due 5/15/2007 .... Aa3/AA 436,859
990,000 New Jersey Wastewater Treatment Trust Loan Rev., 7-3/8% due 5/15/2007 .... Aaa/AAA 1,031,352
10,000 New Jersey Wastewater Treatment Trust Loan Rev., 7-3/8% due 5/15/2007 .... Aaa/AAA 10,409
3,000,000 Port Authority of New York & New Jersey Consolidated Rev.,
5-3/4% due 6/15/2030 .................................................. A1/AA- 3,082,830
2,000,000 Puerto Rico Highway & Transportation Authority Highway Rev.,
5-1/2% due 7/1/2036 ................................................... Baa1/A 2,006,800
2,500,000 Salem County, NJ Improvement Authority Rev. (Correctional Facility
& Courthouse Annex), 5.70% due 5/1/2017 ............................... Aaa/AAA 2,570,775
2,500,000 Salem County, NJ Pollution Control Financing Authority Waste Disposal Rev.
(E. I. duPont de Nemours & Co.), 6-1/8% due 7/15/2022* ................ Aa3/AA- 2,586,600
1,750,000 South Jersey Port Corporation, NJ Marine Terminal Rev.,
6-7/8% due 1/1/2020 ................................................... NR/A+ 1,789,235
1,250,000 South Jersey Port Corporation, NJ Marine Terminal Rev.,
5.60% due 1/1/2023 .................................................... NR/A+ 1,250,400
----------
TOTAL MUNICIPAL BONDS (Cost $59,517,876)-- 97.9% ...................................................... $62,554,011

VARIABLE RATE DEMAND NOTES (Cost $400,000)-- 0.6% ..................................................... 400,000

OTHER ASSETS LESS LIABILITIES-- 1.5% .................................................................. 924,721
----------
NET ASSETS-- 100.0% ................................................................................... $63,878,732
===========
</TABLE>

- ----------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
7

<PAGE>

- -------------------------------------------------------------------------------

Statement of Assets and Liabilities
September 30, 1997

<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (Cost $59,517,876)............................. $62,554,011
Short-term holdings (Cost $400,000)............................... 400,000 $62,954,011
-----------
Cash 94,477
Interest receivable.................................................................. 1,061,220
Receivable for Capital Stock sold.................................................... 39,698
Expenses prepaid to shareholder service agent........................................ 10,585
Other................................................................................ 1,973
-----------
Total Assets 64,161,964
-----------
LIABILITIES:
Dividends payable.................................................................... 111,271
Payable for Capital Stock repurchased................................................ 47,001
Accrued expenses, taxes, and other................................................... 124,960
-----------
Total Liabilities.................................................................... 283,232
-----------
Net Assets........................................................................... $63,878,732
===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($.001 par value; 100,000,000 shares authorized; 8,448,845
shares outstanding):
Class A........................................................................... $ 8,281
Class D........................................................................... 168
Additional paid-in capital........................................................... 60,205,198
Undistributed net realized gain...................................................... 628,950
Net unrealized appreciation of investments........................................... 3,036,135
-----------
Net Assets $63,878,732
===========
NET ASSET VALUE PER SHARE:
Class A ($62,596,774 / 8,281,139 shares)............................................. $7.56
=====
Class D ($1,281,958 / 167,706 shares)................................................ $7.64
=====
</TABLE>

- ------------------
See Notes to Financial Statements.

<PAGE>

- -------------------------------------------------------------------------------
Statement of Operations
For the Year Ended September 30, 1997

<TABLE>
<S>
<C> <C>
INVESTMENT INCOME:
Interest.................................................................................... $3,891,278

EXPENSES:
Management fee................................................................ $ 325,747
Distribution and service fees................................................. 157,912
Shareholder account services.................................................. 93,645
Auditing and legal fees....................................................... 34,478
Custody and related services.................................................. 23,899
Shareholder reports and communications........................................ 18,530
Directors' fees and expenses.................................................. 17,788
Registration.................................................................. 14,064
Shareholders' meeting......................................................... 9,121
Miscellaneous................................................................. 5,493
----------
Total
Expenses.............................................................................. 700,677
----------
Net Investment Income....................................................................... 3,190,601

NET REALIZED AND UNREALIZED
GAIN ON INVESTMENTS:
Net realized gain on investments.............................................. 640,851
Net change in unrealized appreciation of investments.......................... 1,107,067
----------
Net Gain on
Investments..................................................................... 1,747,918
----------
Increase in Net Assets from Operations...................................................... $4,938,519
==========
</TABLE>

- ------------------
See Notes to Financial Statements.
9

<PAGE>
- -------------------------------------------------------------------------------

Statements of Changes in Net Assets

<TABLE>

<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1997 1996
----------- -----------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................... $3,190,601 $ 3,594,115
Net realized gain on investments ............................................... 640,851 2,195,899
Net change in unrealized appreciation of investments ........................... 1,107,067 (2,021,726)
----------- -----------
Increase in Net Assets from Operations.......................................... 4,938,519 3,768,288
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A...................................................................... (3,147,677) (3,541,660)
Class D...................................................................... (42,924) (52,455)
Net realized gain on investments:
Class A...................................................................... (2,166,159) (38,742)
Class D...................................................................... (33,218) (665)
----------- -----------
Decrease in Net Assets from Distributions....................................... (5,389,978) (3,633,522)
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
SHARES
-----------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------
CAPITAL SHARE TRANSACTIONS: 1997 1996
---------- ----------
<S> <C> <C>
<C> <C>
Net proceeds from sale of shares:
Class A............................................. 945,721 402,194 7,009,688 3,064,342
Class D............................................. 63,366 45,794 479,673 351,548
Shares issued in payment of dividends:
Class A............................................. 243,739 265,124 1,811,306 2,018,408
Class D............................................. 4,274 4,538 32,136 34,928
Exchanged from associated Funds:
Class A............................................. 411,620 103,792 3,035,982 787,281
Class D............................................. 2,882 7,301 22,069 56,910
Shares issued in payment of gain distributions:
Class A............................................. 215,373 3,678 1,595,916 28,281
Class D............................................. 3,939 61 29,503 471
---------- ---------- ----------- -----------
Total.................................................. 1,890,914 832,482 14,016,273 6,342,169
---------- ---------- ----------- -----------
Cost of shares repurchased:
Class A............................................. (1,964,212) (1,609,005) (14,557,171) (12,267,718)
Class D............................................. (54,046) (52,478) (408,164) (400,063)
Exchanged into associated Funds:
Class A............................................. (290,897) (136,194) (2,146,414) (1,033,975)
Class D............................................. (2,553) (10,420) (19,210) (80,905)
---------- ---------- ----------- -----------
Total.................................................. (2,311,708) (1,808,097) (17,130,959) (13,782,661)
---------- ---------- ----------- -----------
Decrease in Net Assets from Capital
Share Transactions .................................... (420,794) (975,615) (3,114,686) (7,440,492)
========== ========== ----------- -----------

Decrease in Net Assets.................................................................. (3,566,145) (7,305,726)

NET ASSETS:
Beginning of year....................................................................... 67,444,877 74,750,603
----------- ------------
End of Year............................................................................. $63,878,732 $67,444,877
=========== ===========
</TABLE>
- ------------------
See Notes to Financial Statements.

<PAGE>
- -------------------------------------------------------------------------------

Notes to Financial Statements

1. Multiple Classes of Shares -- Seligman New Jersey Municipal Fund, Inc. (the
"Fund") offers two classes of shares. All shares existing prior to February 1,
1994, the commencement date of Class D shares, were classified as Class A
shares. Class A shares are sold with an initial sales charge of up to 4.75% and
a continuing service fee of up to 0.25% on an annual basis. Class A shares
purchased in an amount of $1,000,000 or more are sold without an initial sales
charge but are subject to a contingent deferred sales load ("CDSL") of 1% on
redemptions within 18 months of purchase. Class D shares are sold without an
initial sales charge but are subject to a distribution fee of up to 0.75% and a
service fee of up to 0.25% on an annual basis, and a CDSL of 1% imposed on
redemptions made within one year of purchase. The two classes of shares
represent interests in the same portfolio of investments, have the same rights,
and are generally identical in all respects except that each class bears its
separate distribution and certain other class expenses, and has exclusive voting
rights with respect to any matter on which a separate vote of any class is
required.

2. Significant Accounting Policies -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:

a. Security Valuation --All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by
an independent pricing service or, in their absence, at fair value
determined in accordance with procedures approved by the Board of Directors.
Short-term holdings maturing in 60 days or less are generally valued at
amortized cost.

b. Federal Taxes -- There is no provision for federal income tax. The Fund has
elected to be taxed as a regulated investment company and intends to
distribute substantially all taxable net income and net gain realized.

c. Security Transactions and Related Investment Income -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Fund amortizes
original issue discounts and premiums paid on purchases of portfolio
securities. Discounts other than original issue discounts are not amortized.

d. Multiple Class Allocations-- All income, expenses (other than class-specific
expenses), and realized and unrealized gains or losses are allocated daily
to each class of shares based upon the relative value of the shares of each
class. Class-specific expenses, which include distribution and service fees
and any other items that are specifically attributable to a particular
class, are charged directly to such class. For the year ended September 30,
1997, distribution and service fees were the only class-specific expenses.

e. Distributions to Shareholders -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the recognition of certain components of
income, expense, or realized capital gain for federal income tax purposes.
Where such differences are permanent in nature, they are reclassified in
the components of net assets based on their ultimate characterization for
federal income tax purposes. Any such reclassifications will have no effect
on net assets, results of operations or net asset value per share of the
Fund.

3. Purchases and Sales of Securities -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended September 30,
1997, amounted to $13,012,333 and $18,521,484, respectively.

<PAGE>

- -------------------------------------------------------------------------------
Notes to Financial Statements

At September 30, 1997, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of investments amounted
to $3,110,005 and $73,870, respectively.

4. Management Fee, Administrative Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager, is paid by the Manager.
The Manager's fee, calculated daily and payable monthly, is equal to 0.50% per
annum of the Fund's average daily net assets.

Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares and an affiliate of the Manager, received
concessions of $11,430 from the sale of Class A shares, after commissions of
$84,854 paid to dealers.

The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended September 30,
1997, fees paid aggregated $147,532, or 0.23% per annum of the average daily net
assets of Class A shares.

Under the Plan, with respect to Class D shares, service organizations can enter
into agreements with the Distributor and receive a continuing fee for providing
personal services and/or the maintenance of shareholder accounts of up to 0.25%
on an annual basis of the average daily net assets of the Class D shares for
which the organizations are responsible, and fees for providing other
distribution assistance of up to 0.75% on an annual basis of such average daily
net assets. Such fees are paid monthly by the Fund to the Distributor pursuant
to the Plan. For the year ended September 30, 1997, fees paid amounted to
$10,380, or 1% per annum of the average daily net assets of Class D shares.

The Distributor is entitled to retain any CDSL imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1997, such charges amounted to $260.

Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of Fund shares, as well as distribution and
service fees pursuant to the Plan. For the year ended September 30, 1997,
Seligman Services, Inc. received commissions of $2,451 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $9,787, pursuant to the Plan.

Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $93,157 for shareholder account services.

Certain officers and directors of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.

The Fund has a compensation arrangement under which directors who receive fees
may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The cost of such fees and interest is included in directors' fees and
expenses, and the accumulated balance thereof at September 30, 1997, of $41,230
is included in other liabilities. Deferred fees and related accrued interest are
not deductible for federal income tax purposes until such amounts are paid.

<PAGE>
- -------------------------------------------------------------------------------

Financial Highlights

The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance of each Class, on a per share basis, from the beginning net asset
value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, per share amounts are derived by converting
the actual dollar amounts incurred for each item, as disclosed in the financial
statements, to their equivalent per share amounts, based on average shares
outstanding.

"Total return based on net asset value" measures each Class's performance
assuming that investors purchased Fund shares at net asset value as of the
beginning of the period, invested dividends and capital gains paid at net asset
value, and then sold their shares at the net asset value on the last day of the
period. The total return computations do not reflect any sales charges investors
may incur in purchasing or selling shares of the Fund. Total returns for periods
of less than one year are not annualized.

<TABLE>
<CAPTION>
CLASS A

- -------------------------------------------------------
YEAR ENDED SEPTEMBER 30,

- -------------------------------------------------------
1997 1996 1995 1994 1993
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Year ..................... $7.60 $7.59 $7.40 $8.24 $7.74
----- ----- ----- ----- -----
Net investment income .................................. .36 .39 .39 .41 .42
Net realized and unrealized investment gain (loss)..... .21 .01 .29 (.74) .61
----- ----- ----- ----- -----
Increase (Decrease) from Investment Operations ......... .57 .40 .68 (.33) 1.03
Dividends paid or declared.............................. (.36) (.39) (.39) (.41) (.42)
Distributions from net gain realized.................... (.25) -- (.10) (.10) (.11)
----- ----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value.............. (.04) .01 .19 (.84) .50
----- ----- ----- ----- -----
Net Asset Value, End of Year ........................... $7.56 $7.60 $7.59 $7.40 $8.24
===== ===== ===== ===== =====

TOTAL RETURN BASED ON NET ASSET VALUE: 7.96% 5.37% 9.77% (4.25)% 14.02%

RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ......................... 1.06% 1.02% 1.01% .90% .86%
Net investment income to average net assets ............ 4.90% 5.06% 5.29% 5.24% 5.37%
Portfolio turnover...................................... 20.22% 25.65% 4.66% 12.13% 15.90%
Net Assets, End of Year
(000s omitted).......................................... $62,597 $66,293 $73,561 $73,942 $82,447
Without management fee waiver:**
Net investment income per share ..................... $.39 $.40 $.40
Ratios:
Expenses to average net assets ...................... 1.06% 1.07% 1.11%
Net investment income to average net assets.......... 5.24% 5.07% 5.12%

</TABLE>

- ------------------
See footnotes on page 14.
13

<PAGE>

- -------------------------------------------------------------------------------
Financial Highlights

<TABLE>
<CAPTION>
CLASS D
-------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
------------------------------ TO
1997 1996 1995 9/30/94
---- ---- ---- -------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net Asset Value, Beginning of Period ..................... $7.68 $7.67 $7.48 $8.14
----- ----- ----- -----
Net investment income .................................... .31 .33 .33 .23
Net realized and unrealized investment gain (loss)........ .21 .01 .29 (.66)
----- ----- ----- -----
Increase (Decrease) from Investment Operations ........... .52 .34 .62 (.43)
Dividends paid or declared ............................... (.31) (.33) (.33) (.23)
Distributions from net gain realized ..................... (.25) .-- (.10) --
----- ----- ----- -----
Net Increase (Decrease) in Net Asset Value ............... (.04) .01 .19 (.66)
----- ----- ----- -----
Net Asset Value, End of Period............................ $7.64 $7.68 $7.67 $7.48
===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: 7.10% 4.56% 8.79% (5.47)%

RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ........................... 1.83% 1.79% 1.89% 1.75%+
Net investment income to average net assets............... 4.13% 4.29% 4.45% 4.37%+
Portfolio turnover........................................ 20.22% 25.65% 4.66% 12.13%++
Net Assets, End of Period
(000s omitted)............................................ $1,282 $1,152 $1,190 $986
Without management fee waiver:**
Net investment income per share ....................... $.33 $.22
Ratios:
Expenses to average net assets......................... 1.94% 1.87%+
Net investment income to average net assets............ 4.40% 4.25%+
</TABLE>

- ------------------
* Commencement of offering of Class D shares.
** During the periods stated, the Manager, at its discretion, waived a portion
of its fees.
+ Annualized.
++ For the year ended September 30, 1994.
See Notes to Financial Statements.

<PAGE>
- -------------------------------------------------------------------------------
Report of Independent Auditors

The Board of Directors and Shareholders,
Seligman New Jersey Municipal Fund, Inc.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman New Jersey Municipal Fund, Inc. as of
September 30, 1997, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements.

Our procedures included confirmation of securities owned as of September 30,
1997 by correspondence with the Fund's custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman New Jersey
Municipal Fund, Inc. as of September 30, 1997, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.

/s/ DELOITTE & TOUCHE LLP
New York, New York
October 31, 1997

<PAGE>

PART C. OTHER INFORMATION
-----------------
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS
- ------- ----------------------------------
(a) Financial Statements:

Part A - Financial Highlights for Class A shares for the period February 16,
1988 (commencement of operations) to September 30, 1997.
Financial Highlights for Class D shares for the period February 1, 1994
(commencement of operations) to September 30, 1997.

Part B - Required Financial Statements are included in the Fund's Annual
Report to shareholders, dated September 30, 1997, which is incorporated
by reference in the Statement of Additional Information. These
Financial Statements are: Portfolio of Investments as of September 30,
1997; Statement of Assets and Liabilities as of September 30, 1997;
Statement of Operations for the year ended September 30, 1997;
Statements of Changes in Net Assets for the years ended September 30,
1997 and September 30, 1996; Notes to Financial Statements; Financial
Highlights for the five years ended September 30, 1997 for the Fund's
Class A shares and for the period February 1, 1994 (commencement of
operations) to September 30, 1997 for the Fund's Class D shares; Report
of Independent Auditors.

(b) EXHIBITS: All Exhibits have been previously filed and are incorporated
herein by reference, except Exhibits marked with an asterisk (*) which
are attached hereto.

(1) Form of Amended and Restated Articles of Incorporation. (Incorporated
by reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)

(2) Amended and Restated By-laws of Registrant. (Incorporated by reference
to Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)

(3) Not applicable.

(4) 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.)

(4a) Copy of Specimen Stock Certificate for Class D Shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 11 filed January 31, 1994.)

(5) 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.)

(6) 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.)

(6a) 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.)

(7) 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.)

(7a) 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.)

(8) 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.)

(9) Not applicable.

(10) Opinion and Consent of Counsel. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)

(11) Consent of Independent Auditors.*

<PAGE>

PART C. OTHER INFORMATION (continued)
----------------
(11a) Opinion and Consent of New Jersey Counsel.*

(12) Not applicable.

(13) Copy of Purchase Agreement for Initial Capital for Class D shares.
(Incorporated by reference to Registrant's Post-Effective Amendment
No. 14, filed on January 29, 1997.)

(14) The Seligman IRA Plan Agreement.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)

(14a) The Seligman Simple IRA Plan Set-Up Kit.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)

(14b) The Seligman Simple IRA Plan Agreement.
(Incorporated by reference to Exhibit 14 of Registration Statement No.
333-20621, Pre-Effective Amendment No. 2, filed on April 17, 1997.)

(15) 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.)

(16) Schedule for computation of tax Equivalent yield and schedule for
computation of each performance quotation provided in Registration
Statement in response to Item 22. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)

(17) Financial Data Schedules meeting the requirements of Rule 483 under the
Securities Act of 1933.*

(18) Copy of Multiclass Plan 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.)

Other Exhibits: Powers of Attorney

ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT - None.
- -------- -------------------------------------------------------------

ITEM 26. NUMBER OF HOLDERS OF SECURITIES - As of January 2, 1998, there were
- -------- --------------------------------
1,410 record holders of Class A Capital Stock and 35 record holders
of Class D Capital Stock of the Registrant.

ITEM 27. 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.

<PAGE>

PART C. OTHER INFORMATION (continued)
-----------------

ITEM 28. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER - J. & W.
- ------- ----------------------------------------------------------
Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen associated investment companies. They
are Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth
Fund, Inc., Seligman Henderson Global Fund Series, Inc., Seligman High
Income Fund Series, Seligman Income Fund, Inc., Seligman Municipal
Fund Series, Inc., Seligman 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 June 3,
1997.

ITEM 29. PRINCIPAL UNDERWRITERS
- -------- ----------------------
(a) The names of each investment company (other than the
Registrant) for which each principal underwriter currently
distributing securities of the Registrant also acts as a
principal underwriter, depositor or investment adviser, are:

Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman Municipal Fund Series, Inc.
Seligman Municipal Series Trust
Seligman Pennsylvania Municipal Fund Series
Seligman Portfolios, Inc.
Seligman Value Fund Series, Inc.

(b) Name of each director, officer or partner of each principal
underwriter named in response to Item 21:

SELIGMAN FINANCIAL SERVICES, INC.
AS OF DECEMBER 31, 1997
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
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

<PAGE>

PART C. OTHER INFORMATION (continued)
----------------
<TABLE>
<CAPTION>

SELIGMAN FINANCIAL SERVICES, INC.
---------------------------------
AS OF DECEMBER 31, 1997
------------------------
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
MARK R. GORDON* Senior Vice President, Director None
of Marketing
GERALD I. CETRULO, III Senior Vice President of Sales None
140 West Parkway
Pompton Plains, NJ 07444
BRADLEY W. LARSON Senior Vice President of Sales None
367 Bryan Drive
Alamo, CA 94526
MICHELLE L. MCCANN Vice President, Manager, Retirement None
Plans Marketing
MICHAEL R. SANDERS Vice President, Product Manager None
Managed Money Services
CHARLES L. VON BREITENBACH, II* Vice President, Product Manager None
Managed Money Services
ROBERT T. HAUSLER* Global Mutual Funds, None
Product Management
MARSHA E. JACOBY* Vice President, National Accounts None
Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None

TRACY A. SALOMON* Vice President, Retirement None
Marketing Manager
HELEN SIMON* Vice President, Sales None
Administration Manager
J. BRERETON YOUNG* Vice President, Mutual Funds None
Product Manager
PETER J. CAMPAGNA Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102
CHARLES E. WENZEL Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
JAMES R. BESHER Regional Vice President None
14000 Margaux Lane
Town & Country, MO 63017
RICHARD B. CALLAGHAN Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
BRADFORD C. DAVIS Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
CHRISTOPHER J. DERRY Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
KENNETH DOUGHERTY Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
ANDREW DRALUCK Regional Vice President None
4032 E. Williams Drive
Phoenix, AZ 85024
JONATHAN G. EVANS Senior Vice President of Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326

<PAGE>

PART C. OTHER INFORMATION (continued)
-----------------
<CAPTION>
SELIGMAN FINANCIAL SERVICES, INC.
---------------------------------
AS OF DECEMBER 31, 1997
------------------------
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
EDWARD S. FINOCCHIARO Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
MICHAEL C. FORGEA Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
DAVID L. GARDNER Regional Vice President None
2504 Clublake Trail
McKinney, TX 75070
CARLA A. GOEHRING Regional Vice President None
11426 Long Pine
Houston, TX 77077
MARK LIEN Regional Vice President None
5904 Mimosa
Sedalia, MO 65301
JUDITH L. LYON Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
DAVID L. MEYNCKE Regional Vice President None
4718 Orange Grove Way
Palm Harbor, FL 34684
TIM O'CONNELL Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
THOMAS PARNELL Regional Vice President None
5250 Greystone Drive #107
Inver Grove Heights, MN 55077
JULIANA PERKINS Regional Vice President None
2348 Adrian Street
Newbury Park, CA 91320
DAVID K. PETZKE Regional Vice President None
2714 Winding Trail Place
Boulder, CO 80304
NICHOLAS ROBERTS Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
BRUCE M. TUCKEY Senior Vice President of Sales None
41644 Chathman Drive
Novi, MI 48375
ANDREW S. VEASEY Senior Vice President of Sales None
14 Woodside
Rumson, NJ 07760
STEVE WILSON Regional Vice President None
83 Kaydeross Park
Saratoga Springs, NY 12866
KELLI A. WIRTH-DUMSER Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215
FRANK J. NASTA* Secretary Secretary
AURELIA LACSAMANA* Treasurer None

<PAGE>

PART C. OTHER INFORMATION (continued)

SELIGMAN FINANCIAL SERVICES, INC.
---------------------------------
AS OF DECEMBER 31, 1997
------------------------
<S> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH UNDERWRITER WITH REGISTRANT
---------------- ---------------- ---------------
JEFFREY S. DEAN* Assistant Vice President, Marketing None
SANDRA FLORIS* Assistant Vice President, Order Desk None
KEITH LANDRY* Assistant Vice President, Order Desk None
GAIL S. CUSHING* Assistant Vice President, None
National Accounts Manager
JOSEPH M. MCGILL* Assistant Vice President and None
Compliance Officer
JACK TALVY* Assistant Vice President, Internal None
Marketing Services Manager
JOYCE PERESS* Assistant Secretary None

</TABLE>

* The principal business address of each of these directors and/or officers is
100 Park Avenue, New York, NY 10017.

ITEM 30. 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 31. MANAGEMENT SERVICES - Seligman Data Corp., ("SDC"), the Registrant's
shareholder service agent, has an agreement with First Data Investor
Services Group ("FDISG") pursuant to which FDISG provides a data
processing system for certain shareholder accounting and
recordkeeping functions performed by SDC, which commenced in July
1990. For the fiscal years ended September 30, 1997, 1996 and 1995,
the approximate cost of these services was $8,000, $8,600 and
$9,100, respectively.

ITEM 32 UNDERTAKINGS - The Registrant undertakes: (1) if requested to do so
by the holders of at least ten percent of its outstanding shares, to
call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940; and (2) to furnish to each person to
whom a prospectus is delivered, a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

<PAGE>

SIGNATURES
----------

Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and and has duly caused this
Post-Effective Amendment No. 15 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 27th day of January, 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. 15 to the Registration Statement has been signed
below by the following persons in the capacities indicated on January 27, 1998.

SIGNATURE TITLE
--------- -----

/s/ WILLIAM C. MORRIS Chairman of the Board (Principal
- --------------------------------------
William C. Morris* executive officer) and Director

/S/ BRIAN T. ZINO President and Director
- --------------------------------------
Brian T. Zino

/s/ THOMAS G. ROSE Treasurer (Principal financial and
- --------------------------------------
Thomas G. Rose and accounting officer)

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 ) * Brian T. Zino, Attorney-In-Fact
James Q. Riordan, Director )
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )

<PAGE>

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
Post-Effective Amendment No. 15 to the
Registration Statement on Form N-1A

EXHIBIT INDEX

24 (b) (11) Consent of Independent Auditors

24 (b) (11) (a) Opinion and Consent of New Jersey Counsel

24 (b) (17) Financial Data Schedules

Other Exhibits Powers of Attorney

CONSENT OF INDEPENDENT AUDITORS

Seligman New Jersey Municipal Fund, Inc.:

We consent to the use in Post-Effective Amendment No. 15 to Registration
Statement No. 33-13401 of our report dated October 31, 1997, appearing in the
Annual Report to Shareholders for the year ended September 30, 1997,
incorporated by reference in the Statement of Additional Information, and to the
reference to us under the caption "Financial Highlights" in the Prospectus,
which is also part of such Registration Statement.

DELOITTE & TOUCHE LLP
New York, New York
January 23, 1998

McCarter & English
Attorneys at Law
Four Gateway Center
100 Mulberry Street
P.O. Box 652
Newark, NJ 07101-0652

December 4, 1997

Seligman New Jersey Municipal Fund, Inc.
100 Park Avenue
New York, New York 100017

Ladies and Gentlemen:

With respect to Post-Effective Amendment No. 16 to the Registration
Statement on Form N-1A under the Securities Act of 1933, as amended, of Seligman
New Jersey Municipal Fund, Inc., we have reviewed the material relative to New
Jersey Taxes in the Registration Statement. Subject to such review, our opinion
as delivered to you and as filed with the Securities and Exchange Commission
remains unchanged.

We consent to the filing of this consent as an exhibit to the
Registration Statement and to the reference to us under the heading "New Jersey
Taxes." In giving such consent, we do not thereby admit that we are in the
category of persons whose consent is required under Section 7 of the Securities
Act of 1933, as amended.

Very truly yours,

/s/John B. Brescher, Jr.
--------------------------
John B. Brescher, Jr.

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN NEW
JERSEY MUNICIPAL FUND, INC., a Maryland corporation, which proposes to file with
the Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
his attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in his name and stead, in his capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.

Executed this 18th day of September, 1997.

/s/ John R. Galvin (L.S.)
-----------------------------
John R. Galvin

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN NEW
JERSEY MUNICIPAL FUND, INC., a Maryland corporation, which proposes to file with
the Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.

Executed this 18th day of September, 1997.

/s/ Alice S. Ilchman (L.S.)
-------------------------------
Alice S. Ilchman

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ Frank A. McPherson (L.S.)
-------------------------------
Frank A. McPherson

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ John E. Merow (L.S.)
-------------------------------
John E. Merow

<PAGE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of SELIGMAN NEW
JERSEY MUNICIPAL FUND, INC., a Maryland corporation, which proposes to file with
the Securities and Exchange Commission an Amendment to Registration Statement on
Form N-1A and further amendments thereto, as necessary, under the Securities Act
of 1933 and the Investment Company Act of 1940, as amended, hereby constitutes
and appoints William C. Morris and Brian T. Zino, and each of them individually,
her attorneys-in-fact and agent, with full power of substitution and
resubstitution, for in her name and stead, in her capacity as such director, to
sign and file such Amendment to Registration Statement or further amendments
thereto, and any and all applications or other documents to be filed with the
Securities and Exchange Commission pertaining thereto, with full power and
authority to do and perform all acts and things requisite and necessary to be
done on the premises.

Executed this 18th day of September, 1997.

/s/Betsy S. Michel (L.S.)
-------------------------------
Betsy S. Michel

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ William C. Morris (L.S.)
-------------------------------
William C. Morris

<PAGE>

POWER OF ATTORNEY

Executed this 20th day of November, 1997.

/s/ James C. Pitney (L.S.)
-------------------------------
James C. Pitney

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ James Q. Riordan (L.S.)
-------------------------------
James Q. Riordan

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ Richard R. Schmaltz (L.S.)
-------------------------------
Richard R. Schmaltz

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ Robert L. Shafer (L.S.)
-------------------------------
Robert L. Shafer

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ James N. Whitson (L.S.)
-------------------------------
James N. Whitson

<PAGE>

POWER OF ATTORNEY

Executed this 18th day of September, 1997.

/s/ BRIAN T. ZINO (L.S.)
-------------------------------
Brian T. Zino

<ARTICLE> 6
<SERIES>
<NUMBER> 001
<NAME> SELIGMAN NEW JERSEY MUNICIPAL FUND CL A
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 59,918
<INVESTMENTS-AT-VALUE> 62,954
<RECEIVABLES> 1,114
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,162
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 283
<TOTAL-LIABILITIES> 283
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,214
<SHARES-COMMON-STOCK> 8,281<F1>
<SHARES-COMMON-PRIOR> 8,720<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 629
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,036
<NET-ASSETS> 62,597<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 3,829<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (681)<F1>
<NET-INVESTMENT-INCOME> 3,148<F1>
<REALIZED-GAINS-CURRENT> 641
<APPREC-INCREASE-CURRENT> 1,107
<NET-CHANGE-FROM-OPS> 4,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,148)<F1>
<DISTRIBUTIONS-OF-GAINS> (2,166)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,357<F1>
<NUMBER-OF-SHARES-REDEEMED> (2,225)<F1>
<SHARES-REINVESTED> (459)<F1>
<NET-CHANGE-IN-ASSETS> (3,566)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,188
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 320 <F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 681 <F1>
<AVERAGE-NET-ASSETS> 64,182 <F1>
<PER-SHARE-NAV-BEGIN> .36 <F1>
<PER-SHARE-NII> .21 <F1>
<PER-SHARE-GAIN-APPREC> (.36)<F1>
<PER-SHARE-DIVIDEND> .21 <F1>
<PER-SHARE-DISTRIBUTIONS> (.36)<F1>
<RETURNS-OF-CAPITAL> (.25)<F1>
<PER-SHARE-NAV-END> 7.56 <F1>
<EXPENSE-RATIO> 1.06 <F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<FN>
<F1>Class D only. All other data are fund level.
</FN>

</TABLE>

<ARTICLE> 6
<SERIES>
<NUMBER> 004
<NAME> SELIGMAN NEW JERSEY MUNICIPAL FUND CL D
<MULTIPLIER> 1000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-END> SEP-30-1997
<INVESTMENTS-AT-COST> 59,918
<INVESTMENTS-AT-VALUE> 62,954
<RECEIVABLES> 1,114
<ASSETS-OTHER> 94
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 64,162
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 283
<TOTAL-LIABILITIES> 283
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 60,214
<SHARES-COMMON-STOCK> 168<F1>
<SHARES-COMMON-PRIOR> 150<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 629
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,036
<NET-ASSETS> 1,282 <F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 62 <F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (19)<F1>
<NET-INVESTMENT-INCOME> 42 <F1>
<REALIZED-GAINS-CURRENT> 641
<APPREC-INCREASE-CURRENT> 1,107
<NET-CHANGE-FROM-OPS> 4,939
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (43)<F1>
<DISTRIBUTIONS-OF-GAINS> (33)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 66 <F1>
<NUMBER-OF-SHARES-REDEEMED> (56)<F1>
<SHARES-REINVESTED> 8 <F1>
<NET-CHANGE-IN-ASSETS> (3,566)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 2,188
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 5 <F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 19 <F1>
<AVERAGE-NET-ASSETS> 1,038 <F1>
<PER-SHARE-NAV-BEGIN> 7.68 <F1>
<PER-SHARE-NII> .31 <F1>
<PER-SHARE-GAIN-APPREC> .21 <F1>
<PER-SHARE-DIVIDEND> (.31)<F1>
<PER-SHARE-DISTRIBUTIONS> (.25)<F1>
<RETURNS-OF-CAPITAL> 0 <F1>
<PER-SHARE-NAV-END> 7.64 <F1>
<EXPENSE-RATIO> 1.83 <F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0

<FN>
<F1>Class D only. All other data are fund level.
</FN>

</TABLE>