SELIGMAN NEW JERSEY MUNICIPAL FUND INC, 485BPOS, 1999-01-29

SELIGMAN NEW JERSEY MUNICIPAL FUND INC
485BPOS, 1999-01-29

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FILE NO. 33-13401
811-5126

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

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FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|

PRE-EFFECTIVE AMENDMENT NO. __ |_|

POST-EFFECTIVE AMENDMENT NO. 18 |X|

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

AMENDMENT NO. 20 |X|

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SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN CHARTER)

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100 PARK AVENUE, NEW YORK, NEW YORK 10017
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)

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REGISTRANT'S TELEPHONE NUMBER: 212-850-1864 OR
TOLL-FREE 800-221-2450

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THOMAS G. ROSE, TREASURER
100 PARK AVENUE
NEW YORK, NEW YORK 10017
(NAME AND ADDRESS OF AGENT FOR SERVICE)

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IT IS PROPOSED THAT THIS FILING WILL BECOME EFFECTIVE (CHECK THE
APPROPRIATE BOX).

|_| IMMEDIATELY UPON FILING PURSUANT TO PARAGRAPH (b) OF RULE 485

|X| ON JANUARY 31, 1999 PURSUANT TO PARAGRAPH (b) OF RULE 485

|_| 60 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(1) OF RULE 485

|_| ON (DATE) PURSUANT TO PARAGRAPH (a)(1) OF RULE 485

|_| 75 DAYS AFTER FILING PURSUANT TO PARAGRAPH (a)(2) OF RULE 485

|_| ON (DATE) PURSUANT TO PARAGRAPH (a)(2) 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.
<PAGE>

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SELIGMAN
- -----------------------
MUNICIPAL FUNDS

SELIGMAN MUNICIPAL FUND
SERIES, INC.

SELIGMAN MUNICIPAL
SERIES TRUST [GRAPHIC]

SELIGMAN NEW JERSEY
MUNICIPAL FUND, INC.

SELIGMAN PENNSYLVANIA
MUNICIPAL FUND SERIES

The Securities and Exchange PROSPECTUS
Commission has neither FEBRUARY 1, 1999
approved nor disapproved these
Funds, and it has not Seeking
determined the prospectus to
be accurate or adequate. Any Income
representation to the contrary
is a criminal offense. Exempt From

Regular

An investment in these Funds or any Income Tax
other fund cannot provide a
complete investment program. The
suitability of an investment in a
Fund should be evaluated based on
the investment objective,
strategies and risks described
herein, considered in light of all
of the other investments in your
portfolio, as well as your risk
tolerance, financial goals, and
time horizons. We recommend that
you consult your financial advisor
to determine if one or more of
these Funds is suitable for you.

managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864

MUNI-1 2/99

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Table of Contents

The Funds Shareholder Information

A discussion of the investment Deciding Which Class of Shares
strategies, risks, performance and to Buy 44
expenses of the Funds.
Pricing of Fund Shares 45
Overview of the Funds 1
Opening Your Account 46
National Fund 4
How to Buy Additional Shares 46
California High-Yield Fund 6
How to Exchange Shares Between
California Quality Fund 8 the Seligman Mutual Funds 47

Colorado Fund 10 How to Sell Shares 48

Florida Fund 12 Important Policies That May Affect
Your Account 49
Georgia Fund 14
Dividends and Capital Gain
Louisiana Fund 16 Distributions 50

Maryland Fund 18 Taxes 50

Massachusetts Fund 20 Financial Highlights 51

Michigan Fund 22 How to Contact Us 61

Minnesota Fund 24 For More Information back cover

Missouri Fund 26

New Jersey Fund 28

New York Fund 30

North Carolina Fund 32

Ohio Fund 34

Oregon Fund 36

Pennsylvania Fund 38

South Carolina Fund 40

Management of the Funds 42

Year 2000 43

TIMES CHANGE ... VALUES ENDURE

<PAGE>

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The Funds

OVERVIEW OF THE FUNDS

This Prospectus contains information about four separate funds, which together
offer 19 investment options: Seligman Municipal Fund Series offers the following
13 series:

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

Seligman Municipal Series Trust offers the following four series:

California High-Yield Fund Florida Fund
California Quality Fund North Carolina Fund

Seligman New Jersey Municipal Fund, Inc. (New Jersey Fund)
Seligman Pennsylvania Municipal Fund Series (Pennsylvania Fund)

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

Each Fund has its own objectives, strategies and risks. You should read the
discussion of a particular Fund, in addition to the information below, before
making an investment decision about that Fund.

The Seligman Municipal Funds seek to provide income exempt from regular federal
income taxes and, as applicable, regular state and local personal income taxes.

The Funds are managed for total return, which means, in addition to income
considerations, the Funds (except the Pennsylvania Fund) look to enhance
portfolio returns by pursuing opportunities for capital appreciation. The
Pennsylvania Fund does not pursue capital appreciation as one of its objectives.
At all times, safety of principal is a primary concern of all of the Funds.
However, there is no assurance that the Funds will meet their objectives. Each
Fund normally invests at least 80% of its net assets in municipal securities
that pay interest that is exempt from regular federal income taxes and (except
the National Fund) regular personal income taxes in its respective state. Income
may be subject to the federal alternative minimum tax and, where applicable,
state alternative minimum tax.

Municipal securities are issued by state and local governments, their agencies
and authorities, as well as territories and possessions of the United States,
and the District of Columbia. Municipal bonds are issued to obtain funds to
finance various public or private projects, to meet general expenses, and to
refinance outstanding debt.

The Funds use a top-down method of selecting securities to purchase. This means
the investment manager analyzes the current interest rate environment and trends
in the municipal market to formulate investment strategy before selecting
individual securities for each Fund. The investment manager determines the
appropriate cash positions, quality parameters, market sectors, and bond
duration and then uses in-depth credit analysis to evaluate individual
securities considered for purchase.

Portfolio holdings are continually monitored to identify securities which should
be sold as a result of a deterioration in credit quality. A Fund may also sell a
security when there is a better investment opportunity available in the market.

The Funds (except the California High-Yield Fund) will purchase only investment
grade municipal securities, defined as those issues rated in the four highest
rating categories by independent rating agencies at the time of purchase. The
Funds may also purchase non-rated securities if, based on credit analysis, the
investment manager believes that they are of comparable quality to investment
grade securities.

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Alternative Minimum Tax (AMT):

A tax imposed on certain types of income to ensure that all taxpayers pay at
least a minimum amount of taxes.
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Under normal market conditions, the Funds will invest in longer maturity bonds
(typically, bonds with maturities in excess of ten years). However, a Fund may
shorten or lengthen maturities to achieve its objective.

As a defensive measure, a Fund may invest a considerable amount of its portfolio
in cash or in securities that are subject to regular federal income tax or, if
applicable, the regular income tax of its designated state. A Fund would take
such a defensive position only temporarily in seeking to minimize extreme
volatility caused by adverse market, economic or other conditions or in
anticipating significant withdrawals from the Fund. However, such a position is
inconsistent with the Funds' principal strategies and could prevent a Fund from
achieving its investment objective.

PRINCIPAL RISKS

The value of your investment in a Fund will fluctuate with fluctuations in the
value of the Fund's investment portfolio. The principal factors that may affect
the value of a Fund's portfolio are changes in interest rates and the credit
worthiness of the Fund's portfolio holdings.

Interest rate risk. Changes in market interest rates will affect the value of a
Fund's investment portfolio. In general, the market value of a municipal bond
moves in the opposite direction of interest rates: the market value decreases
when interest rates rise and increases when interest rates decline. A Fund's net
asset value per share moves in the same direction as the market value of the
municipal securities held in its portfolio. Therefore, if interest rates rise,
you should expect a Fund's net asset value per share to fall, and if interest
rates decline, the Fund's net asset value per share should rise.

Additionally, longer maturity bonds (like those held by the Funds) are generally
more sensitive to changes in interest rates. Each Fund's strategy of investing
in longer maturity bonds could subject its portfolio holdings to a greater
degree of market price volatility.

Declining interest rates increase the risk that portfolio holdings which contain
call features could be redeemed by the issuer. Proceeds of called bonds may be
reinvested at lower yields, which could affect the level of income a Fund
generates.

Credit risk. A municipal bond issue could deteriorate in quality to the extent
that its rating is downgraded or its market value declines relative to
comparable municipal securities. Credit risk also includes the risk that an
issuer of a municipal bond would be unable to make interest and principal
payments.

The investment manager seeks to minimize the credit risk inherent in municipal
securities by performing its own in-depth credit analysis on every municipal
security before purchase and by continuing to monitor all securities while they
remain in the portfolio. Each Fund may purchase municipal bonds that are insured
as to the payment of principal and interest. However, the Funds view insurance
as an enhancement of quality, not as a substitute for it. A Fund and will not
purchase a bond unless the investment manager approves the underlying credit.
The Funds are also subject to the following risks:

Concentration risk. Each Fund (except the National Fund) invests in municipal
securities issued by a single state and its municipalities. Specific events or
factors affecting a particular state may have an impact on the municipal
securities of that state without affecting the municipal market in general. The
Funds seek to minimize this risk by diversifying investments within the state.
In addition, each Fund is subject to certain investment restrictions limiting
the amount of its assets that can be invested in the securities of a single
issuer.

Market risk. At times, market conditions could result in a lack of liquidity.
The municipal market is an over-the-counter market, which means that the Funds
purchase and sell portfolio holdings through municipal bond dealers. A Fund's
ability to sell securities held in its portfolio is dependent on the willingness
and ability of market participants to provide bids that reflect current market
levels. Adverse market conditions could result in a lack of liquidity by
reducing the number of ready buyers. Lower-rated securities may be less liquid
than higher-rated securities.

An investment in any of the Funds is not a deposit in a bank and is not insured
or guaranteed by the Federal Deposit Insurance Corporation or any other
government agency.

2
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PAST PERFORMANCE

Each Fund offers two Classes of shares. The performance information presented
for each Fund provides some indication of the risks of investing in the Fund by
showing how the performance of Class A shares has varied year to year, as well
as how each Class's performance compares to the Lehman Brothers Municipal Bond
Index, a widely-used measure of municipal bond performance. Although each Fund's
fiscal year ends on September 30, the performance information is provided on a
calendar year basis to assist you in comparing the returns of the Funds with the
returns of other mutual funds. How a Fund has performed in the past, however, is
not necessarily an indication of how the Fund will perform in the future. Total
returns will vary between each Fund's Class A and Class D shares due to their
different fees and expenses.

FEES AND EXPENSES

The fee and expense table provided for each Fund summarizes the fees and
expenses that you may pay as a shareholder of a Fund. Each Class of shares has
its own sales charge schedule and is subject to different ongoing fees.
Shareholder fees are charged directly to you. Annual fund operating expenses are
deducted from a Fund's assets and are therefore paid indirectly by you and other
Fund shareholders.

Accompanying each Fund's fee and expense table is an example intended to help
you compare the expenses of investing in that Fund with the expenses of
investing in other mutual funds.

Discussions of each Fund begin on page 4.

3
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National Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The National Fund seeks to maximize income exempt from regular federal income
taxes to the extent consistent with preservation of capital and with
consideration given to opportunities for capital gain.

The National Fund uses the following strategies to pursue its objective:

The National Fund invests at least 80% of its net assets in municipal securities
of states, territories, and possessions of the United States, and the District
of Columbia, and their political subdivisions, agencies, and instrumentalities
that are rated investment grade when purchased.

The Fund generally invests in long-term quality municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.

In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.

PRINCIPAL RISKS

The National Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o Generally, the longer the maturity (duration) of a bond, the more sensitive
it is to movements in interest rates. Therefore, long-term bonds, while
generally providing higher current income, may be subject to greater price
volatility than bonds with shorter maturities.

o The Fund is subject to credit risk. If the Fund holds securities that are
downgraded or whose issuers become unable to pay interest or principal, the
Fund's net asset value may decline. Revenue bonds held by the Fund may be
downgraded or may default on payment if revenues from their underlying
facilities decline.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

4
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National Fund

PAST PERFORMANCE

The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be less. The average annual total returns presented in the table do reflect the
effect of the applicable sales charges. Both the bar chart and table assume that
all dividends and capital gain distributions were reinvested. Past performance
does not indicate future results.

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.82%
1990 5.82%
1991 11.47%
1992 7.88%
1993 14.10%
1994 -9.95%
1995 20.10%
1996 3.33%
1997 10.38%
1998 5.67%

Best calendar quarter return: 8.25% - quarter ended 3/31/95

Worst calendar quarter return: -8.20% - quarter ended 3/31/94

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Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.61% 4.41% 7.07% --
Class D 3.60 n/a n/a 4.27%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
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FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------
Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ......... 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) .......... none(1) 1%

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ................................ .50% .50%
Distribution and/or
Service (12b-1) Fees ......................... .09% 1.00%
Other Expenses ................................. .21% .21%
--- ---
Total Annual Fund Operating Expenses ........... .80% 1.71%
=== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

This example assumes (1) you invest $10,000 in the Fund for each period and then
sell all of your shares at the end of that period, (2) your investment has a 5%
return each year, and (3) the Fund's operating expenses remain the same.
Although your actual expenses may be higher or lower, based on these assumptions
your expenses would be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019

5
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California High-Yield Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The California High-Yield Fund seeks the maximum income exempt from regular
federal income taxes and from the personal income taxes of California consistent
with preservation of capital and with consideration given to capital gain.

The California High-Yield Fund uses the following strategies to pursue its
objective:

The California High-Yield Fund invests at least 80% of its net assets in
California municipal securities that are within any rating category, including
securities rated below investment grade or securities that are not rated.

In selecting securities to purchase, the investment manager may consider the
current market conditions, the availability of lower-rated securities, and
whether lower-rated securities offer yields high enough relative to yields on
investment grade securities to justify their higher risk.

The Fund generally invests in long-term municipal bonds. The Fund favors
investing in revenue bonds, which pay interest and principal from revenues
derived from a particular facility or class of facilities. Revenue bonds
generally offer a higher yield than general obligation bonds, the payment on
which is secured by the general taxing power of the issuer.

PRINCIPAL RISKS

The California High-Yield Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o Lower-rated municipal bonds are subject to a greater degree of credit risk
than higher-rated bonds. They generally involve greater price volatility and
risk of loss of principal and income than higher-rated bonds.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of California issuers,
its performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.

6
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California High-Yield Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.28%
1990 6.00%
1991 10.48%
1992 9.53%
1993 9.91%
1994 -2.79%
1995 14.55%
1996 5.52%
1997 8.72%
1998 6.8%

Best calendar quarter return: 6.48% - quarter ended 3/31/95

Worst calendar quarter return: -2.30% - quarter ended 3/31/94

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Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.16% 5.26% 7.13% --
Class D 4.21 n/a n/a 5.22%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
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FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Maximum Sales Charge (Load) on
Purchases (as a % of offering price) ............ 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............. none(1) 1%

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ................................... .50% .50%
Distribution and/or
Service (12b-1) Fees ............................ .09% 1.00%
Other Expenses .................................... .23% .23%
--- ----
Total Annual Fund Operating Expenses .............. .82% 1.73%
=== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

<PAGE>

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Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 276 545 939 2,041

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $555 $724 $908 $1,440
Class D 176 545 939 2,041

7
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California Quality Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The California Quality Fund seeks high income exempt from regular federal income
taxes and from the personal income taxes of California consistent with
preservation of capital and with consideration given to capital gain.

The California Quality Fund uses the following strategies to pursue its
objective:

The California Quality Fund invests at least 80% of its net assets in California
municipal securities that are within the three highest ratings of Moody's (Aaa,
Aa, or A) or S&P (AAA, AA, or A) on the date of purchase.

PRINCIPAL RISKS

The California Quality Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

8
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California Quality Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.77%
1990 6.57%
1991 11.22%
1992 8.49%
1993 12.6%
1994 -8.30%
1995 19.79%
1996 3.91%
1997 8.80%
1998 6.26%

Best calendar quarter return: 8.97% - quarter ended 3/31/95

Worst calendar quarter return: -6.63% - quarter ended 3/31/94

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Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.23% 4.69% 7.16% --
Class D 4.33 n/a n/a 4.54%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.
(1) From 1/31/94.
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FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- -------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .18% .18%
---- ----
Total Annual Fund Operating Expenses ................ .77% 1.68%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 271 530 913 1,987

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $550 $709 $883 $1,384
Class D 171 530 913 1,987

9
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Colorado Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Colorado Fund seeks to maximize income exempt from regular federal income
taxes and from Colorado personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Colorado Fund uses the following strategies to pursue its objective:

The Colorado Fund invests at least 80% of its net assets in Colorado municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Colorado Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Colorado issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Colorado's largest trading
partner is Japan, and the State is sensitive to national and international
business cycles. Turmoil in the world economy, especially in Asia, has the
potential to dramatically affect Colorado's economy.

10
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Colorado Fund

Past Performance

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.04%
1990 5.05%
1991 9.40%
1992 7.67%
1993 11.11%
1994 -5.13%
1995 13.96%
1996 3.39%
1997 7.52%
1998 5.80%

Best calendar quarter return: 6.34% - quarter ended 3/31/95

Worst calendar quarter return: -4.87% - quarter ended 3/31/94

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Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.83% 3.91% 6.24% --
Class D 3.83 n/a n/a 3.71%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
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FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .90% 1.80%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $748 $950 $1,530
Class D 283 566 975 2,116

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $748 $950 $1,530
Class D 183 566 975 2,116

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11

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Florida Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The Florida Fund seeks high income exempt from regular federal income taxes
consistent with preservation of capital and with consideration given to capital
gain.

The Florida Fund uses the following strategies to pursue its objective:

The Florida Fund invests at least 80% of its net assets in Florida municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Florida Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Florida issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. The lack of an income tax
in Florida exposes total tax collections to more volatility than would
otherwise be the case and, in the event of an economic downturn, could affect
the State's ability to pay principal and interest in a timely manner.
Florida's economy may be affected by foreign trade, crop failures, and severe
weather conditions and is sensitive to trends in the tourism and construction
industries.

12
- --------------------------------------------------------------------------------

<PAGE>

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

Florida Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 11.35%
1990 6.46%
1991 10.62%
1992 9.07%
1993 13.52%
1994 -5.52%
1995 16.67%
1996 2.76%
1997 9.33%
1998 5.67%

Best calendar quarter return: 7.49% - quarter ended 6/30/89

Worst calendar quarter return: -5.99% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.69% 4.51% 7.31% --
Class D 3.85 n/a n/a 4.59%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .23% 1.00%
Other Expenses ...................................... .27% .27%
---- ----
Total Annual Fund Operating Expenses ................ 1.00% 1.77%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 280 557 959 2,084

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $572 $778 $1,001 $1,641
Class D 180 557 959 2,084

13
- --------------------------------------------------------------------------------

<PAGE>

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

Georgia Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Georgia Fund seeks to maximize income exempt from regular federal income
taxes and from Georgia personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Georgia Fund uses the following strategies to pursue its objective:

The Georgia Fund invests at least 80% of its net assets in Georgia municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Georgia Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Georgia issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local policy changes, economics, natural disasters, and the
possibility of credit problems. Georgia's economy will be affected by trends
in the services, wholesale and retail trade, manufacturing, and
transportation industries, as these industries, along with government,
comprise the largest sources of employment within the State.

14
- --------------------------------------------------------------------------------

<PAGE>

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

Georgia Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.87%
1990 7.01%
1991 10.97%
1992 9.00%
1993 12.21%
1994 -7.64%
1995 19.16%
1996 3.86%
1997 9.02%
1998 5.94%

Best calendar quarter return: 7.71% - quarter ended 3/31/95

Worst calendar quarter return: -6.83% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.90% 4.70% 7.21% --
Class D 3.99 n/a n/a 4.67%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Maximum Sales Charge (Load) on
Purchases (as a % of offering price) .............. 4.75%(1) none
Maximum Deferred Sales
Charge (Load) (CDSC) on
Redemptions (as a % of original
purchase price or current
net asset value, whichever is less) ............... none(1) 1%
Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.80%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

<PAGE>

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

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 $975 2,116

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116

15
- --------------------------------------------------------------------------------

<PAGE>

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

Louisiana Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Louisiana Fund seeks to maximize income exempt from regular federal income
taxes and from Louisiana personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Louisiana Fund uses the following strategies to pursue its objective:

The Louisiana Fund invests at least 80% of its net assets in Louisiana municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Louisiana Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Louisiana issuers,
its performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Louisiana's economy is
affected by trends in the oil and gas, tourism, and gaming industries within
the State.

16
- --------------------------------------------------------------------------------

<PAGE>

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

Louisiana Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.14%
1990 6.86%
1991 11.38%
1992 7.83%
1993 11.45%
1994 -5.89%
1995 17.10%
1996 3.49%
1997 8.45%
1998 5.93%

Best calendar quarter return: 6.57% - quarter ended 3/31/95

Worst calendar quarter return: -5.38% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.87% 4.54% 6.99% --
Class D 3.86 n/a n/a 4.43%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .28% .28%
---- ----
Total Annual Fund Operating Expenses ................ .88% 1.78%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 281 560 964 2,095

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 181 560 964 2,095

17
- --------------------------------------------------------------------------------

<PAGE>

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

Maryland Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Maryland Fund seeks to maximize income exempt from regular federal income
taxes and from Maryland personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Maryland Fund uses the following strategies to pursue its objective:

The Maryland Fund invests at least 80% of its net assets in Maryland municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Maryland Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the Fund's
yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Maryland issuers, its
performance may be affected by local, state, and regional factors. These may
include state or local legislation or policy changes, economics, natural
disasters, and the possibility of credit problems. Because the Fund favors
investing in revenue bonds, its performance may also be affected by economic
developments impacting a specific facility or type of facility. The
performance of general obligation bonds of the State of Maryland may be
affected by efforts to limit or reduce state or local taxes.

18
- --------------------------------------------------------------------------------

<PAGE>

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

Maryland Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.49%
1990 6.15%
1991 10.47%
1992 8.24%
1993 11.93%
1994 -5.48%
1995 16.84%
1996 3.66%
1997 8.09%
1998 5.85%

Best calendar quarter return: 6.96% - quarter ended 3/31/95

Worst calendar quarter return: -5.29% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.80% 4.52% 6.95% --
Class D 3.89 n/a n/a 4.42%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance.

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.80%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 283 566 975 2,116

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 183 566 975 2,116

19
- --------------------------------------------------------------------------------

<PAGE>

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

Massachusetts Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Massachusetts Fund seeks to maximize income exempt from regular federal
income taxes and from Massachusetts personal income taxes to the extent
consistent with preservation of capital and with consideration given to
opportunities for capital gain.

The Massachusetts Fund uses the following strategies to pursue its objective:

The Massachusetts Fund invests at least 80% of its net assets in Massachusetts
municipal securities rated investment grade when purchased.

PRINCIPAL RISKS

The Massachusetts Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Massachusetts
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems.
Massachusetts and certain of its cities, towns, counties, and other
political subdivisions have at certain times in the past experienced
serious financial difficulties which have adversely affected their credit
standing. The recurrence of these financial difficulties could adversely
affect the market value and marketability of, or result in default payments
on, outstanding obligations issued by Massachusetts or its public
authorities or municipalities.

20
- --------------------------------------------------------------------------------

<PAGE>

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

Massachusetts Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 8.67%
1990 5.42%
1991 12.97%
1992 9.08%
1993 11.52%
1994 -4.43%
1995 15.20%
1996 4.14%
1997 8.68%
1998 6.55%

Best calendar quarter return: 6.16% - quarter ended 3/31/95

Worst calendar quarter return: -4.69% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.49% 4.81% 7.13% --
Class D 4.59 n/a n/a 4.69%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .21% .21%
---- ----
Total Annual Fund Operating Expenses ................ .80% 1.71%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019

21
- --------------------------------------------------------------------------------

<PAGE>

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

Michigan Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Michigan Fund seeks to maximize income exempt from regular federal income
taxes and from Michigan personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain

The Michigan Fund uses the following strategies to pursue its objective:

The Michigan Fund invests at least 80% of its net assets in Michigan municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Michigan Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Michigan issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. The principal
sectors of Michigan's economy are manufacturing of durable goods (including
automobiles and components and office equipment), tourism, and agriculture.
The cyclical nature of these industries can adversely affect the revenue
stream of the State and its political subdivisions because it may adversely
impact tax sources, particularly sales taxes, income taxes and single
business taxes.

22
- --------------------------------------------------------------------------------

<PAGE>

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

Michigan Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.71%
1990 5.85%
1991 12.01%
1992 9.31%
1993 11.48%
1994 -4.84%
1995 15.78%
1996 3.74%
1997 8.73%
1998 6.12%

Best calendar quarter return: 6.57% - quarter ended 3/31/95

Worst calendar quarter return: -4.63% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.09% 4.66% 7.23% --
Class D 4.06 n/a n/a 4.51%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .20% .20%
---- ----
Total Annual Fund Operating Expenses ................ .79% 1.70%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $552 $715 $898 $1,406
Class D 273 536 923 2,009

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $552 $715 $893 $1,406
Class D 173 536 923 2,009

23
- --------------------------------------------------------------------------------

<PAGE>

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

Minnesota Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Minnesota Fund seeks to maximize income exempt from regular federal income
taxes and from regular Minnesota personal income taxes to the extent consistent
with preservation of capital and with consideration given to opportunities for
capital gain.

The Minnesota Fund uses the following strategies to pursue its objective:

The Minnesota Fund invests at least 80% of its net assets in Minnesota municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Minnesota Fund is subject to the following principal risks

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Minnesota issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Pursuant to
Minnesota legislation enacted in 1995, dividends that would otherwise be
exempt from Minnesota personal income tax in the case of individuals,
estates, and trusts, could become subject to the Minnesota personal income
tax if it were judicially determined that exempting such dividends would
discriminate against interstate commerce.

24
- --------------------------------------------------------------------------------

<PAGE>

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

Minnesota Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.89%
1990 6.52%
1991 7.53%
1992 7.67%
1993 13.49%
1994 -2.54%
1995 11.41%
1996 3.39%
1997 7.02%
1998 6.43%

Best calendar quarter return: 6.01% - quarter ended 6/30/89

Worst calendar quarter return: -3.23% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.18% 3.79% 6.45% --
Class D 4.26 n/a n/a 3.89%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .22% .22%
---- ----
Total Annual Fund Operating Expenses ................ .81% 1.72%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030

25
- --------------------------------------------------------------------------------

<PAGE>

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

Missouri Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Missouri Fund seeks to maximize income exempt from regular federal income
taxes and from Missouri personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Missouri Fund uses the following strategies to pursue its objective

The Missouri Fund invests at least 80% of its net assets in Missouri municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Missouri Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Missouri issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. The national
economic recession of the early 1980s had a disproportionately adverse
impact on Missouri's economy, and its unemployment levels. A return to a
pattern of high unemployment could adversely affect the Missouri debt
obligations acquired by the Fund. Defense related business plays an
important role in Missouri's economy. Negative trends in this industry or
relocations of major employers could have a negative impact on the economy
of the State and particularly on the economy of the St. Louis metropolitan
area.

26
- --------------------------------------------------------------------------------

<PAGE>

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

Missouri Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.44%
1990 6.93%
1991 11.37%
1992 7.25%
1993 11.40%
1994 -6.32%
1995 16.95%
1996 3.71%
1997 8.08%
1998 5.77%

Best calendar quarter return: 7.31% - quarter ended 3/31/95

Worst calendar quarter return: -6.11% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.76% 4.34% 6.78% --
Class D 3.83 n/a n/a 4.20%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .10% 1.00%
Other Expenses ...................................... .29% .29%
---- ----
Total Annual Fund Operating Expenses ................ .89% 1.79%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 282 563 970 2,105

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $562 $745 $945 $1,519
Class D 182 563 970 2,105

27
- --------------------------------------------------------------------------------

<PAGE>

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

New Jersey Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The New Jersey Fund seeks to maximize income exempt from regular federal income
tax and New Jersey gross income tax consistent with preservation of capital and
with consideration given to opportunities for capital gain.

The New Jersey Fund uses the following strategies to pursue its objective:

The New Jersey Fund invests at least 80% of its net assets in New Jersey
municipal securities rated investment grade when purchased.

PRINCIPAL RISKS

The New Jersey Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of New Jersey issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. 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. New Jersey's economy will be affected by
trends in these sectors.

28
- --------------------------------------------------------------------------------

<PAGE>

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

New Jersey Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.56%
1990 6.78%
1991 11.04%
1992 8.99%
1993 12.37%
1994 -6.15%
1995 15.57%
1996 3.40%
1997 8.93%
1998 6.00%

Best calendar quarter return: 6.78% - quarter ended 3/31/95

Worst calendar quarter return: -5.63% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.96% 4.29% 7.07% --
Class D 4.03 n/a n/a 4.52%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .30% 1.00%
Other Expenses ...................................... .30% .30%
---- ----
Total Annual Fund Operating Expenses ................ 1.02% 1.80%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 283 566 975 2,116

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $574 $784 $1,011 $1,664
Class D 183 566 975 2,116

29
- --------------------------------------------------------------------------------

<PAGE>

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

New York Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The New York Fund seeks to maximize income exempt from regular federal income
taxes and from New York personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain

The New York Fund uses the following strategies to pursue its objective:

The New York Fund invests at least 80% of its net assets in New York municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The New York Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of New York issuers,
its performance may be affected by local, state, and regional factors.
These may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. New York City
and certain localities outside New York City have experienced financial
problems. These problems may affect the fiscal health of the State.

30
- --------------------------------------------------------------------------------

<PAGE>

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

New York Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.39%
1990 4.18%
1991 13.53%
1992 9.31%
1993 13.26%
1994 -7.93%
1995 19.31%
1996 3.83%
1997 10.04%
1998 6.86%

Best calendar quarter return: 8.13% - quarter ended 3/31/95

Worst calendar quarter return: -6.61% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.73% 5.03% 7.42% --
Class D 4.90 n/a n/a 4.93%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .22% .22%
---- ----
Total Annual Fund Operating Expenses ................ .81% 1.72%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 275 542 933 2,030

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $554 $721 $903 $1,429
Class D 175 542 933 2,030

31
- --------------------------------------------------------------------------------

<PAGE>

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

North Carolina Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The North Carolina Fund seeks high income exempt from regular federal income
taxes and North Carolina personal income taxes consistent with preservation of
capital and with consideration given to capital gain.

The North Carolina Fund uses the following strategies to pursue its objective:

The North Carolina Fund invests at least 80% of its net assets in North Carolina
municipal securities rated investment grade when purchased.

In abnormal market conditions, the Fund may temporarily invest more than
20% of its assets in taxable investment-grade fixed-income securities. Under
these circumstances, the Fund may not achieve its investment objective.

PRINCIPAL RISKS

The North Carolina Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of North Carolina
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. North
Carolina's total expenditures for each fiscal period covered by the budget
must not exceed total receipts during the period and the surplus in the
State Treasury at the beginning of the period. During the State's 1990-1991
fiscal year, it began facing a substantial budget shortfall resulting from
the failure of revenues received by the State to meet projected levels.
While the State was successful in dealing with the problem, pressure on
state revenues may be an ongoing problem.

32
- --------------------------------------------------------------------------------
<PAGE>

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

North Carolina Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1990* 2.80%
1991 10.63%
1992 8.15%
1993 12.98%
1994 -7.35%
1995 19.56%
1996 2.71%
1997 8.75%
1998 5.81%

Best calendar quarter return: 8.72% - quarter ended 3/31/95

Worst calendar quarter return: -6.73% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.85% 4.53% 6.80% --
Class D 4.14 n/a n/a 4.57%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.24(1) 6.09(2)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 8/31/90.

(2) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .23% 1.00%
Other Expenses ...................................... .32% .32%
---- ----
Total Annual Fund Operating Expenses ................ 1.05% 1.82%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 285 573 985 2,137

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $577 $793 $1,027 $1,697
Class D 185 573 985 2,137

33
- --------------------------------------------------------------------------------

<PAGE>

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

Ohio Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Ohio Fund seeks to maximize income exempt from regular federal income taxes
and from Ohio personal income taxes to the extent consistent with preservation
of capital and with consideration given to opportunities for capital gain.

The Ohio Fund uses the following strategies to pursue its objective:

The Ohio Fund invests at least 80% of its net assets in Ohio municipal
securities rated investment grade when purchased.

PRINCIPAL RISKS

The Ohio Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Ohio issuers, its
performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Ohio's economy
relies in part on durable goods manufacturing largely concentrated in motor
vehicles and equipment, steel, rubber products and household appliances. As
a result, general economic activity, as in many other industrially
developed states, tends to be more cyclical than in other states and in the
nation as a whole.

34
- --------------------------------------------------------------------------------
<PAGE>

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

Ohio Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 9.94%
1990 6.58%
1991 11.31%
1992 8.43%
1993 11.64%
1994 -4.91%
1995 15.23%
1996 3.77%
1997 8.39%
1998 5.89%

Best calendar quarter return: 6.47% - quarter ended 3/31/95

Worst calendar quarter return: -4.89% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.85% 4.44% 6.97% --
Class D 3.94 n/a n/a 4.41%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .19% .19%
---- ----
Total Annual Fund Operating Expenses ................ .78% 1.69%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 272 533 918 1,998

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $551 $712 $888 $1,395
Class D 172 533 918 1,998

35
- --------------------------------------------------------------------------------

<PAGE>

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

Oregon Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The Oregon Fund seeks to maximize income exempt from regular federal income
taxes and from Oregon personal income taxes to the extent consistent with
preservation of capital and with consideration given to opportunities for
capital gain.

The Oregon Fund uses the following strategies to pursue its objective:

The Oregon Fund invests at least 80% of its net assets in Oregon municipal
securities rated investment grade when purchased.

Principal Risks

The Oregon Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Oregon issuers, its
performance may be affected by local, state, and regional factors. These
may include state or local legislation or policy changes, economics,
natural disasters, and the possibility of credit problems. Oregon's economy
has been affected by the high technology manufacturing, forest products,
and agriculture industries, which have all been slowed by declining exports
to Asia.

36
- --------------------------------------------------------------------------------
<PAGE>

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

Oregon Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.44%
1990 6.50%
1991 10.82%
1992 7.78%
1993 10.90%
1994 -4.56%
1995 14.55%
1996 3.81%
1997 9.05%
1998 6.09%

Best calendar quarter return: 6.49% - quarter ended 6/30/89

Worst calendar quarter return: -4.48% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.09% 4.57% 6.89% --
Class D 4.13 n/a n/a 4.53%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .29% .29%
---- ----
Total Annual Fund Operating Expenses ................ .88% 1.79%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 282 563 970 2,105

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $561 $742 $939 $1,508
Class D 182 563 970 2,105

37
- --------------------------------------------------------------------------------
<PAGE>

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

Pennsylvania Fund

INVESTMENT OBJECTIVE/PRINCIPAL STRATEGIES

The Pennsylvania Fund seeks high income exempt from regular federal income tax
and Pennsylvania income taxes consistent with preservation of capital.

The Pennsylvania Fund uses the following strategies to pursue its objective:

The Pennsylvania Fund invests at least 80% of its net assets in Pennsylvania
municipal securities rated investment grade when purchased. The Fund will
ordinarily hold securities with maturities in excess of one year.

In abnormal market conditions, the Fund may temporarily invest more than
20% of its assets in taxable investment-grade fixed-income securities. Under
these circumstances, the Fund may not achieve its investment objective.

PRINCIPAL RISKS

The Pennsylvania Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of Pennsylvania
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. From
time to time, Pennsylvania and various of its political subdivisions
(including particularly the City of Philadelphia and the City of Scranton)
have encountered financial difficulty due to slowdowns in the pace of
economic activity and to other factors.

38
- --------------------------------------------------------------------------------
<PAGE>

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

Pennsylvania Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.24%
1990 5.35%
1991 11.29%
1992 9.32%
1993 12.91%
1994 -7.03%
1995 18.01%
1996 3.44%
1997 8.70%
1998 6.14%

Best calendar quarter return: 7.59% - quarter ended 3/31/95

Worst calendar quarter return: -6.40% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 1.10% 4.53% 7.12% --
Class D 4.32 n/a n/a 4.49%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .22% 1.00%
Other Expenses ...................................... .47% .47%
---- ----
Total Annual Fund Operating Expenses ................ 1.19% 1.97%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 300 618 1,062 2,296

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $591 $835 $1,098 $1,850
Class D 200 618 1,062 2,296

39
- --------------------------------------------------------------------------------

<PAGE>

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

South Carolina Fund

INVESTMENT OBJECTIVES/PRINCIPAL STRATEGIES

The South Carolina Fund seeks to maximize income exempt from regular federal
income taxes and from South Carolina personal income taxes to the extent
consistent with preservation of capital and with consideration given to
opportunities for capital gain.

The South Carolina Fund uses the following strategies to pursue its objective:

The South Carolina Fund invests at least 80% of its net assets in South Carolina
municipal securities rated investment grade when purchased.

Principal Risks

The South Carolina Fund is subject to the following principal risks:

o The Fund is subject to interest rate risk. When interest rates rise,
municipal bond prices fall. Movements in interest rates may affect the
Fund's yield, net asset value, and total return.

o If certain securities or market sectors represented in the Fund's portfolio
do not perform as expected, the Fund's net asset value may decline.

o Because the Fund invests primarily in the securities of South Carolina
issuers, its performance may be affected by local, state, and regional
factors. These may include state or local legislation or policy changes,
economics, natural disasters, and the possibility of credit problems. While
South Carolina has not defaulted on its bonded debt since 1879, the State
did experience certain budgeting difficulties over several recent years
through June 30, 1993. Such difficulties have not to date impacted the
State's ability to pay its indebtedness but did result in S&P lowering its
rating on South Carolina general obligation bonds in 1993. The rating was
restored to AAA in 1996.

40
- --------------------------------------------------------------------------------
<PAGE>

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

South Carolina Fund

PAST PERFORMANCE

[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]

Class A Annual Total Returns
Calendar Years

1989 10.61%
1990 6.01%
1991 11.52%
1992 8.69%
1993 11.71%
1994 -6.70%
1995 17.65%
1996 3.93%
1997 8.72%
1998 5.73%

Best calendar quarter return: 7.23% - quarter ended 3/31/95

Worst calendar quarter return: -6.18% - quarter ended 3/31/94

- --------------------------------------------------------------------------------
Average Annual Total Returns
Periods Ended 12/31/98

Class D
Since
One Five Ten Inception
Year Years Years 2/1/94
---- ----- ----- ------
Class A 0.70% 4.54% 7.06% --
Class D 3.78 n/a n/a 4.46%
Lehman Brothers
Municipal Bond Index 6.48 6.23 8.22 6.09(1)

The Lehman Brothers Municipal Bond Index is an unmanaged index that does not
reflect any fees or sales charges, and does not reflect state-specific bond
market performance

(1) From 1/31/94.
- --------------------------------------------------------------------------------

FEES AND EXPENSES

Shareholder Fees Class A Class D
- ---------------- ------- -------

Annual Fund Operating
Expenses for Fiscal 1998
- ------------------------
(as a percentage of average net assets)

Management Fees ..................................... .50% .50%
Distribution and/or
Service (12b-1) Fees .............................. .09% 1.00%
Other Expenses ...................................... .21% .21%
---- ----
Total Annual Fund Operating Expenses ................ .80% 1.71%
==== ====

(1) If you buy Class A shares for $1,000,000 or more you will not pay an
initial sales charge, but your shares will be subject to a 1% CDSC if sold
within 18 months.

Example

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 274 539 928 2,019

If you did not sell your shares at the end of each period, your expenses would
be:

1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
Class A $553 $718 $898 $1,418
Class D 174 539 928 2,019

41
- --------------------------------------------------------------------------------

<PAGE>

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

MANAGEMENT OF THE FUNDS

A Board of Directors or Board of Trustees (as applicable) provides broad
supervision over the affairs of each Fund.

Each Fund's manager is J. & W. Seligman & Co. Incorporated (Seligman), 100 Park
Avenue, New York, New York 10017. Seligman manages the investment of each Fund's
assets, including making purchases and sales of portfolio securities consistent
with each Fund's investment objective and strategies, and administers each
Fund's business and other affairs.

Established in 1864, Seligman currently serves as manager to 18 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $21.5 billion in assets as of December 31, 1998. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at December 31, 1998, of approximately $9.4 billion.

Each Fund pays Seligman a fee for its management services. The fee for each Fund
is equal to an annual rate of .50% of the Fund's average daily net assets.

Portfolio Management

The Funds are managed by the Seligman Municipals Team, headed by Thomas G.
Moles. Mr. Moles, a Managing Director of Seligman, has been Vice President and
Portfolio Manager of each Fund since its inception. Mr. Moles is also President
and Portfolio Manager of Seligman Quality Municipal Fund, Inc. and Seligman
Select Municipal Fund, Inc., two closed-end investment companies.

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

Affilates of Seligman

Seligman Advisors, Inc. (Seligman Advisors):
Each Fund's general distributor; responsible
for accepting orders for purchases and sales
of Fund shares.

Seliman Services, Inc.:

A limited purpose broker/dealer; acts as the
broker/dealer of record for shareholder
accounts that do not have a designated
financial advisor.

Seligman Data Corp. (SDC):

Each Fund's shareholder service agent
provides shareholder account services to the
Fund at cost.

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

42
- --------------------------------------------------------------------------------
<PAGE>

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

YEAR 2000

As the millennium approaches, mutual funds, financial and business
organizations, and individuals could be adversely affected if their computer
systems do not properly process and calculate date-related information and data
on and after January 1, 2000. Like other mutual funds, the Funds rely upon
service providers and their computer systems for its day-to-day operations. Many
of the Funds' service providers in turn depend upon computer systems of their
vendors. Seligman and SDC, have established a year 2000 project team. The team's
purpose is to assess the state of readiness of Seligman and SDC and the Funds'
other service providers and vendors. The team is comprised of several
information technology and business professionals, as well as outside
consultants. The Project Manager of the team reports directly to the
Administrative Committee of Seligman. The Project Manager and other members of
the team also report to each Fund's Board and its Audit Committee.

The team has identified the service providers and vendors who furnish critical
services or software systems to the Funds, including securities firms that
execute portfolio transactions for the Funds and firms responsible for
shareholder account recordkeeping. The team is working with these critical
service providers and vendors to evaluate the impact year 2000 issues may have
on their ability to provide uninterrupted services to the Funds. The team will
assess the feasibility of their year 2000 plans. The team has made progress on
its year 2000 contingency plans -- recovery efforts the team will employ in the
event that year 2000 issues adversely affect the Funds. The team anticipates
finalizing these plans in the near future.

The Funds anticipate the team will have implemented all significant components
of the team's year 2000 plans by mid-1999, including appropriate testing of
critical systems and receipt of satisfactory assurances from critical service
providers and vendors regarding their year 2000 compliance. The Funds believe
that the critical systems on which they rely will function properly on and after
the year 2000, but this is not guaranteed. If these systems do not function
properly, or the Funds' critical service providers are not successful in
implementing their year 2000 plans, the Funds' operations may be adversely
affected, including pricing, securities trading and settlement, and the
provision of shareholder services.

In addition, the Funds hold securities issued by governmental or
quasi-governmental issuers, which, like other organizations, may be susceptible
to year 2000 concerns. Year 2000 issues may affect an issuer's operations,
creditworthiness, and ability to make timely payment on any indebtedness and
could have an adverse impact on the value of its securities. If a Fund holds
these securities, its performance could be negatively affected. Seligman seeks
to identify an issuer's state of year 2000 readiness as part of the research it
employs. However, the perception of an issuer's year 2000 preparedness is only
one of the many factors considered in determining whether to buy, sell, or
continue to hold a security. Information provided by issuers concerning their
state of readiness may or may not be accurate or readily available. Further, the
Funds may be adversely affected if the exchanges, markets, depositories,
clearing agencies, or government or third parties responsible for infrastructure
needs do not address their year 2000 issues in a satisfactory manner.

SDC has informed the Funds that it does not expect the cost of its services to
increase materially as a result of the modifications to its computer systems
necessary to prepare for the year 2000. The Funds will not pay to remediate the
systems of Seligman or bear directly the costs to remediate the systems of any
other service providers or vendors, other than SDC. Affiliates of Seligman:

43
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Shareholder Information

DECIDING WHICH CLASS OF SHARES TO BUY

Each Fund's Class A and Class D shares represent an interest in the same
portfolio of investments. However, each Class has its own sales charge schedule
and is subject to different ongoing 12b-1 fees. When deciding which Class of
shares to buy, you should consider, among other things:

o The amount you plan to invest.

o How long you intend to remain invested in the Fund, or another
Seligman mutual fund.

o If you would prefer to pay an initial sales charge and lower ongoing
12b-1 fees, or be subject to a CDSC and pay higher ongoing 12b-1 fees.

o Whether you may be eligible for reduced or no sales charges when you
buy or sell shares.

Your financial advisor will be able to help you decide which Class of shares
best meets your needs.

Class A

o Initial sales charge on Fund purchases, as set forth below:

<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
as a % of Net as a % of
Amount of your Investment of Offering Price(1) Amount Invested Offering Price
-------------------------- -------------------- --------------- --------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0.00 0.00 0.00
</TABLE>

(1) "Offering Price" is the amount that you actually pay for Fund
shares; it includes the initial sales charge.

(2) You will not pay a sales charge on purchases of $1 million or
more, but you will be subject to a 1% CDSC if you sell your
shares within 18 months.

o Annual 12b-1 fee (for shareholder services) of up to 0.25%.

o No sales charge on reinvested dividends or capital gain distributions.

Class D

o No initial sales charge on purchases.

o A 1% CDSC on shares sold within one year of purchase.

o Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.

o No CDSC on redemptions of shares purchased with reinvested dividends
or capital gain distributions.

Each Fund has adopted a plan under Rule 12b-1 of the Investment Company Act of
1940. The plan allows each Class to pay distribution and/or service fees for the
sale and distribution of its shares and/or for providing services to
shareholders.

Because 12b-1 fees are paid out of each Class's assets on an ongoing basis, over
time these fees will increase your investment expenses and may cost you more
than other types of sales charges.

44
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- --------------------------------------------------------------------------------

The Board of Directors or Trustees, as applicable, believes that no conflict of
interest currently exists between a Fund's Class A and Class D shares. On an
ongoing basis, the Directors or Trustees, in the exercise of their fiduciary
duties under the Investment Company Act of 1940 and applicable state law, will
seek to ensure that no such conflict arises.

How CDSCs Are Calculated

To minimize the amount of CDSC you may pay when you sell your shares, each Fund
assumes that shares acquired through reinvested dividends and capital gain
distributions (which are not subject to a CDSC) are sold first. Shares that have
been in your account long enough so they are not subject to a CDSC are sold
next. After these shares are exhausted, shares will be sold in the order they
were purchased (oldest to youngest). The amount of any CDSC that you pay will be
based on the shares' original purchase price or current net asset value,
whichever is less.

You will not pay a CDSC when you exchange shares of any Fund to buy shares of
the same class of any other Seligman mutual fund. For the purpose of calculating
the CDSC when you sell shares that you acquired by exchanging shares of a Fund,
it will be assumed that you held the shares since the date you purchased the
shares of that Fund.

PRICING OF FUND SHARES

- ----------------------------------------
NAV:
Computed separately for each Class of a
Fund by dividing that Class's share of
the value of the net assets of the Fund
(i.e., its assets less liabilities) by
the total number of outstanding shares
of the Class.
- ----------------------------------------

When you buy or sell shares, you do so at the Class's net asset value (NAV) next
calculated after Seligman Advisors accepts your request. Any applicable sales
charge will be included in the purchase price for Class A shares. Purchase or
sale orders received by an authorized dealer or financial advisor by the close
of regular trading on the New York Stock Exchange (NYSE) (normally 4:00 p.m.
Eastern time) and accepted by Seligman Advisors before the close of business
(5:00 p.m. Eastern time) on the same day will be executed at the Class's NAV
calculated as of the close of regular trading on the NYSE on that day. Your
broker/dealer or financial advisor is responsible for forwarding your order to
Seligman Advisors before the close of business.

If your buy or sell order is received by your broker/dealer or financial advisor
after the close of regular trading on the NYSE, or is accepted by Seligman
Advisors after the close of business, the order will be executed at the Class's
NAV calculated as of the close of regular trading on the next NYSE trading day.
When you sell shares, you receive the Class's per share NAV, less any applicable
CDSC.

The NAV of a Fund's shares is determined each day, Monday through Friday, on
days that the NYSE is open for trading. Because of their higher 12b-1 fees, the
NAV of Class D shares will generally be lower than the NAV of Class A shares.

Securities owned by a Fund are valued at current market prices. If reliable
market prices are unavailable, securities are valued in accordance with
procedures approved by the Board of Directors or Trustees, as applicable.

45
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OPENING YOUR ACCOUNT

The Funds' shares are sold through authorized broker/dealers or financial
advisors who have sales agreements with Seligman Advisors. There are several
programs under which you may be eligible for reduced sales charges. Ask your
financial advisor if any of these programs apply to you.

To make your initial investment in a Fund, contact your financial advisor or
complete an account application and send it with your check directly to SDC at
the address provided on the account application. If you do not choose a Class,
your investment will automatically be made in Class A shares.

The required minimum initial investments are:

o Regular (non-retirement) accounts: $1,000

o For accounts opened concurrently with Invest-A-Check(R):
$100 to open if you will be making monthly investments
$250 to open if you will be making quarterly investments

If you buy shares by check and subsequently sell the shares, SDC will not send
your proceeds until your check clears, which could take up to 15 calendar days
from the date of your purchase.

You will be sent a statement confirming your purchase, and any subsequent
transactions in your account. You will also be sent at least annually, a
statement detailing all your transactions in the Fund and all other Seligman
funds you own. Duplicate account statements will be sent to you free of charge
for the current year and most recent prior year. Copies of year-end statements
for prior years are available for a fee of $10 per year, per account, with a
maximum charge of $150 per account request. Send your request and a check for
the fee to SDC.

If you want to be able to buy, sell, or exchange shares by telephone, you
should complete an application when you open your account. This will
prevent you from having to complete a supplemental election form
(which may require a signature guarantee) at a later date.

HOW TO BUY ADDITIONAL SHARES

After you have made your initial investment, there are many options available to
make additional purchases of Fund shares. Shares may be purchased through your
authorized broker/dealer or financial advisor, or you may send a check directly
to SDC. Please provide either an investment slip or a note that provides your
name(s), Fund name, and account number. Your investment will be made in the
Class you already own.

Send investment checks to:

Seligman Data Corp.
P.O. Box 9766
Providence, RI 02940-5051

Your check must be in US dollars and be drawn on a US bank. You may not use
third party or credit card convenience checks for investment.

46
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- --------------------------------------------------------------------------------

You may also use the following account services to make additional investments:

Invest-a-Check(R). You may buy Fund shares electronically from a savings or
checking account of an Automated Clearing House (ACH) member bank. If your bank
is not a member of ACH, the Fund will debit your checking account by
preauthorized checks. You may buy Fund shares at regular monthly intervals in
fixed amounts of $100 or more, or regular quarterly intervals in fixed amounts
of $250 or more. If you use Invest-A-Check(R), you must continue to make
automatic investments until the Fund's minimum initial investment of $1,000 is
met or your account may be closed.

Automatic Dollar-Cost-Averaging. If you have at least $5,000 in Seligman Cash
Management Fund, you may exchange uncertificated shares of that fund to buy
shares of the same class of any Seligman mutual fund at regular monthly
intervals in fixed amounts of $100 or more or regular quarterly intervals in
fixed amounts of $250 or more. If you exchange Class A shares, you may pay an
initial sales charge to buy shares.

Automatic CD Transfer. You may instruct your bank to invest the proceeds of a
maturing bank certificate of deposit (CD) in shares of the Fund. If you wish to
use this service, contact SDC or your financial advisor to obtain the necessary
forms. Because your bank may charge you a penalty, it is not normally advisable
to withdraw CD assets before maturity.

Dividends From Other Investments. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name and Class of shares.) Direct Deposit. You may buy Fund shares
electronically with funds from your employer, the IRS or any other institution
that provides direct deposit. Call SDC for more information.

Seligman Time Horizon Matrix(SM). (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It considers
your financial needs, and helps frame a personalized asset allocation strategy
around the cost of your future commitments and the time you have to meet them.
Contact your financial advisor for more information.

Seligman Harvester. If you are a retiree or nearing retirement, this program is
designed to help you establish an investment strategy that seeks to meet your
income needs throughout your retirement. The strategy is customized to your
personal financial situation by allocating your assets to seek to address your
income requirements, and prioritizing your expenses and establishing a prudent
withdrawal schedule.

HOW TO EXCHANGE SHARES BETWEEN THE SELIGMAN MUTUAL FUNDS

You may sell Fund shares to buy shares of the same Class of another Seligman
mutual fund, or you may sell shares of another Seligman mutual fund to buy Fund
shares. Exchanges will be made at each fund's respective NAV. You will not pay
an initial sales charge when you exchange, unless you exchange Class A shares of
Seligman Cash Management Fund to buy shares of a Fund or another Seligman mutual
fund.

Only your dividend and capital gain distribution options and telephone services
will be automatically carried over to any new fund account. If you wish to carry
over any other account options (for example, Invest-a-Check(R) or Systematic
Withdrawals) to the new fund, you must specifically request so at the time of
your exchange.

If you exchange into a new fund, you must exchange enough to meet the new fund's
required minimum initial investment.

Before making an exchange, contact your financial advisor or SDC to obtain the
applicable fund prospectus(es), which you should read and understand before
investing.

47
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HOW TO SELL SHARES

The easiest way to sell Fund shares is by phone. If you have telephone services,
you may be able use this service to sell Fund shares. Restrictions apply to
certain types of accounts. Please see "Important Policies That May Affect Your
Account."

When you sell Fund shares by phone, a check for the proceeds is sent to your
address of record. If you have current ACH bank information on file, you may
have the proceeds of the sale of your Fund shares directly deposited into your
bank account (typically, 3-4 business days after your shares are sold).

You may always send a written request to sell shares of any Fund. It may take
longer to get your money if you send your request by mail.

You may need to provide additional documents to sell shares if you are:

o a corporation; o an executor or administrator;
o a trustee or custodian; or
o in a retirement plan.

If your Fund shares are represented by certificates, you will need to surrender
the certificates to SDC before you sell your shares.

Contact your financial advisor or SDC's Shareholder Services Department for
information on selling your shares under any of the above circumstances.

You will need to guarantee your signature(s) if the proceeds are:

(1) $50,000 or more;
(2) to be paid to someone other than all account owners, or
(3) mailed to other than your address of record.

- ----------------------------------------
Signature Guarantee:

Protects you and the Funds from fraud.
It guarantees that a signature is
genuine. A guarantee must be obtained
from an eligible financial institution.
Notarization by a notary public is not
an acceptable guarantee.
- ----------------------------------------

You may also use the following account services to sell shares:

Systematic Withdrawal Plan. If you have at least $5,000 in a Fund, you may
withdraw (sell) a fixed amount (minimum of $50) of uncertificated shares at
regular intervals. A check will be sent to you at your address of record or, if
you have current ACH bank information on file, you may have your payments
directly deposited to your predesignated bank account in 3-4 business days after
your shares are sold. If you bought $1,000,000 or more of Class A shares without
an initial sales charge, your withdrawals may be subject to a 1% CDSC if they
occur within 18 months of purchase. If you own Class D shares and reinvest your
dividends and capital gain distributions, you may withdraw 10% of the value of
your Fund account (at the time of election) annually without a CDSC.

Check Redemption Service. If you have at least $25,000 in a Fund, you may use
this service to draw checks against your Fund account in amounts of $500 or
more. If you have shares represented by certificates, those shares will not be
available to draw checks against. If you bought $1,000,000 or more of Class A
shares without an initial sales charge, you may be subject to a 1% CDSC if you
draw checks against the shares within 18 months of purchase. If you own Class D
shares, you may only draw checks against shares that have been held for one year
or more. If you did not elect this service on your account application, you must
complete a supplemental election form to add this service to your account.
Contact SDC for more information.

48
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IMPORTANT POLICIES THAT MAY AFFECT YOUR ACCOUNT

To protect you and other shareholders, each Fund reserves the right to:

o Refuse an exchange request if:

1. you have exchanged twice from the same fund in any three-month
period.

2. the amount you wish to exchange equals the lesser of $1,000,000
or 1% of a Fund's net assets, or

3. you or your financial advisor have been advised that previous
patterns of purchases and sales or exchanges have been considered
excessive.

o Refuse any request to buy Fund shares.

o Reject any request received by telephone.

o Suspend or terminate telephone services.

o Reject a signature guarantee that SDC believes may be fraudulent.

o Close your fund account if its value falls below $500.

o Close your account if it does not have a certified taxpayer
identification number.

Telephone Services

You and your broker/dealer or financial advisor representative or financial
advisor will be able to place the following requests by telephone, unless you
indicate on your account application that you do not want telephone services:

o Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record)

o Exchange shares between funds o Change dividend and/or capital gain
distribution options

o Change your address

o Establish systematic withdrawals to address of record

If you do not complete an account application when you open your account,
telephone services must be elected on a supplemental election form.

Restrictions apply to certain types of accounts:

o Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.

o Corporations may not sell Fund shares by phone.

o IRAs may only exchange Fund shares or request address changes by
phone.

o Group retirement plans may not sell Fund shares by phone; plans that
allow participants to exchange by phone must provide a letter of
authorization signed by the plan custodian or trustee and provide a
supplemental election form signed by all plan participants.

Unless you have current ACH bank information on file, you will not be able to
sell Fund shares by phone within thirty days following an address change. Your
request must be communicated to an SDC representative.

You may not request any phone transactions via the automated access line.

You may cancel telephone services at any time by sending a written request to
SDC. Each account owner, by accepting or adding telephone services, authorizes
each of the other owners to make requests by phone. Your broker/dealer or
financial advisor representative or financial advisor may not establish
telephone services without your written authorization. SDC will send written
confirmation to the address of record when telephone services are added or
terminated.

During times of heavy call volume, you may not be able to get through to SDC by
phone to request a sale or exchange of shares. In this case, you may need to
write, and it may take longer for your request to be processed. A Fund's NAV may
fluctuate during this time.

The Funds and SDC will not be liable for processing requests received by phone
as long as it was reasonable to believe that the request was genuine.

Reinstatement Privilege

If you sell Fund shares, you may, within 120 calendar days, use part or all of
the proceeds to buy shares of the same Fund or any other Seligman mutual fund
(reinstate your investment) without paying an initial sales charge or, if you
paid a CDSC when you sold your shares, receiving a credit for the applicable
CDSC paid. This privilege is available only once each calendar year. Contact
your financial advisor for more information. You should consult your tax advisor
concerning possible tax consequences of exercising this privilege.

49
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DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS

Each Fund generally declares any dividends from net investment income daily and
pays dividends on the 17th of each month. If the 17th day of a month falls on a
weekend or on a NYSE holiday, the dividend will be distributed on the previous
business day. The Funds distribute net capital gains realized on investments
annually. It is expected that the Funds' distributions will be primarily income
dividends.

- ----------------------------------------
Dividend:

A payment by a mutual fund, usually
derived from the fund's net investment
income (dividends and interest earned on
portfolio securities less expenses).

Capital Gain Distribution:

A payment to mutual fund shareholders
which represents profits realized on the
sale of securities in a Fund's
portfolio.

Ex-dividend Date:

The day on which any declared
distributions (dividends or capital
gains) are deducted from the Fund's
assets before it calculates its NAV.
- ----------------------------------------

You may elect to:

(1) reinvest both dividends and capital gain distributions;

(2) receive dividends in cash and reinvest capital gain distributions; or

(3) receive both dividends and capital gain distributions in cash.

Your dividends and capital gain distributions will be reinvested if you do not
instruct otherwise.

If you want to change your election, you may write SDC at the address listed on
the back cover of this prospectus, or, if you have telephone services, you or
your financial advisor may call SDC. Your request must be received by SDC before
the record date to be effective for that dividend or capital gain distribution.

Cash dividends or capital gain distributions will be sent by check to your
address of record or, if you have current ACH bank information on file, directly
deposited into your predesignated bank account within 3-4 business days from the
payable date.

Dividends and capital gain distributions are reinvested to buy additional shares
on the payable date using the NAV of the payable date.

Dividends on Class D shares will be lower than the dividends on Class A shares
as a result of their higher 12b-1 fees. Capital gain distributions, if any, will
be paid in the same amount for each Class.

TAXES

The Funds intend to pay dividends that are exempt from regular income tax. A
Fund may invest a portion of its assets in securities that generate income that
is not exempt from federal or state income tax. Income exempt from federal tax
may be subject to state and local tax. If you wish more specific information on
the possible tax consequences of investing in a particular Fund, you should read
that Fund's Statement of Additional Information.

Any capital gains distributed by a Fund may be taxable, whether you take them in
cash or reinvest them to buy additional Fund shares. Capital gains may be taxed
at different rates depending on the length of time the Fund holds its assets.

When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital loss
to the extent that it offsets the long-term capital gain distribution.

An exchange of Fund shares is a sale and
may result in a gain or loss for federal income tax purposes.

Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each shareholder's
situation is unique, you should always consult your tax advisor concerning the
effect income taxes may have on your individual investment.

50
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Financial Highlights

The tables below are intended to help you understand the financial performance
of each Fund's Classes for the past five years or, if less than five years, the
period of the Class's operations. Certain information reflects financial results
for a single share of a Class that was held throughout the periods shown. "Total
return" shows the rate that you would have earned (or lost) on an investment in
the Fund, assuming you reinvested all your dividends and capital gain
distributions. Total returns do not reflect any sales charges. Deloitte & Touche
LLP, independent auditors, have audited this information for each Fund. Their
report, along with the financial statements, is included in each Fund's annual
report, which is available upon request.

NATIONAL FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- --------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.01 $7.70 $7.58 $7.18 $8.72 $8.02 $7.70 $7.57 $7.18 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ .39 0.39 0.40 0.40 0.41 0.32 0.32 0.33 0.32 0.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net gains or losses on securities
(both realized and unrealized).. .31 0.31 0.12 0.40 (1.04) 0.29 0.32 0.13 0.39 (1.02)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.70 0.70 0.52 0.80 (0.63) 0.61 0.64 0.46 0.71 (0.80)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.39) (0.39) (0.40) (0.40) (0.41) (0.32) (0.32) (0.33) (0.32) (0.22)
Distributions (from capital gains) -- -- -- -- (0.50) -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.39) (0.39) (0.40) (0.40) (0.91) (0.32) (0.32) (0.33) (0.32) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.32 $8.01 $7.70 $7.58 $7.18 $8.31 $8.02 $7.70 $7.57 $7.18
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.00% 9.40% 6.97% 11.48% (7.83)% 7.76% 8.56% 6.13% 10.17% (9.96)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $101,909 $97,481 $98,767 $104,184 $111,374 $7,392 $2,279 $4,826 $1,215 $446
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.86% 0.85% 1.71% 1.75% 1.67% 1.95% 1.76%(3)
Ratio of net income to
average net assets ............... 4.82% 5.05% 5.19% 5.46% 5.30% 3.91% 4.15% 4.27% 4.40% 4.37%(3)
Portfolio turnover rate ............ 18.00% 20.63% 33.99% 24.91% 24.86% 18.00% 20.63% 33.99% 24.91% 24.86%(4)
</TABLE>

- ----------
See footnotes on page 60.

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CALIFORNIA HIGH-YIELD FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- --------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $6.61 $6.50 $6.47 $6.30 $6.73 $6.61 $6.51 $6.48 $6.31 $6.67
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.32 0.34 0.36 0.37 0.37 0.26 0.28 0.30 0.31 0.21
Net gains or losses on securities
(both realized and unrealized).. 0.22 0.20 0.05 0.17 (0.34) 0.22 0.19 0.05 0.17 (0.36)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.54 0.54 0.41 0.54 0.03 0.48 0.47 0.35 0.48 (0.15)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.32) (0.34) (0.36) (0.37) (0.37) (0.26) (0.28) (0.30) (0.31) (0.21)
Distributions (from capital gains) (0.03) (0.09) (0.02) -- (0.09) (0.03) (0.09) (0.02) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.35) (0.43) (0.38) (0.37) (0.46) (0.29) (0.37) (0.32) (0.31) (0.21)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $6.80 $6.61 $6.50 $6.47 $6.30 $6.80 $6.61 $6.51 $6.48 $6.31
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.45% 8.74% 6.49% 8.85% 0.41% 7.47% 7.60% 5.53% 7.78% (2.47)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $58,374 $52,883 $50,264 $51,504 $48,007 $6,393 $3,320 $1,919 $1,277 $650
Ratio of expenses to average
net assets ....................... 0.82% 0.87% 0.84% 0.90% 0.85% 1.73% 1.77% 1.74% 1.91% 1.74%(3)
Ratio of net income to
average net assets ............... 4.81% 5.26% 5.49% 5.84% 5.74% 3.90% 4.36% 4.59% 4.84% 4.73%(3)
Portfolio turnover rate ............ 10.75% 22.42% 34.75% 17.64% 8.36% 10.75% 22.42% 34.75% 17.64% 8.36%(4)

CALIFORNIA QUALITY FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $6.99 $6.75 $6.65 $6.39 $7.28 $6.97 $6.74 $6.63 $6.38 $7.13
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.33 0.34 0.35 0.34 0.35 0.27 0.28 0.28 0.28 0.19
Net gains or losses on securities
(both realized and unrealized) . 0.25 0.24 0.11 0.32 (0.73) 0.25 0.23 0.12 0.31 (0.75)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.58 0.46 0.66 (0.38) 0.52 0.51 0.40 0.59 (0.56)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.33) (0.34) (0.35) (0.34) (0.35) (0.27) (0.28) (0.28) (0.28) (0.19)
Distributions (from capital gains) (0.03) -- (0.01) (0.06) (0.16) (0.03) -- (0.01) (0.06) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.36) (0.34) (0.36) (0.40) (0.51) (0.30) (0.28) (0.29) (0.34) (0.19)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.21 $6.99 $6.75 $6.65 $6.39 $7.19 $6.97 $6.74 $6.63 $6.38
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.67% 8.87% 7.00% 10.85% (5.46)% 7.71% 7.75% 6.20% 9.61% (8.01)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $87,522 $86,992 $95,560 $94,947 $99,020 $2,302 $1,677 $1,645 $863 $812
Ratio of expenses to average
net assets ....................... 0.77% 0.82% 0.79% 0.89% 0.81% 1.68% 1.72% 1.69% 1.88% 1.77%(3)
Ratio of net income to
average net assets ............... 4.75% 4.99% 5.11% 5.34% 5.20% 3.84% 4.09% 4.21% 4.36% 4.39%(3)
Portfolio turnover rate ............ 30.82% 12.16% 12.84% 11.24% 22.16% 30.82% 12.16% 12.84% 11.24% 22.16%(4)
</TABLE>

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See footnotes on page 60.

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COLORADO FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.42 $7.27 $7.30 $7.09 $7.76 $7.42 $7.27 $7.29 $7.09 $7.72
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.36 0.37 0.37 0.38 0.37 0.29 0.30 0.31 0.30 0.20
Net gains or losses on securities
(both realized and unrealized).. 0.22 0.15 (0.03) 0.21 (0.59) 0.21 0.15 (0.02) 0.20 (0.63)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.52 0.34 0.59 (0.22) 0.50 0.45 0.29 0.50 (0.43)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.37) (0.37) (0.38) (0.37) (0.29) (0.30) (0.31) (0.30) (0.20)
Distributions (from capital gains) -- -- -- -- (0.08) -- -- -- -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.36) (0.37) (0.37) (0.38) (0.45) (0.29) (0.30) (0.31) (0.30) (0.20)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.64 $7.42 $7.27 $7.30 $7.09 $7.63 $7.42 $7.27 $7.29 $7.09
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.03% 7.30% 4.76% 8.56% (2.92)% 6.90% 6.34% 3.95% 7.26% (5.73)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $45,583 $49,780 $52,295 $54,858 $58,197 $344 $238 $255 $193 $96
Ratio of expenses to average
net assets ....................... 0.90% 0.90% 0.85% 0.93% 0.86% 1.80% 1.81% 1.75% 2.02% 1.78%(3)
Ratio of net income to
average net assets ............... 4.80% 5.01% 5.07% 5.31% 5.06% 3.90% 4.10% 4.17% 4.23% 4.05%(3)
Portfolio turnover rate ............ 28.66% 3.99% 12.39% 14.70% 10.07% 28.66% 3.99% 12.39% 14.70% 10.07%(4)

FLORIDA FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $7.80 $7.67 $7.71 $7.34 $8.20 $7.81 $7.68 $7.72 $7.34 $8.10
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.35 0.36 0.38 0.40 0.42 0.29 0.30 0.32 0.34 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.34 0.23 0.04 0.37 (0.74) 0.34 0.23 0.04 0.38 (0.76)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.69 0.59 0.42 0.77 (0.32) 0.63 0.53 0.36 0.72 (0.52)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.38) (0.40) (0.42) (0.29) (0.30) (0.32) (0.34) (0.24)
Distributions (from capital gains) (0.07) (0.10) (0.08) -- (0.12) (0.07) (0.10) (0.08) -- --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.46) (0.46) (0.40) (0.54) (0.36) (0.40) (0.40) (0.34) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.07 $7.80 $7.67 $7.71 $7.34 $8.08 $7.81 $7.68 $7.72 $7.34
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.16% 8.01% 5.54% 10.87% (3.99)% 8.32% 7.18% 4.74% 10.07% (6.64)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $42,464 $42,024 $45,200 $49,030 $49,897 $1,940 $1,678 $1,277 $603 $244
Ratio of expenses to average
net assets**...................... 1.00% 1.04% 0.97% 0.72% 0.42% 1.77% 1.81% 1.73% 1.66% 1.29%(3)
Ratio of net income to average
net assets**...................... 4.45% 4.70% 4.90% 5.38% 5.49% 3.68% 3.93% 4.14% 4.53% 4.61%(3)
Portfolio turnover rate ............ 6.73% 33.68% 18.53% 11.82% 6.17% 6.73% 33.68% 18.53% 11.82% 6.17%(4)
</TABLE>

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See footnotes on page 60.

53
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GEORGIA FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.12 $7.87 $7.81 $7.48 $8.43 $8.13 $7.88 $7.82 $7.49 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.38 0.38 0.39 0.39 0.41 0.30 0.31 0.32 0.32 0.22
Net gains or losses on securities
(both realized and unrealized).. 0.29 0.28 0.11 0.43 (0.86) 0.30 0.28 0.11 0.43 (0.84)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.67 0.66 0.50 0.82 (0.45) 0.60 0.59 0.43 0.75 (0.62)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.38) (0.39) (0.39) (0.41) (0.30) (0.31) (0.32) (0.32) (0.22)
Distributions (from capital gains) (0.03) (0.03) (0.05) (0.10) (0.09) (0.03) (0.03) (0.05) (0.10) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.41) (0.41) (0.44) (0.49) (0.50) (0.33) (0.34) (0.37) (0.42) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.38 $8.12 $7.87 $7.81 $7.48 $8.40 $8.13 $7.88 $7.82 $7.49
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.44% 8.65% 6.56% 11.66% (5.52)% 7.59% 7.67% 5.60% 10.58% (7.57)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $48,424 $50,614 $50,995 $57,678 $61,466 $2,809 $2,640 $2,327 $2,079 $849
Ratio of expenses to average
net assets**...................... 0.89% 0.89% 0.83% 0.91% 0.73% 1.80% 1.79% 1.73% 1.90% 1.76%(3)
Ratio of net income to
average net assets**.............. 4.57% 4.82% 4.94% 5.26% 5.21% 3.66% 3.92% 4.03% 4.28% 4.28%(3)
Portfolio turnover rate ............ 2.92% 12.28% 16.24% 3.36% 19.34% 2.92% 12.28% 16.24% 3.36% 19.34%(4)

LOUISIANA FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $8.28 $8.16 $8.14 $7.94 $8.79 $8.27 $8.16 $8.14 $7.94 $8.73
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.41 0.41 0.42 0.43 0.44 0.33 0.34 0.35 0.35 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.24 0.23 0.08 0.34 (0.77) 0.24 0.22 0.08 0.34 (0.79)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.65 0.64 0.50 0.77 (0.33) 0.57 0.56 0.43 0.69 (0.55)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.41) (0.41) (0.42) (0.43) (0.44) (0.33) (0.34) (0.35) (0.35) (0.24)
Distributions (from capital gains) (0.01) (0.11) (0.06) (0.14) (0.08) (0.01) (0.11) (0.06) (0.14) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.52) (0.48) (0.57) (0.52) (0.34) (0.45) (0.41) (0.49) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.51 $8.28 $8.16 $8.14 $7.94 $8.50 $8.27 $8.16 $8.14 $7.94
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.08% 8.17% 6.32% 10.30% (3.83)% 7.11% 7.07% 5.37% 9.17% (6.45)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $56,308 $56,199 $57,264 $61,988 $61,441 $837 $509 $389 $465 $704
Ratio of expenses to average
net assets ....................... 0.88% 0.86% 0.82% 0.89% 0.87% 1.78% 1.76% 1.72% 1.91% 1.78%(3)
Ratio of net income to
average net assets ............... 4.86% 5.08% 5.15% 5.44% 5.31% 3.96% 4.18% 4.25% 4.41% 4.33%(3)
Portfolio turnover rate ............ 15.72% 16.08% 10.08% 4.82% 17.16% 15.72% 16.08% 10.08% 4.82% 17.16%(4)
</TABLE>

- ----------
See footnotes on page 60.

54
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MARYLAND FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.14 $7.99 $7.96 $7.71 $8.64 $8.15 $7.99 $7.97 $7.72 $8.46
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.40 0.40 0.41 0.42 0.32 0.33 0.33 0.33 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.23 0.19 0.06 0.38 (0.76) 0.23 0.20 0.05 0.38 (0.74)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.63 0.59 0.46 0.79 (0.34) 0.55 0.53 0.38 0.71 (0.51)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.40) (0.40) (0.41) (0.42) (0.32) (0.33) (0.33) (0.33) (0.23)
Distributions (from capital gains) (0.05) (0.04) (0.03) (0.13) (0.17) (0.05) (0.04) (0.03) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.45) (0.44) (0.43) (0.54) (0.59) (0.37) (0.37) (0.36) (0.46) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.32 $8.14 $7.99 $7.96 $7.71 $8.33 $8.15 $7.99 $7.97 $7.72
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 7.89% 7.64% 6.00% 10.90% (4.08)% 6.91% 6.80% 4.91% 9.75% (6.21)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $54,891 $52,549 $54,041 $56,290 $57,263 $3,128 $2,063 $2,047 $630 $424
Ratio of expenses to average
net assets ....................... 0.89% 0.90% 0.84% 0.96% 0.92% 1.80% 1.81% 1.72% 2.02% 1.80%(3)
Ratio of net income to
average net assets ............... 4.82% 4.99% 5.05% 5.31% 5.17% 3.91% 4.08% 4.14% 4.27% 4.26%(3)
Portfolio turnover rate ............ 7.59% 14.79% 5.56% 3.63% 17.68% 7.59% 14.79% 5.56% 3.63% 17.68%(4)

MASSACHUSETTS FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $7.99 $7.85 $7.91 $7.66 $8.54 $7.99 $7.84 $7.90 $7.66 $8.33
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.38 0.40 0.41 0.42 0.44 0.31 0.33 0.34 0.34 0.24
Net gains or losses on securities
(both realized and unrealized).. 0.37 0.22 0.05 0.28 (0.67) 0.36 0.23 0.05 0.27 (0.67)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.75 0.62 0.46 0.70 (0.23) 0.67 0.56 0.39 0.61 (0.43)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.40) (0.41) (0.42) (0.44) (0.31) (0.33) (0.34) (0.34) (0.24)
Distributions (from capital gains) (0.09) (0.08) (0.11) (0.03) (0.21) (0.09) (0.08) (0.11) (0.03) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.47) (0.48) (0.52) (0.45) (0.65) (0.40) (0.41) (0.45) (0.37) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.27 $7.99 $7.85 $7.91 $7.66 $8.26 $7.99 $7.84 $7.90 $7.66
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.80% 8.11% 5.97% 9.58% (2.94)% 8.68% 7.29% 5.01% 8.33% (5.34)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $109,328 $110,011 $109,872 $115,711 $120,149 $1,468 $1,245 $1,405 $809 $1,099
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.86% 0.85% 1.71% 1.74% 1.70% 1.95% 1.78%(3)
Ratio of net income to
average net assets ............... 4.72% 5.06% 5.24% 5.51% 5.46% 3.81% 4.16% 4.32% 4.47% 4.52%(3)
Portfolio turnover rate ............ 13.41% 29.26% 26.30% 16.68% 12.44% 13.41% 29.26% 26.30% 16.68% 12.44%(4)
</TABLE>

- ----------
See footnotes on page 60.

55
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MICHIGAN FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.60 $8.46 $8.54 $8.28 $9.08 $8.59 $8.45 $8.54 $8.28 $9.01
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.41 0.43 0.45 0.46 0.46 0.33 0.36 0.37 0.37 0.25
Net gains or losses on securities
(both realized and unrealized) 0.30 0.23 0.06 0.30 (0.71) 0.30 0.23 0.05 0.30 (0.73)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.71 0.66 0.51 0.76 (0.25) 0.63 0.59 0.42 0.67 (0.48)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.41) (0.43) (0.45) (0.46) (0.46) (0.33) (0.36) (0.37) (0.37) (0.25)
Distributions (from capital gains) (0.07) (0.09) (0.14) (0.04) (0.09) (0.07) (0.09) (0.14) (0.04) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.48) (0.52) (0.59) (0.50) (0.55) (0.40) (0.45) (0.51) (0.41) (0.25)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.83 $8.60 $8.46 $8.54 $8.28 $8.82 $8.59 $8.45 $8.54 $8.28
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.63% 8.16% 6.16% 9.56% (2.90)% 7.66% 7.19% 5.09% 8.36% (5.47)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $144,161 $143,370 $148,178 $151,589 $151,095 $1,841 $1,845 $1,486 $1,172 $671
Ratio of expenses to average
net assets ....................... 0.79% 0.81% 0.78% 0.87% 0.84% 1.70% 1.71% 1.68% 2.01% 1.75%(3)
Ratio of net income to
average net assets ............... 4.78% 5.13% 5.29% 5.50% 5.32% 3.87% 4.23% 4.39% 4.40% 4.40%(3)
Portfolio turnover rate ............ 23.60% 10.98% 19.62% 20.48% 10.06% 23.60% 10.98% 19.62% 20.48% 10.06%(4)

MINNESOTA FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $7.79 $7.68 $7.82 $7.72 $8.28 $7.79 $7.68 $7.82 $7.73 $8.22
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.38 0.40 0.42 0.45 0.45 0.31 0.33 0.35 0.38 0.25
Net gains or losses on securities
(both realized and unrealized) . 0.20 0.11 (0.12) 0.11 (0.44) 0.20 0.11 (0.12) 0.10 (0.49)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total from investment operations ... 0.58 0.51 0.30 0.56 0.01 0.51 0.44 0.23 0.48 (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Less distributions:
Dividends (from net
investment income) ............. (0.38) (0.40) (0.42) (0.45) (0.45) (0.31) (0.33) (0.35) (0.38) (0.25)
Distributions (from capital gains) (0.01) -- (0.02) (0.01) (0.12) (0.01) -- (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.39) (0.40) (0.44) (0.46) (0.57) (0.32) (0.33) (0.37) (0.39) (0.25)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.98 $7.79 $7.68 $7.82 $7.72 $7.98 $7.79 $7.68 $7.82 $7.73
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 7.68% 6.85% 3.99% 7.61% 0.12% 6.71% 5.89% 3.06% 6.45% (3.08)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $121,374 $121,674 $126,173 $132,716 $134,990 $2,103 $1,799 $2,036 $2,237 $1,649
Ratio of expenses to average
net assets ....................... 0.81% 0.85% 0.81% 0.87% 0.85% 1.72% 1.75% 1.71% 1.85% 1.74%(3)
Ratio of net income to
average net assets ............... 4.87% 5.21% 5.47% 5.89% 5.70% 3.96% 4.31% 4.57% 4.92% 4.68%(3)
Portfolio turnover rate ............ 21.86% 6.88% 26.89% 5.57% 3.30% 21.86% 6.88% 26.89% 5.57% 3.30%(4)
</TABLE>

- ----------
See footnotes on page 60.

56
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<PAGE>

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MISSOURI FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.82 $7.71 $7.70 $7.41 $8.31 $7.82 $7.72 $7.70 $7.41 $8.20
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.38 0.39 0.40 0.40 0.29 0.31 0.32 0.32 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.28 0.19 0.08 0.36 (0.79) 0.28 0.18 0.09 0.36 (0.79)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.64 0.57 0.47 0.76 (0.39) 0.57 0.49 0.41 0.68 (0.57)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.38) (0.39) (0.40) (0.40) (0.29) (0.31) (0.32) (0.32) (0.22)
Distributions (from capital gains) (0.07) (0.08) (0.07) (0.07) (0.11) (0.07) (0.08) (0.07) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.46) (0.46) (0.47) (0.51) (0.36) (0.39) (0.39) (0.39) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.03 $7.82 $7.71 $7.70 $7.41 $8.03 $7.82 $7.72 $7.70 $7.41
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.41% 7.70% 6.27% 10.67% (4.85)% 7.45% 6.60% 5.46% 9.49% (7.16)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $49,949 $52,766 $49,941 $51,169 $52,621 $418 $474 $565 $515 $350
Ratio of expenses to average
net assets**...................... 0.89% 0.89% 0.86% 0.88% 0.74% 1.79% 1.80% 1.76% 1.98% 1.70%(3)
Ratio of net income to
average net assets**.............. 4.59% 4.93% 5.03% 5.31% 5.18% 3.69% 4.02% 4.13% 4.23% 4.27%(3)
Portfolio turnover rate ............ 21.26% 6.47% 8.04% 3.88% 14.33% 21.26% 6.47% 8.04% 3.88% 14.33%(4)

NEW JERSEY FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $7.56 $7.60 $7.59 $7.40 $8.24 $7.64 $7.68 $7.67 $7.48 $8.14
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.35 0.36 0.39 0.39 0.41 0.29 0.31 0.33 0.33 0.23
Net gains or losses on securities
(both realized and unrealized) . 0.30 0.21 0.01 0.29 (0.74) 0.30 0.21 0.01 0.29 (0.66)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.65 0.57 0.40 0.68 (0.33) 0.59 0.52 0.34 0.62 (0.43)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.39) (0.39) (0.41) (0.29) (0.31) (0.33) (0.33) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions (from capital gains) (0.08) (0.25) -- (0.10) (0.10) (0.08) (0.25) -- (0.10) --
----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.61) (0.39) (0.49) (0.51) (0.37) (0.56) (0.33) (0.43) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $7.78 $7.56 $7.60 $7.59 $7.40 $7.86 $7.64 $7.68 $7.67 $7.48
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.87% 7.96% 5.37% 9.77% (4.25)% 7.97% 7.10% 4.56% 8.79% (5.47)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $61,739 $62,597 $66,293 $73,561 $73,942 $1,582 $1,282 $1,152 $1,190 $986
Ratio of expenses to average
net assets**...................... 1.02% 1.06% 1.02% 1.01% 0.90% 1.80% 1.83% 1.79% 1.89% 1.75%(3)
Ratio of net income to
average net assets**.............. 4.54% 4.90% 5.06% 5.29% 5.24% 3.76% 4.13% 4.29% 4.45% 4.37%(3)
Portfolio turnover rate ............ 23.37% 20.22% 25.65% 4.66% 12.13% 23.37% 20.22% 25.65% 4.66% 12.13%(4)
</TABLE>

- ----------
See footnotes on page 60.

57
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<PAGE>

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

NEW YORK FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- -------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ----- ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.28 $7.98 $7.86 $7.67 $8.75 $8.29 $7.98 $7.87 $7.67 $8.55
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.41 0.42 0.42 0.43 0.32 0.34 0.34 0.34 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.40 0.32 0.12 0.36 (0.88) 0.39 0.33 0.11 0.37 (0.88)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.80 0.73 0.54 0.78 (0.45) 0.71 0.67 0.45 0.71 (0.65)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.41) (0.42) (0.42) (0.43) (0.32) (0.34) (0.34) (0.34) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Distributions (from capital gains) (0.08) (0.02) -- (0.17) (0.20) (0.08) (0.02) -- (0.17) --
----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.48) (0.43) (0.42) (0.59) (0.63) (0.40) (0.36) (0.34) (0.51) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.60 $8.28 $7.98 $7.86 $7.67 $8.60 $8.29 $7.98 $7.87 $7.67
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 10.02% 9.45% 6.97% 10.93% (5.37)% 8.88% 8.60% 5.86% 9.87% (7.73)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $84,822 $83,528 $82,719 $83,980 $90,914 $2,182 $1,572 $1,152 $885 $476
Ratio of expenses to average
net assets ....................... 0.81% 0.82% 0.77% 0.88% 0.87% 1.72% 1.73% 1.68% 1.96% 1.81%(3)
Ratio of net income to
average net assets ............... 4.74% 5.09% 5.24% 5.52% 5.31% 3.83% 4.18% 4.33% 4.42% 4.39%(3)
Portfolio turnover rate ............ 39.85% 23.83% 25.88% 34.05% 28.19% 39.85% 23.83% 25.88% 34.05% 28.19%(4)

NORTH CAROLINA FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $8.05 $7.84 $7.74 $7.30 $8.22 $8.05 $7.83 $7.74 $7.29 $8.17
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.37 0.37 0.39 0.41 0.30 0.31 0.31 0.33 0.23
Net gains or losses on securities
(both realized and unrealized).. 0.31 0.24 0.11 0.45 (0.87) 0.31 0.25 0.10 0.46 (0.88)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.67 0.61 0.48 0.84 (0.46) 0.61 0.56 0.41 0.79 (0.65)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.37) (0.37) (0.39) (0.41) (0.30) (0.31) (0.31) (0.33) (0.23)
Distributions (from capital gains) (0.06) (0.03) (0.01) (0.01) (0.05) (0.06) (0.03) (0.01) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.42) (0.40) (0.38) (0.40) (0.46) (0.36) (0.34) (0.32) (0.34) (0.23)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.30 $8.05 $7.84 $7.74 $7.30 $8.30 $8.05 $7.83 $7.74 $7.29
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.60% 8.01% 6.39% 11.92% (5.80)% 7.77% 7.33% 5.45% 11.19% (8.15)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $32,358 $32,684 $35,934 $37,446 $38,920 $1,456 $1,217 $1,232 $1,257 $1,282
Ratio of expenses to average
net assets**...................... 1.05% 1.09% 1.05% 0.82% 0.44% 1.82% 1.85% 1.81% 1.64% 1.27%(3)
Ratio of net income to
average net assets**.............. 4.41% 4.66% 4.75% 5.21% 5.29% 3.64% 3.90% 3.99% 4.42% 4.49%(3)
Portfolio turnover rate ............ 20.37% 13.04% 15.12% 4.38% 15.61% 20.37% 13.04% 15.12% 4.38% 15.61%(4)
</TABLE>

- ----------
See footnotes on page 60.

58
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<PAGE>

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OHIO FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- ------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $8.19 $8.09 $8.11 $7.90 $8.77 $8.23 $8.13 $8.15 $7.92 $8.61
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.40 0.42 0.43 0.44 0.44 0.33 0.35 0.36 0.36 0.24
Net gains or losses on securities
(both realized and unrealized) . 0.29 0.17 0.02 0.28 (0.70) 0.29 0.17 0.02 0.30 (0.69)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.69 0.59 0.45 0.72 (0.26) 0.62 0.52 0.38 0.66 (0.45)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.40) (0.42) (0.43) (0.44) (0.44) (0.33) (0.35) (0.36) (0.36) (0.24)
Distributions (from capital gains) (0.11) (0.07) (0.04) (0.07) (0.17) (0.11) (0.07) (0.04) (0.07) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.51) (0.49) (0.47) (0.51) (0.61) (0.44) (0.42) (0.40) (0.43) (0.24)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.37 $8.19 $8.09 $8.11 $7.90 $8.41 $8.23 $8.13 $8.15 $7.92
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.77% 7.54% 5.68% 9.59% (3.08)% 7.78% 6.57% 4.74% 8.67% (5.36)%(2)

Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $153,126 $154,419 $162,243 $170,191 $171,469 $1,103 $1,160 $1,011 $660 $324
Ratio of expenses to average
net assets ....................... 0.78% 0.81% 0.77% 0.84% 0.84% 1.69% 1.71% 1.67% 1.93% 1.78%(3)
Ratio of net income to
average net assets ............... 4.92% 5.19% 5.32% 5.56% 5.34% 4.01% 4.29% 4.42% 4.48% 4.41%(3)
Portfolio turnover rate ............ 24.74% 11.76% 12.90% 2.96% 9.37% 24.74% 11.76% 12.90% 2.96% 9.37%(4)

OREGON FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $7.87 $7.65 $7.66 $7.43 $8.08 $7.87 $7.64 $7.65 $7.43 $8.02
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income**........... 0.36 0.38 0.40 0.40 0.40 0.29 0.31 0.33 0.33 0.22
---- ---- ---- ---- ---- ---- ---- ---- ---- ----
Net gains or losses on securities
(both realized and unrealized) . 0.28 0.26 -- 0.25 (0.59) 0.27 0.27 -- 0.24 (0.59)
---- ---- ---- ----- ---- ---- ---- -----
Total from investment operations ... 0.64 0.64 0.40 0.65 (0.19) 0.56 0.58 0.33 0.57 (0.37)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.36) (0.38) (0.40) (0.40) (0.40) (0.29) (0.31) (0.33) (0.33) (0.22)
Distributions (from capital gains) (0.10) (0.04) (0.01) (0.02) (0.06) (0.10) (0.04) (0.01) (0.02) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.46) (0.42) (0.41) (0.42) (0.46) (0.39) (0.35) (0.34) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.05 $7.87 $7.65 $7.66 $7.43 $8.04 $7.87 $7.64 $7.65 $7.43
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.48% 8.60% 5.27% 9.05% (2.38)% 7.37% 7.77% 4.33% 7.86% (4.76)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $57,601 $55,239 $57,345 $59,549 $59,884 $2,650 $1,678 $1,540 $1,495 $843
Ratio of expenses to average
net assets**...................... 0.88% 0.90% 0.86% 0.86% 0.78% 1.79% 1.80% 1.76% 1.83% 1.72%(3)
Ratio of net income to
average net assets**.............. 4.60% 4.88% 5.18% 5.40% 5.20% 3.69% 3.98% 4.28% 4.41% 4.32%(3)
Portfolio turnover rate ............ 12.62% 19.46% 28.65% 2.47% 9.43% 12.62% 19.46% 28.65% 2.47% 9.43%(4)
</TABLE>

- ----------
See footnotes on page 60.

59
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<PAGE>

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

PENNSYLVANIA FUND

<TABLE>
<CAPTION>
CLASS A CLASS D
---------------------------------------------- -------------------------------------------
Year ended September 30, Year ended September 30,
---------------------------------------------- --------------------------------------------
2/1/94(1)
1998 1997 1996 1995 1994 1998 1997 1996 1995 to 9/30/94
-------- ------- ------- -------- -------- ------ ------ ------ ------ -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning
of period ........................ $7.96 $7.82 $7.79 $7.55 $8.61 $7.95 $7.81 $7.78 $7.54 $8.37
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.35 0.36 0.38 0.38 0.39 0.29 0.30 0.32 0.31 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.36 0.24 0.12 0.37 (0.80) 0.36 0.24 0.12 0.37 (0.83)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.71 0.60 0.50 0.75 (0.41) 0.65 0.54 0.44 0.68 (0.61)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.35) (0.36) (0.38) (0.38) (0.39) (0.29) (0.30) (0.32) (0.31) (0.22)
Distributions (from capital gains) (0.08) (0.10) (0.09) (0.13) (0.26) (0.08) (0.10) (0.09) (0.13) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.43) (0.46) (0.47) (0.51) (0.65) (0.37) (0.40) (0.41) (0.44) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.24 $7.96 $7.82 $7.79 $7.55 $8.23 $7.95 $7.81 $7.78 $7.54
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 9.20% 7.89% 6.57% 10.55% (5.00)% 8.36% 7.07% 5.76% 9.53% (7.50)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $29,582 $30,092 $31,139 $33,251 $34,943 $607 $816 $876 $426 $43
Ratio of expenses to average
net assets ....................... 1.19% 1.19% 1.11% 1.21% 1.16% 1.97% 1.96% 1.88% 2.23% 2.00%(3)
Ratio of net income to
average net assets ............... 4.34% 4.60% 4.82% 5.05% 4.91% 3.56% 3.83% 4.05% 4.10% 4.20%(3)
Portfolio turnover rate ............ 13.05% 32.99% 4.56% 11.78% 7.71% 13.05% 32.99% 4.56% 11.78% 7.71%(4)

SOUTH CAROLINA FUND

Per Share Data:*
Net asset value, beginning
of period ........................ $8.16 $8.07 $7.97 $7.61 $8.52 $8.16 $8.06 $7.97 $7.61 $8.42
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Income from investment operations:
Net investment income ............ 0.39 0.40 0.41 0.41 0.41 0.31 0.33 0.34 0.34 0.22
Net gains or losses on securities
(both realized and unrealized) . 0.29 0.22 0.12 0.37 (0.79) 0.29 0.23 0.11 0.37 (0.81)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Total from investment operations ... 0.68 0.62 0.53 0.78 (0.38) 0.60 0.56 0.45 0.71 (0.59)
---- ---- ---- ---- ----- ---- ---- ---- ---- -----
Less distributions:
Dividends (from net
investment income) ............. (0.39) (0.40) (0.41) (0.41) (0.41) (0.31) (0.33) (0.34) (0.34) (0.22)
Distributions (from capital gains) (0.07) (0.13) (0.02) (0.01) (0.12) (0.07) (0.13) (0.02) (0.01) --
----- ----- ----- ----- ----- ----- ----- ----- -----
Total distributions ................ (0.46) (0.53) (0.43) (0.42) (0.53) (0.38) (0.46) (0.36) (0.35) (0.22)
----- ----- ----- ----- ----- ----- ----- ----- ----- -----
Net asset value, end of period ..... $8.38 $8.16 $8.07 $7.97 $7.61 $8.38 $8.16 $8.06 $7.97 $7.61
===== ===== ===== ===== ===== ===== ===== ===== ===== =====
Total return ....................... 8.66% 7.99% 6.82% 10.69% (4.61)% 7.68% 7.15% 5.73% 9.63% (7.14)%(2)
Ratios/Supplemental Data:
Net assets, end of period
(in thousands) ................... $106,328 $101,018 $108,163 $112,421 $115,133 $5,594 $3,663 $2,714 $1,704 $1,478
Ratio of expenses to average
net assets ....................... 0.80% 0.84% 0.80% 0.88% 0.83% 1.71% 1.75% 1.70% 1.85% 1.74%(3)
Ratio of net income to
average net assets ............... 4.74% 5.04% 5.15% 5.38% 5.12% 3.83% 4.13% 4.25% 4.40% 4.29%(3)
Portfolio turnover rate ............ 16.63% -- 20.66% 4.13% 1.81% 16.63% -- 20.66% 4.13% 1.81%(4)
</TABLE>

- ----------

* Per share amounts are based on average shares outstanding.

** For periods prior to 1996 (1997 for the Florida and the North Carolina
Fund), Seligman voluntarily waived a portion of its management fee. These
amounts reflect the effect of the waivers.

(1) Commencement of offering of Class D shares.
(2) Not annualized.
(3) Annualized.
(4) For the year ended September 30, 1994.

60
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<PAGE>

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How to Contact Us

The Fund Write: Corporate Communications/
Investor Relations Department
J. & W. Seligman & Co. Incorporated
100 Park Avenue, New York, NY 10017

Phone: Toll-Free (800) 221-7844 in the US or
(212) 850-1864 outside the US

Website : http://www.seligman.com

Your Regular
(Non-Retirement)
Account Write: Shareholder Services Department
Seligman Data Corp.
100 Park Avenue, New York, NY 10017

Phone: Toll-Free (800) 221-2450 in the US or
(212) 682-7600 outside the US

Website : http://www.seligman.com

--------------------------------------------------
24-hour telephone access is available by
dialing (800) 622-4597 on a touchtone
telephone. You will have instant access
to price, yield, account balance, most
recent transaction, and other information.
--------------------------------------------------

61
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<PAGE>

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

For More Information

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

The following information is available without charge upon
request: Call toll-free (800) 221-2450 in the US or (212)
682-7600 outside the US.

Statement of Additional Information (SAI) contains
additional information about the Fund. It is on file with
the Securities and Exchange Commission (SEC) and is
incorporated by reference into (is legally part of) this
prospectus.

Annual/Semi-Annual Reports contain additional information
about the Fund's investments. In the Fund's annual report,
you will find a discussion of the market conditions

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

SELIGMAN ADVISORS, INC.
an affiliate of

[LOGO]

J. & W. SELIGMAN & CO.
INCORPORATED

ESTABLISHED 1864

100 Park Avenue, New York 10017

Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (800) SEC-0330. The SAI,
Annual/Semi-Annual reports and other information about the Fund are also
available on the SEC's Internet site: http://www.sec.gov.

Copies of this information may be obtained, upon payment of a duplicating fee,
by writing: Public Reference Section of the SEC, Washington, DC 20549-6009.

SEC FILE NUMBERS: Seligman Municipal Fund Series, Inc.: 811-3828
Seligman Municipal Series Trust: 811-4250
Seligman New Jersey Municipal Fund, Inc.: 811-5126
Seligman Pennsylvania Municipal Fund Series: 811-4666

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

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.

Statement of Additional Information
February 1, 1999

100 Park Avenue
New York, New York 10017
(212) 850-1864
Toll Free Telephone: (800) 221-2450
For Retirement Plan Information - Toll-Free Telephone: (800) 445-1777

This Statement of Additional Information (SAI) expands upon and supplements the
information contained in the current Prospectus of the Seligman Municipal Funds,
dated February 1, 1999. This SAI, although not in itself a prospectus, is
incorporated by reference into the Prospectus in its entirety. It should be read
in conjunction with the prospectus, which may be obtained by writing or calling
the Fund at the above address or telephone numbers.

The financial statements and notes included in the Fund's Annual Report, and the
Independent Auditors' Report thereon, are incorporated herein by reference. The
Annual Report will be furnished to you without charge if you request a copy of
this SAI.

Table of Contents

Fund History ......................................................... 2
Description of the Fund and Its Investments and Risks ................ 2
Management of the Fund ............................................... 8
Control Persons and Principal Holders of Securities .................. 13
Investment Advisory and Other Services ............................... 13
Brokerage Allocation and Other Practices ............................. 17
Capital Stock and Other Securities ................................... 18
Purchase, Redemption, and Pricing of Shares .......................... 18
Taxation of the Fund ................................................. 22
Underwriters ......................................................... 24
Calculation of Performance Data ...................................... 26
Financial Statements ................................................. 28
General Information................................................... 28
Appendix A ........................................................... 29
Appendix B ........................................................... 32
Appendix C ........................................................... 43

TEC1A

<PAGE>

Fund History

The Fund was incorporated under the laws of the state of Maryland on March 13,
1987.

Description of the Fund and Its Investments and Risks

Classification

The Fund is a diversified open-end management investment company, or mutual
fund.

Investment Strategies and Risks

The following information regarding the Fund's investments and risks supplements
the information contained in the Prospectus.

The Fund seeks to maximize income exempt from regular federal income tax and New
Jersey gross income tax consistent with preservation of capital and with
consideration given to opportunities for capital gain by investing in
investment-grade New Jersey Municipal Securities.

The Fund is expected to invest principally, without percentage limitations, in
municipal securities which on the date of purchase are rated within the four
highest rating categories of Moody's Investors Service (Moody's) or Standard &
Poor's Corporation (S&P). Municipal Securities rated in these categories are
commonly referred to as investment grade. The Fund may invest in municipal
securities that are not rated, or which do not fall into the credit ratings
noted above if, based upon credit analysis, it is believed that such securities
are of comparable quality. In determining suitability of investment in a lower
rated or unrated security, the Fund will take into consideration asset and debt
service coverage, the purpose of the financing, history of the issuer, existence
of other rated securities of the issuer and other considerations as may be
relevant, including comparability to other issuers.

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

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

New Jersey Municipal Securities. New Jersey Municipal Securities include bonds,
notes and commercial paper issued by or on behalf of the State of New Jersey,
its political subdivisions, agencies, and instrumentalities, the interest on
which is exempt from regular federal income tax and New Jersey gross 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.

Under the Investment Company Act of 1940 (1940 Act), the identification of the
issuer of municipal bonds or notes depends on the terms and conditions of the
obligation. If the assets and revenues of an agency, authority, instrumentality
or other political subdivision are separate from those of the government
creating the subdivision and the obligation is backed only by the assets and
revenues of the

2
<PAGE>

subdivision, such subdivision is regarded as the sole issuer. Similarly, in the
case of an industrial development revenue bond or pollution control revenue
bond, if only the assets and revenues of the non-governmental user back the
bond, the non-governmental user is regarded as the sole issuer. If in either
case the creating government or another entity guarantees an obligation, the
security is treated as an issue of such guarantor to the extent of the value of
the guarantee.

The Fund invests principally in long-term municipal bonds. Municipal bonds are
issued to obtain funds for various public purposes, including the construction
of a wide range of public facilities such as airports, bridges, highways,
housing, hospitals, mass transportation, schools, streets, water and sewer
works, and gas and electric utilities. Municipal bonds also may be issued in
connection with the refunding of outstanding obligations, obtaining funds to
lend to other public institutions, and for general operating expenses.
Industrial development bonds are issued by or on behalf of public authorities to
obtain funds to provide various privately-operated facilities for business and
manufacturing, housing, sports, pollution control, and for airport, mass
transit, port and parking facilities.

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

The Fund, with respect to 75% of its assets, will not purchase any revenue bonds
if as a result of such purchase more than 5% of the Fund's assets would be
invested in the revenue bonds of a single issuer.

The Fund may also invest in municipal notes. Municipal notes generally are used
to provide for short-term capital needs and generally have maturities of five
years or less. Municipal Notes include:

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

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

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

Variable and Floating Rate Securities. The Fund may purchase floating or
variable rate securities, including participation interests therein. Investments
in floating or variable rate provide that the rate of interest is either pegged
to money market rates or set as a specific percentage of a designated base rate,
such as rates on Treasury Bonds or Treasury Bills or the prime rate of a major
commercial bank. A floating rate or variable rate security generally provides
that the Fund can demand payment of the obligation on short notice (daily or
weekly, depending on the terms of the obligation) at an amount equal to par
(face value) plus accrued interest. In Unusual circumstances, the amount
received may be more or less than the amount the Fund paid for the securities.

3
<PAGE>

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 or issuer, as the case may be, must be equivalent to the
standards set forth with respect to taxable investments below.

The maturity of variable or floating rate obligations (including participation
interests therein) is deemed to be the longer of (1) the notice period required
before the Fund is entitled to receive payment of the obligation upon demand, or
(2) the period remaining until the obligation's next interest rate adjustment.
If the Fund does not redeem the obligation through the demand feature, the
obligation will mature on a specific date, which may range up to thirty years
from the date of its issuance.

Participation Interests. From time to time, the Fund may purchase from banks,
participation interests in all or part of specific holdings of municipal
securities. A participation interest gives the Fund an undivided interest in the
municipal security in the proportion that the Fund's participation interest
bears to the total principal amount of the municipal security and provides the
demand repurchase feature described above. Participations are frequently backed
by an irrevocable letter of credit or guarantee of a bank that the Fund has
determined meets its prescribed quality standards. The Fund has the right to
sell the instrument back to the bank and draw on the letter of credit on demand,
on short notice, for all or any part of the Fund's participation interest in the
municipal security, plus accrued interest. The Fund intends to exercise the
demand under the letter of credit only (1) upon a default under the terms of the
documents of the municipal security, (2) as needed to provide liquidity in order
to meet redemptions, or (3) to maintain a high quality investment portfolio.
Banks will retain a service and letter of credit fee and a fee for issuing
repurchase commitments in an amount equal to the excess of the interest paid on
the municipal securities over the negotiated yield at which the instruments are
purchased by the Fund. Participation interests will be purchased only if, in the
opinion of counsel, interest income on such interests will be tax-exempt when
distributed as dividends to shareholders of the Fund. The Fund currently does
not purchase participation interests and has no current intention of doing so.

When-Issued Securities. The Fund may purchase municipal securities on a
"when-issued" basis, which means that delivery of and payment for securities
normally take place in less than 45 days after the date of the buyer's purchase
commitment. The payment obligation and the interest rate on when-issued
securities are each fixed at the time the purchase commitment is made, although
no interest accrues to a purchaser prior to the settlement of the purchase of
the securities. As a result, the yields obtained and the market value of such
securities may be higher or lower on the date the securities are actually
delivered to the buyer. The Fund will generally purchase a municipal security
sold on a when-issued basis with the intention of actually acquiring the
securities on the settlement date.

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

Municipal securities purchased on a when-issued basis and the other securities
held in 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 purchased on a when-issued basis.

4
<PAGE>

Standby Commitments. The Fund is authorized to acquire standby commitments
issued by banks with respect to securities they hold, although the Fund has no
present intention of investing any assets 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 deemed creditworthy. The Board of 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.

Illiquid Securities. The Fund 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. The Fund may
purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Fund's Board of
Directors, may determine, when appropriate, that specific Rule 144A securities
are liquid and not subject to the 15% limitation on illiquid securities. Should
the Board of Directors make this determination, it will carefully monitor the
security (focusing on such factors, among 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 the Fund, if and
to the extent that qualified institutional buyers become for a time uninterested
in purchasing Rule 144A securities.

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

Taxable Investments. Under normal market conditions, 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 California personal income tax. Such interest,
however, may be subject to the federal alternative minimum tax.

5
<PAGE>

Under normal market conditions, temporary investments in taxable securities will
be limited as a matter of fundamental policy to 20% of the value of the Fund's
net assets.

As a matter of policy, with respect to 50% of the value of its total assets,
securities of any issuer will not be purchased by the Fund if immediately
thereafter more than 5% of total assets at market value would be invested in the
securities of any single issuer (except that this limitation does not apply to
obligations issued or guaranteed as to principal and interest by the US
Government or its agencies or instrumentalities) at the close of each quarter of
its taxable year.

Except as otherwise specifically noted above, the Fund's investment strategies
are not fundamental and the Fund, with the approval of the Board of Directors,
may change such strategies without the vote of shareholders.

Fund Policies

The Fund is subject to fundamental policies that place restrictions on certain
types of investments. These policies cannot be changed except by vote of a
majority of the outstanding voting securities of the Fund. Under these policies,
the Fund may not:

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

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

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

- - Invest in securities issued by other investment companies, except in
connection with a merger, consolidation, acquisition or reorganization or
for the purpose of hedging the Fund's obligations under the Deferred
Compensation Plan for Directors, 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;

- - Write or purchase put, call, straddle or spread options except that the
Fund may acquire standby commitments; purchase securities on margin or sell
"short"; or underwrite the securities of other issuers, except that the
Fund may be deemed an underwriter in connection with the purchase and sale
of portfolio securities;

- - Purchase or sell commodities or commodity contracts including futures
contracts; or

- - Make loans, except to the extent that the purchase of notes, bonds or other
evidences of indebtedness or deposits with banks may be considered loans.

The Fund also may not change its investment objective without shareholder
approval.

6
<PAGE>

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

Temporary Defensive Position

In abnormal market conditions, if, in the judgment of the Fund, municipal
securities satisfying the Fund's investment objectives may not be purchased, the
Fund may, for defensive purposes, temporarily invest in instruments the interest
on which is exempt from regular federal income taxes, but not state personal
income taxes. Such securities would include those described under "California
Municipal Securities" above that would otherwise meet the Fund's objectives.

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

Portfolio Turnover

Portfolio transactions will be undertaken principally to accomplish the Fund's
objective in relation to anticipated movements in the general level of interest
rates but the Fund may also engage in short-term trading consistent with its
objective. Securities may be sold in anticipation of a market decline (a rise in
interest rates) or purchased in anticipation of a market rise (a decline in
interest rates) and later sold. In addition, a security may be sold and another
purchased at approximately the same time to take advantage of what the
investment manager believes to be a temporary disparity in the normal yield
relationship between the two securities.

The Fund's portfolio turnover rate is calculated by dividing the lesser of
purchases or sales of portfolio securities for the fiscal year by the monthly
average of the value of the portfolio securities owned during the year.
Securities whose maturity or expiration date at the time of acquisition were one
year or less are excluded from the calculation. The Fund's portfolio turnover
rates for the fiscal years ended September 30, 1998 and 1997, were 23.37% and
20.22 %, respectively. The Fund's portfolio turnover rate will not be a limiting
factor when the Fund deems it desirable to sell or purchase securities.

7
<PAGE>

Management of the Fund

Board of Directors

The Board of Directors provides broad supervision over the affairs of the Fund.

Management Information

Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Director who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.

<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman of the Chairman, J. & W. Seligman & Co. Incorporated, Chairman and
(60) Board, Chief Executive Chief Executive Officer, the Seligman Group of investment
Officer and Chairman of the companies; Chairman, Seligman Advisors, Inc, Seligman
Executive Committee Services, Inc., and Carbo Ceramics Inc., ceramic proppants
for oil and gas industry; Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company; and
Sarah Lawrence College; and a Member of the Board of
Governors of the Investment Company Institute. Formerly,
Director, Daniel Industries Inc., manufacturer of oil and
gas metering equipment.

Brian T. Zino* Director, President and Director and President, J. & W. Seligman & Co. Incorporated;
(46) Member of the Executive President (with the exception of Seligman Quality Municipal
Committee Fund, Inc. and Seligman Select Municipal Fund, Inc.) and
Director or Trustee, the Seligman Group of investment
companies; Chairman, Seligman Data Corp.; Director, ICI
Mutual Insurance Company, Seligman Advisors, Inc., and
Seligman Services, Inc.

Richard R. Schmaltz* Director and Member of the Director and Managing Director, Director of Investments, J.
(58) Executive Committee & W. Seligman & Co. Incorporated; Director or Trustee, the
Seligman Group of investment companies; Director, Seligman
Henderson Co., and Trustee Emeritus of Colby College.
Formerly, Director, Investment Research at Neuberger &
Berman from May 1993 to September 1996.
</TABLE>

8
<PAGE>

<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts
(69) University; Director or Trustee, the Seligman Group of
Tufts University investment companies; Chairman, American Council on Germany;
Packard Avenue, a Governor of the Center for Creative Leadership; Director;
Medford, MA 02155 Raytheon Co., electronics; National Defense University; and
the Institute for Defense Analysis. Formerly, Director,
USLIFE Corporation; Ambassador, U.S. State Department for
negotiations in Bosnia; Distinguished Policy Analyst at Ohio
State University and Olin Distinguished Professor of
National Security Studies at the United States Military
Academy. From June, 1987 to June, 1992, he was the Supreme
Allied Commander, Europe and the Commander-in-Chief, United
States European Command.

Alice S. Ilchman Director Retired President, Sarah Lawrence College; Director or
(63) Trustee, the Seligman Group of investment companies;
18 Highland Circle Director, the Committee for Economic Development; and
Bronxville, NY 10708 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.

Frank A. McPherson Director Retired Chairman and Chief Executive Officer of Kerr-McGee
(65) Corporation; Director or Trustee, the Seligman Group of
2601 Northwest Expressway, investment companies; Director, Kimberly-Clark Corporation,
Suite 805E consumer products; Bank of Oklahoma Holding Company; Baptist
Oklahoma City, OK 73112 Medical Center; Oklahoma Chapter of the Nature Conservancy;
Oklahoma Medical Research Foundation; and National Boys and
Girls Clubs of America; and Member of the Business
Roundtable and National Petroleum Council. Formerly,
Chairman, Oklahoma City Public Schools Foundation; and
Director, Federal Reserve System's Kansas City Reserve Bank
and the Oklahoma City Chamber of Commerce.

</TABLE>

9
<PAGE>

<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>

John E. Merow Director Retired Chairman and Senior Partner, Sullivan & Cromwell,
(69) law firm; Director or Trustee, the Seligman Group of
125 Broad Street, investment companies; Director, Commonwealth Industries,
New York, NY 10004 Inc., manufacturers of aluminum sheet products; the Foreign
Policy Association; Municipal Art Society of New York; the
U.S. Council for International Business; and New York
Presbyterian Hospital; Chairman, American Australian
Association; and New York Presbyterian Healthcare Network,
Inc.; Vice-Chairman, the U.S.-New Zealand Council; and
Member of the American Law Institute and Council on Foreign
Relations.

Betsy S. Michel Director Attorney; Director or Trustee, the Seligman Group of
(56) investment companies; Trustee, the Geraldine R. Dodge
P.O. Box 449 Foundation, charitable foundation; and Chairman of the Board
Gladstone, NJ 07934 of Trustees of St. George's School (Newport, RI). Formerly,
Director, the National Association of Independent Schools
(Washington, DC).

James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm;
(72) Director or Trustee, the Seligman Group of investment
Park Avenue at Morris County, companies. Formerly, Director, Public Service Enterprise
P.O. Box 1945, Morristown, NJ Group, public utility.
07962

James Q. Riordan Director Director or Trustee, the Seligman Group of investment
(71) companies; Director, The Houston Exploration Company; The
675 Third Avenue, Brooklyn Museum, KeySpan Energy Corporation; and Public
Suite 3004 Broadcasting Service; and Trustee, the Committee for
New York, NY 10017 Economic Development. Formerly, Co-Chairman of the Policy
Council of the Tax Foundation; Director, Tesoro Petroleum
Companies, Inc. and Dow Jones & Company, Inc.; Director and
President, Bekaert Corporation; and Co-Chairman, Mobil
Corporation.

Robert L. Shafer Director Retired Vice President, Pfizer Inc.; Director or Trustee,
(66) the Seligman Group of investment companies. Formerly,
96 Evergreen Avenue, Director, USLIFE Corporation.
Rye, NY 10580
</TABLE>

10
<PAGE>

<TABLE>
<CAPTION>
Name, Principal
(Age) and Positions(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>

James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc.; Director
(63) or Trustee, the Seligman Group of investment companies;
6606 Forestshire Drive C-SPAN; and CommScope, Inc. manufacturer of coaxial cables.
Dallas, TX 75230 Formerly, Executive Vice President, Chief Operating Officer,
Sammons Enterprises, Inc.; and Director, Red Man Pipe and
Supply Company, piping and other materials.

Thomas G. Moles Vice President and Senior Director and Managing Director, J. & W. Seligman & Co.
(56) Portfolio Manager Incorporated; Vice President and Senior Portfolio Manager,
three other open-end investment companies in the Seligman
Group; President and Senior Portfolio Manager, Seligman
Quality Municipal Fund, Inc. and Seligman Select Municipal
Fund, Inc., closed-end investment companies; and Director,
Seligman Advisors, Inc. and Seligman Services, Inc.

Lawrence P. Vogel Vice President Senior Vice President, Finance, J. & W. Seligman & Co.
(42) Incorporated, Seligman Advisors, Inc., and Seligman Data
Corp.; Vice President, the Seligman Group of investment
companies and Seligman Services, Inc.; and Treasurer,
Seligman Henderson Co.

Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and Regulation
(34) and Corporate Secretary, J. & W. Seligman & Co.
Incorporated; Secretary, the Seligman Group of investment
companies, Seligman Advisors, Inc., Seligman Henderson Co.,
Seligman Services, Inc., and Seligman Data Corp.

Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies
(41) and Seligman Data Corp.
</TABLE>

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

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

11
<PAGE>

Compensation

<TABLE>
<CAPTION>
Pension or Total Compensation
Aggregate Retirement Benefits from Funds and
Name and Compensation Accrued as Part of Fund Complex Paid
Position with Fund from Fund (1) Fund Expenses to Directors (1)(2)
------------------ ------------- ------------- -------------------
<S> <C> <C> <C>
William C. Morris, Director and Chairman N/A N/A N/A
Brian T. Zino, Director and President N/A N/A N/A
Richard R. Schmaltz, Director N/A N/A N/A
John R. Galvin, Director $631 N/A $77,000
Alice S. Ilchman, Director 559 N/A 70,000
Frank A. McPherson, Director 609 N/A 75,000
John E. Merow, Director 600 N/A 74,000
Betsy S. Michel, Director 631 N/A 77,000
James C. Pitney, Director 579 N/A 72,000
James Q. Riordan, Director 579 N/A 72,000
Robert L. Shafer, Director 579 N/A 72,000
James N. Whitson, Director 631(d) N/A 77,000(d)
</TABLE>

- ----------
(1) For the Fund's fiscal year ended September 30, 1998. Effective January 16,
1998, the per meeting fee for Directors was increased by $1,000, which is
allocated among all funds in the Fund Complex.
(2) The Seligman Group of investment companies consists of eighteen investment
companies.
(d) Deferred.

The Fund has a compensation arrangement under which outside directors may elect
to defer receiving their fees. The Fund has adopted a Deferred Compensation Plan
under which a director who has elected deferral of his or her fees may choose a
rate of return equal to either (1) the interest rate on short-term Treasury
bills, or (2) the rate of return on the shares of any of the investment
companies advised by J. & W. Seligman & Co. Incorporated, as designated by the
director. The cost of such fees and earnings is included in directors' fees and
expenses, and the accumulated balance thereof is included in other liabilities
in the Fund's financial statements. The total amount of deferred compensation
(including earnings) payable in respect of the Fund to Mr. Whitson as of
September 30, 1998 was $10,688. Messrs. Merow and Pitney no longer defer current
compensation; however, they have accrued deferred compensation in the amounts of
$17,074 and $8,311, respectively, as of September 30, 1998.

The Fund may, but is not obligated to, purchase shares of Seligman Group
investment companies to hedge its obligations in connection with the Fund's
Deferred Compensation Plan.

Sales Charges

Class A shares of the Fund may be issued without a sales charge to present and
retired directors, trustees, officers, employees (and their family members) of
the Fund, the other investment companies in the Seligman Group, and J. & W.
Seligman & Co. Incorporated and its affiliates. Family members are defined to
include lineal descendents and lineal ancestors, siblings (and their spouses and
children) and any company or organization controlled by any of the foregoing.
Such sales also may be made to employee benefit plans for such persons and to
any investment advisory, custodial, trust or other fiduciary account managed or
advised by J. & W. Seligman & Co. Incorporated or any affiliate. These sales may
be made for investment purposes only, and shares may be resold only to the Fund.

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

12
<PAGE>

Control Persons and Principal Holders of Securities

Control Persons

As of January 12, 1999, there was no person or persons who controlled the Fund,
either through significant ownership of Fund shares or any other means of
control.

Principal Holders

As of January 12, 1999, MLPF&S For The Benefit Of Its Customers #974B3, Attn
Fund Administration, 4800 Deer Lake Drive East 3rd Floor, Jacksonville, FL 32246
owned of record 13.51% of the outstanding Class A shares of capital stock of the
Fund.

Management Ownership

Directors and officers of the Fund as a group owned 1.38% of the Fund's Class A
capital stock as of January 12, 1999. As of that date, no Directors or officers
owned shares of the Fund's Class D capital stock.

Investment Advisory and Other Services

Investment Manager

J. & W. Seligman & Co. Incorporated (Seligman) manages the Fund. Seligman is a
successor firm to an investment banking business founded in 1864 which has
thereafter provided investment services to individuals, families, institutions,
and corporations. On December 29, 1988, a majority of the outstanding voting
securities of Seligman was purchased by Mr. William C. Morris and a simultaneous
recapitalization of Seligman occurred. See Appendix C for further history of
Seligman.

All of the officers of the Fund listed above are officers or employees of
Seligman. Their affiliations with the Fund and with Seligman are provided under
their principal business occupations.

The Fund pays Seligman a management fee for its services, calculated daily and
payable monthly. The management fee is equal to .50% per annum of the Fund's
average daily net assets. For the fiscal years ended September 30, 1998, 1997,
and 1996, the Fund paid Seligman management fees in the amount of $315,590,
$325,747, and $356,576,respectively.

The Fund pays all of its expenses other than those assumed by Seligman,
including brokerage commissions, if any, shareholder services and distribution
fees, fees and expenses of independent attorneys and auditors, taxes and
governmental fees, including fees and expenses of qualifying the Funds and their
shares under federal and state securities laws, cost of stock certificates and
expenses of repurchase or redemption of shares, expenses of printing and
distributing reports, notices and proxy materials to shareholders, expenses of
printing and filing reports and other documents with governmental agencies,
expenses of shareholders' meetings, expenses of corporate data processing and
related services, shareholder record keeping and shareholder account services,
fees and disbursements of transfer agents and custodians, expenses of disbursing
dividends and distributions, fees and expenses of directors of the Fund not
employed by or serving as a director of Seligman or its affiliates, insurance
premiums and extraordinary expenses such as litigation expenses. These expenses
are allocated between the Funds in a manner determined by the Trustees to be
fair and equitable.

The Management Agreement also provides that Seligman will not be liable to the
Fund for any error of judgment or mistake of law, or for any loss arising out of
any investment, or for any act or omission in performing its duties under the
Management Agreement, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Management Agreement.

13
<PAGE>

The Management Agreement was unanimously approved by the Directors at a Meeting
held on October 11, 1988 and was also approved by the shareholders at a meeting
held on December 16, 1988. The Management Agreement will continue in effect
until December 29 of each year if (1) such continuance is approved in the manner
required by the 1940 Act (i.e., by a vote of a majority of the Directors or of
the outstanding voting securities of the Fund and by a vote of a majority of the
Directors who are not parties to the Management Agreement or interested persons
of any such party) and (2) Seligman shall not have notified the Fund at least 60
days prior to December 29 of each year that it does not desire such continuance.
The Management Agreement may be terminated by the Fund, without penalty, on 60
days' written notice to Seligman and will terminate automatically in the event
of its assignment. The Fund has agreed to change its name upon termination of
its Management Agreement if continued use of the name would cause confusion in
the context of Seligman's business.

Officers, directors and employees of Seligman are permitted to engage in
personal securities transactions, subject to Seligman's Code of Ethics. The Code
of Ethics proscribes certain practices with regard to personal securities
transactions and personal dealings, provides a framework for the reporting and
monitoring of personal securities transactions by Seligman's Compliance Officer,
and sets forth a procedure of identifying, for disciplinary action, those
individuals who violate the Code of Ethics. The Code of Ethics prohibits each of
the officers, directors and employees (including all portfolio managers) of
Seligman from purchasing or selling any security that the officer, director, or
employee knows or believes (1) was recommended by Seligman for purchase or sale
by any client, including the Fund, within the preceding two weeks, (2) has been
reviewed by Seligman for possible purchase or sale within the preceding two
weeks, (3) is being purchased or sold by any client, (4) is being considered by
a research analyst, (5) is being acquired in a private placement, unless prior
approval has been obtained from Seligman's Compliance Officer, or (6) is being
acquired during an initial or secondary public offering. The Code of Ethics also
imposes a strict standard of confidentiality and requires portfolio managers to
disclose any interest they may have in the securities or issuers that they
recommend for purchase by any client.

The Code of Ethics also prohibits (1) each portfolio manager or member of an
investment team from purchasing or selling any security within seven calendar
days of the purchase or sale of the security by a client's account (including
investment company accounts) for which the portfolio manager or investment team
manages; and (2) each employee from engaging in short-term trading (a purchase
and sale or vice-versa within 60 days). Any profit realized pursuant to either
of these prohibitions must be disgorged.

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

Principal Underwriter

Seligman Advisors, Inc., (Seligman Advisors) an affiliate of Seligman, 100 Park
Avenue, New York, New York 10017, acts as general distributor of the shares of
the Fund and of the other mutual funds in the Seligman Group. Seligman Advisors
is an "affiliated person" (as defined in the 1940 Act) of Seligman, which is
itself an affiliated person of the Fund. Those individuals identified above
under "Management Information" as directors or officers of both the Fund and
Seligman Advisors are affiliated persons of both entities.

Services Provided by the Investment Manager

Under the Management Agreement, dated December 29, 1988, subject to the control
of the Board of Directors, Seligman manages the investment of the assets of the
Fund, including making purchases and sales of portfolio securities consistent
with the Fund's investment objectives and policies, and administers their
business and other affairs. Seligman provides the Fund with such office space,
administrative and

14
<PAGE>

other services and executive and other personnel as are necessary for Fund
operations. Seligman pays all of the compensation of directors of the Fund who
are employees or consultants of Seligman and of the officers and employees of
the Fund. Seligman also provides senior management for Seligman Data Corp., the
Fund's shareholder service agent.

Service Agreements

There are no other management-related service contracts under which services are
provided to the Fund.

Other Investment Advice

No person or persons, other than directors, officers, or employees of Seligman,
regularly advise the Fund with respect to its investments.

Dealer Reallowances

Dealers and financial advisors receive a percentage of the initial sales charge
on sales of Class A shares of the Fund, as set forth below:

Regular Dealer
Sales Charge Sales Charge Reallowance
as a % of as a % of Net As a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------

Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over(2) 0 0 0

(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
(2) You will not pay a sales charge on purchases of $1 million or more, but you
will be subject to a 1% CDSC if you sell your shares within 18 months.

Seligman Services, Inc. (Seligman Services), an affiliate of Seligman, is a
limited purpose broker/dealer. Seligman Services is eligible to receive
commissions from certain sales of Fund shares. For the Fund's fiscal years ended
September 30, 1998, 1997, and 1996, Seligman Services received commissions of
$362, $2,451, and $611, respectively.

Rule 12b-1 Plan

The Fund has adopted an Administration, Shareholder Services and Distribution
Plan (12b-1 Plan) in accordance with Section 12(b) of the 1940 Act and Rule
12b-1 thereunder.

Under the 12b-1 Plan, the Fund may pay to Seligman Advisors an administration,
shareholder services and distribution fee in respect of the Fund's Class A and
Class D shares. Payments under the 12b-1 Plan may include, but are not limited
to: (1) compensation to securities dealers and other organizations (Service
Organizations) for providing distribution assistance with respect to assets
invested in the Fund; (2) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Fund
shareholders; and (3) otherwise promoting the sale of shares of the Fund,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying Seligman Advisors' costs incurred in
connection with its marketing efforts with respect to shares of the Fund.
Seligman, in its sole discretion, may also make similar payments to Seligman
Advisors from its own resources, which may include the management fee that
Seligman receives from the Fund. Payments made by the Fund

15
<PAGE>

under the 12b-1 Plan are intended to be used to encourage sales of the Fund, as
well as to discourage redemptions.

Fees paid by the Fund under the 12b-1 Plan with respect to any class of shares
may not be used to pay expenses incurred solely in respect of any other class or
any other Seligman fund. Expenses attributable to more than one class of the
Fund will be allocated between the classes in accordance with a methodology
approved by the Fund's Board of Directors. The Fund may participate in joint
distribution activities with other Seligman funds, and the expenses of such
activities will be allocated among the applicable funds based on relative sales,
in accordance with a methodology approved by the Board.

Class A

Under the 12b-1 Plan, the Fund, with respect to Class A shares, pays quarterly
to Seligman Advisors a service fee at an annual rate of up to .25% of the
average daily net asset value of the Class A shares. These fees are used by
Seligman Advisors exclusively to make payments to Service Organizations which
have entered into agreements with Seligman Advisors. Such Service Organizations
receive from Seligman Advisors a continuing fee of up to .25% on an annual
basis, payable quarterly, of the average daily net assets of Class A shares
attributable to the particular Service Organization for providing personal
service and/or maintenance of shareholder accounts. The fee payable to Service
Organizations from time to time shall, within such limits, be determined by the
Directors of the Fund. The Fund is not obligated to pay Seligman Advisors for
any such costs it incurs in excess of the fee described above. No expense
incurred in one fiscal year by Seligman Advisors with respect to Class A shares
of the Fund may be paid from Class A 12b-1 fees received from the Fund in any
other fiscal year. If the Fund's 12b-1 Plan is terminated in respect of Class A
shares, no amounts (other than amounts accrued but not yet paid) would be owed
by the Fund to Seligman Advisors with respect to Class A shares. The total
amount paid by the Fund to Seligman Advisors in respect of Class A shares for
the fiscal year ended September 30, 1998 was $133,429, equivalent to .22% of the
Class A shares' average daily net assets.

Class D

Under the 12b-1 Plan, the Fund, with respect to Class D shares, pays monthly to
Seligman Advisors a 12b-1 fee at an annual rate of up to 1% of the average daily
net asset value of the Class D shares. The Fee is used by Seligman Advisors as
follows: During the first year following the sale of Class D shares, a
distribution fee of .75% of the average daily net assets attributable to Class D
share is used, along with any CDSC proceeds, to (1) reimburse Seligman Advisors
for its payment at the time of sale of Class D shares of a .75% sales commission
to Service Organizations, and (2) pay for other distribution expenses, 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 other marketing costs of Seligman Advisors. In addition, during
the first year following the sale of Class D shares, a service fee of up to .25%
of the average daily net assets attributable to such Class D shares is used to
reimburse Seligman Advisors for its prepayment to Service Organizations at the
time of sale of Class D shares of a service fee of up to .25% of the net asset
value of the Class D share sold (for shareholder services to be provided to
Class D shareholders over the course of the one year immediately following the
sale). The payment to Seligman Advisors is limited to amounts Seligman Advisors
actually paid to Service Organizations at the time of sale as service fees.
After the initial one-year period following a sale of Class D shares, the entire
12b-1 fee attributable to such Class D shares is paid to Service Organizations
for providing continuing shareholder services and distribution assistance in
respect of assets invested in the Fund. The total amount paid by the Fund in
respect of Class D shares for the fiscal year ended September 30, 1998 was
$16,974 equivalent to 1% per annum of the average daily net assets of Class D
shares.

The amounts expended by Seligman Advisors in any one year with respect to Class
D shares of the Fund may exceed the 12b-1 fees paid by the Fund in that year.
The Fund's 12b-1 Plan permits expenses incurred by Seligman Advisors in respect
of Class D shares in one fiscal year to be paid from Class D 12b-1 fees

16
<PAGE>

received from the Fund in any other fiscal year; however, in any fiscal year the
Fund is not obligated to pay any 12b-1 fees in excess of the fees described
above.

As of September 30, 1998 Seligman Advisors has incurred $8,361 of unreimbursed
expenses in respect of the Fund's Class D shares. This amount is equal to .53%
of the net assets of Class D at September 30, 1998.

If the 12b-1 Plan is terminated in respect of Class D shares, no amounts (other
than amounts accrued but not yet paid) would be owed by the Fund to Seligman
Advisors with respect to Class D shares.

Payments made by the Fund under the 12b-1 Plan for its fiscal year ended
September 30, 1998, were spent on the following activities in the following
amounts:

Class A Class D
------- -------

Compensation to underwriters $5,440

Compensation to broker/dealers $133,429 $11,534

The 12b-1 Plan was approved on January 12, 1988 by the Directors, including a
majority of the Directors who are not "interested persons" (as defined in the
1940 Act) of the Fund and who have no direct or indirect financial interest in
the operation of the 12b-1 Plan or in any agreement related to the 12b-1 Plan
(the "Qualified Directors") and was approved by shareholders of the Fund
December 16, 1988. Amendments to the Plan were approved in respect of the Class
D shares on November 18, 1993 by the Directors, including a majority of the
Qualified Directors, and became effective with respect to the Class D shares on
February 1, 1994. The 12b-1 Plan will continue in effect until December 31 of
each year so long as such continuance is approved annually by a majority vote of
both the Directors and the Qualified Directors, cast in person at a meeting
called for the purpose of voting on such approval. The 12b-1 Plan may not be
amended to increase materially the amounts payable under the terms of the 12b-1
Plan without the approval of a majority of the outstanding voting securities of
the Fund and no material amendment to the 12b-1 Plan may be made except with the
approval of a majority of both the Directors and the Qualified Directors in
accordance with the applicable provisions of the 1940 Act and the rules
thereunder.

The 12b-1 Plan requires that the Treasurer of the Fund shall provide to the
Directors, and the Directors shall review at least quarterly, a written report
of the amounts expended (and purposes therefor) made under the 12b-1 Plan. Rule
12b-1 also requires that the selection and nomination of Directors who are not
"interested persons" of the Fund be made by such disinterested Directors.

Seligman Services acts as a broker/dealer of record for shareholder accounts
that do not have a designated financial advisor and receives compensation from
the Fund pursuant to the 12b-1 Plan for providing personal services and account
maintenance to such accounts and other distribution services. For the fiscal
years ended September 30, 1998, 1997, and 1996, Seligman Services received
distribution and service fees of $10,296, $9,787, and $8,659, respectively,
pursuant to the 12b-1 Plan.

Brokerage Allocation and Other Practices

Brokerage Transactions

For the fiscal years ended September 30, 1998, 1997, and 1996, no brokerage
commissions were paid by the Fund. When two or more of the investment companies
in the Seligman Group or other investment advisory clients of Seligman desire to
buy or sell the same security at the same time, the securities purchased or sold
are allocated by Seligman in a manner believed to be equitable to each. There
may be possible advantages or disadvantages of such transactions with respect to
price or the size of positions readily obtainable or saleable.

In over-the-counter markets, the Fund deals with responsible primary market
makers unless a more favorable execution or price is believed to be obtainable.
The Fund may buy securities from or sell

17
<PAGE>

securities to dealers acting as principal, except dealers with which its
directors and/or officers are affiliated.

Commissions

For the fiscal years ended September 30, 1998, 1997, and 1996, the Fund did not
execute any portfolio transactions with, and therefore did not pay any
commissions to, any broker affiliated with either the Fund, Seligman, or
Seligman Advisors.

Regular Broker-Dealers

During the Fund's fiscal year ended September 30, 1998, the Fund did not acquire
securities of its regular brokers or dealers (as defined in Rule 10b-1 under the
1940 Act) or of their parents.

Capital Stock and Other Securities

Capital Stock

The Fund is authorized to issue 100,000,000 shares of capital stock, each with a
par value of $.001, divided into two classes, designated Class A and Class D
shares. Each share of the Fund's Class A and Class D capital stock is equal as
to earnings, assets, and voting privileges, except that each class bears its own
separate distribution and, potentially, certain other class expenses and has
exclusive voting rights with respect to any matter to which a separate vote of
any class is required by the 1940 Act or Maryland law. The Fund has adopted a
multiclass plan pursuant to Rule 18f-3 under the 1940 Act permitting the
issuance and sale of multiple classes of common stock. In accordance with the
Articles of Incorporation, the Board of Directors may authorize the creation of
additional classes of common stock with such characteristics as are permitted by
the multiclass plan and Rule 18f-3. The 1940 Act requires that where more than
one class exists, each class must be preferred over all other classes in respect
of assets specifically allocated to such class. All shares have noncumulative
voting rights for the election of directors. Each outstanding share is fully
paid and non-assessable, and each is freely transferable. There are no
liquidation, conversion, or preemptive rights.

Other Securities

The Fund has no authorized securities other than capital stock.

18
<PAGE>

Purchase, Redemption, and Pricing of Shares

Purchase of Shares

Class A

Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus an initial sales charge.

Purchases of Class A shares by a "single person" (as defined below) may be
eligible for the following reductions in initial sales charges:

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

The Right of Accumulation allows an investor to combine the amount being
invested in Class A shares of the Fund and shares of the other Seligman mutual
funds sold with an initial sales charge with the total net asset value of shares
of those mutual funds already owned that were sold with an initial sales charge
and the total net asset value of shares of Seligman Cash Management Fund which
were acquired through an exchange of shares of another Seligman mutual fund on
which there was an initial sales charge at the time of purchase to determine
reduced sales charges in accordance with the schedule in the prospectus. The
value of the shares owned, including the value of shares of Seligman Cash
Management Fund acquired in an exchange of shares of another Seligman mutual
fund on which there was an initial sales charge at the time of purchase will be
taken into account in orders placed through a dealer, however, only if Seligman
Advisors is notified by an investor or a dealer of the amount owned by the
investor at the time the purchase is made and is furnished sufficient
information to permit confirmation.

A Letter of Intent allows an investor to purchase Class A shares over a 13-month
period at reduced initial sales charges in accordance with the schedule in the
Prospectus, based on the total amount of Class A shares of the Fund that the
letter states the investor intends to purchase plus the total net asset value of
shares that were sold with an initial sales charge of the other Seligman mutual
funds already owned and the total net asset value of shares of Seligman Cash
Management Fund which were acquired through an exchange of shares of another
Seligman mutual fund on which there was an initial sales charge at the time of
purchase. Reduced sales charges also may apply to purchases made within a
13-month period starting up to 90 days before the date of execution of a letter
of intent.

CDSC Applicable to Class A Shares. Class A shares purchased without an initial
sales charge in accordance with the sales charge schedule in the Fund's
Prospectus, or pursuant to a Volume Discount, Right of Accumulation, or Letter
of Intent are subject to a CDSC of 1% on redemptions of such shares within
eighteen months of purchase. Employee benefit plans eligible for net asset value
sales (as described below) may be subject to a CDSC of 1% for terminations at
the plan level only, on redemptions of shares purchased within eighteen months
prior to plan termination. The 1% CDSC will be waived on shares that were
purchased through Morgan Stanley Dean Witter & Co. by certain Chilean
institutional investors (i.e. pension plans, insurance companies, and mutual
funds). Upon redemption of such shares within an eighteen-month period, Morgan
Stanley Dean Witter will reimburse Seligman Advisors a pro rata portion of the
fee it received from Seligman Advisors at the time of sale of such shares.

See "CDSC Waivers" below for other waivers which may be applicable to Class A
shares.

Persons Entitled To Reductions. Reductions in initial sales charges apply to
purchases of Class A shares by a "single person," including an individual;
members of a family unit comprising husband, wife and minor children; or a
trustee or other fiduciary purchasing for a single fiduciary account. Employee
benefit plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended, organizations tax exempt under Section 501(c)(3) or (13) of the
Internal Revenue Code, and non-qualified

19
<PAGE>

employee benefit plans that satisfy uniform criteria are considered "single
persons" for this purpose. The uniform criteria are as follows:

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

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

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

Eligible Employee Benefit Plans. The table of sales charges in the Prospectus
applies to sales to "eligible employee benefit plans," except that the Fund may
sell shares at net asset value to "eligible employee benefit plans" which have
at least (1) $500,000 invested in the Seligman Group of mutual funds or (2) 50
eligible employees to whom such plan is made available. Such sales must be made
in connection with a payroll deduction system of plan funding or other systems
acceptable to Seligman Data Corp., the Fund's shareholder service agent.
"Eligible employee benefit plan" means any plan or arrangement, whether or not
tax qualified, which provides for the purchase of Fund shares. Sales of shares
to such plans must be made in connection with a payroll deduction system of plan
funding or other system acceptable to Seligman Data Corp.

Such sales are believed to require limited sales effort and sales-related
expenses and therefore are made at net asset value. Contributions or account
information for plan participation also should be transmitted to Seligman Data
Corp. by methods which it accepts. Additional information about "eligible
employee benefit plans" is available from financial advisors or Seligman
Advisors.

Further Types of Reductions. Class A shares may also be issued without an
initial sales charge to any registered unit investment trust which is the issuer
of periodic payment plan certificates, the net proceeds of which are invested in
Fund shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors; to
financial institution trust departments; to registered investment advisers
exercising discretionary investment authority with respect to the purchase of
Fund shares; to accounts of financial institutions or broker/dealers that charge
account management fees, provided Seligman or one of its affiliates has entered
into an agreement with respect to such accounts; pursuant to sponsored
arrangements with organizations which make recommendations to, or permit group
solicitations of, its employees, members or participants in connection with the
purchase of shares of the Fund; to other investment companies in the Seligman
Group in connection with a deferred fee arrangement for outside directors; and
to "eligible employee benefit plans" which have at least (1) $500,000 invested
in the Seligman mutual funds or (2) 50 eligible employees to whom such plan is
made available.

Class D

Class D shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class D shares are
subject to a CDSC of 1% if the shares are redeemed within one year of purchase,
charged as a percentage of the current net asset value or the original purchase
price, whichever is less.

20
<PAGE>

Systematic Withdrawals. Class D shareholders who reinvest both their dividends
and capital gain distributions to purchase additional shares of the Fund, may
use the Fund's Systematic Withdrawal Plan to withdraw up to 10 of the value of
their accounts per year without the imposition of a CDSC. Account value is
determined as of the date the systematic withdrawals begin.

CDSC Waivers. The CDSC on Class D shares (and certain Class A shares, as
discussed above) will be waived or reduced in the following instances:

(1) on redemptions following the death or disability (as defined in Section
72(m)(7) of the Internal Revenue Code) of a shareholder or beneficial
owner;

(2) in connection with (1) distributions from retirement plans qualified under
Section 401(a) of the Internal Revenue Code when such redemptions are
necessary to make distributions to plan participants (such payments
include, but are not limited to, death, disability, retirement, or
separation of service), (2) distributions from a custodial account under
Section 403(b)(7) of the Internal Revenue Code or an IRA due to death,
disability, minimum distribution requirements after attainment of age 70
1/2 or, for accounts established prior to January 1, 1998, attainment of
age 59 1/2, and (3) a tax-free return of an excess contribution to an IRA;

(3) in whole or in part, in connection with shares sold to current and retired
Directors of the Fund;

(4) in whole or in part, in connection with shares sold to any state, county,
or city or any instrumentality, department, authority, or agency thereof,
which is prohibited by applicable investment laws from paying a sales load
or commission in connection with the purchase of any registered investment
management company;

(5) in whole or in part, in connection with systematic withdrawals;

(6) in connection with participation in the Merrill Lynch Small Market 401(k)
Program.

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

Fund Reorganizations

Class A shares may be issued without an initial sales charge in connection with
the acquisition of cash and securities owned by other investment companies. Any
CDSC will be waived in connection with the redemption of shares of a Fund if the
Fund is combined with another Seligman mutual fund, or in connection with a
similar reorganization transaction.

Payment in Securities. In addition to cash, the Funds may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales charge), although the Funds do not presently
intend to accept securities in payment for Fund shares. Generally, a Fund will
only consider accepting securities (l) to increase its holdings in a portfolio
security, or (2) if Seligman determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that a Fund
would not accept securities with a value of less than $100,000 per issue in
payment for shares. A Fund may reject in whole or in part offers to pay for Fund
shares with securities, may require partial payment in cash for applicable sales
charges, and may discontinue accepting securities as payment for Fund shares at
any time without notice. The Funds will not accept restricted securities in
payment for shares. The Funds will value accepted securities in the manner
provided for valuing portfolio securities.

21
<PAGE>

Offering Price

When you buy or sell Fund shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be added to the purchase price for Class A shares.

NAV per share of each class of the Fund is determined as of the close of regular
trading on the New York Stock Exchange (normally, 4:00 p.m. Eastern time), on
each day that the NYSE is open for business. The NYSE is currently closed on New
Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial
Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. The Fund
will also determine NAV for each class on each day in which there is a
sufficient degree of trading in the Fund's portfolio securities that the NAV of
Fund shares might be materially affected. NAV per share for a class is computed
by dividing such class's share of the value of the net assets of the Fund (i.e.,
the value of its assets less liabilities) by the total number of outstanding
shares of such class. All expenses of the Fund, including the management fee,
are accrued daily and taken into account for the purpose of determining NAV.

The securities in which the Fund invests are traded primarily in the
over-the-counter market. Municipal securities and other short-term holdings
maturing in more than 60 days are valued on the basis of quotations provided by
an independent pricing service, approved by the Trustees, which uses information
with respect to transactions in bonds, quotations from bond dealers, market
transactions in comparable securities and various relationships between
securities in determining value. In the absence of such quotations, fair value
will be determined in accordance with procedures approved by the Trustees.
Short-term holdings having remaining maturities of 60 days or less are generally
valued at amortized cost.

Generally, trading in certain securities such as municipal securities, corporate
bonds, US Government securities, and money market instruments is substantially
completed each day at various times prior to the close of the NYSE. The values
of such securities used in determining the net asset value of a Fund's shares
are computed as of such times.

Specimen Price Make-Up

Under the current distribution arrangements between the Fund and Seligman
Advisors, Class A shares are sold with a maximum initial sales charge of 4.75%
and Class D shares are sold at NAV(1). Using each Class's NAV at September 30,
1998, the maximum offering price of the Fund's shares is as follows:

Class A
- -------

Net asset value per share................................. $7.78

Maximum sales charge (4.75% of offering price)............ .39
-----

Offering price to public.................................. $8.17
=====

Class D
- -------

Net asset value and offering price per share(1) .......... $7.86
=====
- --------------
(1) Class D shares are subject to a CDSC of 1% on redemptions within one year
of purchase.

Redemption in Kind

The procedures for selling Fund shares under ordinary circumstances are set
forth in the Prospectus. In unusual circumstances, payment may be postponed, or
the right of redemption postponed for more than seven days, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted

22
<PAGE>

trading on, the NYSE during periods of emergency, or such other periods as
ordered by the Securities and Exchange Commission. Under these circumstances,
redemption proceeds may be made in securities. If payment is made in securities,
a shareholder may incur brokerage expenses in converting these securities to
cash.

Taxation of the Fund

The Fund is qualified and intends to continue to qualify as a regulated
investment company under Subchapter M of the Internal Revenue Code. For each
year so qualified, the Fund will not be subject to federal income taxes on its
net investment income and capital gains, if any, realized during any taxable
year, which it distributes to its shareholders, provided that at least 90% of
its net investment income and net short-term capital gains are distributed to
shareholders each year.

Qualification as a regulated investment company under the Internal Revenue Code
requires among other things, that (1) at least 90% of the annual gross income of
the Fund be derived from dividends, interest, payments with respect to
securities loans and gains from the sale or other disposition of stocks,
securities or currencies, or other income (including but not limited to gains
from options, futures, or forward contracts) derived with respect to its
business of investing in such stocks, securities or currencies; (2) and the Fund
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by
cash, US Government securities and other securities limited in respect of any
one issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
US Government securities).

Federal Income Taxes

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

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

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

Any gain or loss realized upon a sale or redemption of shares in the Fund by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gains at a maximum rate of
20% in respect of shares

23
<PAGE>

held for more than one year. Net capital gain of a corporate shareholder is
taxed at the same rate as ordinary income. However, if shares on which a
long-term capital gain distribution has been received are subsequently sold or
redeemed and such shares have been held for six months or less, any loss
realized will be treated as long-term capital loss to the extent that it offsets
the long-term capital gain distribution. In addition, no loss will be allowed on
the sale or other disposition of shares of the Fund if, within a period
beginning 30 days before the date of such sale or disposition and ending 30 days
after such date, the holder acquires (including shares acquired through dividend
reinvestment) securities that are substantially identical to the shares of the
Fund.

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

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

New Jersey Taxes

In the opinion of McCarter & English, LLP, New Jersey counsel to the New Jersey
Fund, income distributions paid from a "qualified investment fund" are exempt
from the New Jersey gross income tax, to the extent attributable to tax-exempt
obligations specified by New Jersey law. As defined in N.J.S.A. 54A:6-14.1, a
qualified investment fund is any investment or trust company, or Fund of such
investment company or trust registered with the Securities and Exchange
Commission, which for the calendar year in which a distribution is paid, has (i)
no investments other than interest-bearing obligations, obligations issued at a
discount, and cash and cash items, including receivables, and financial options,
futures, forward contracts, or other similar financial instruments related to
interest-bearing obligations, obligations issued at a discount or bond indices
related thereto (such financial options, etc. being referred to herein as
"Financial Instruments"), and (ii) which has at least 80% of the aggregate
principal amount of all its investments, excluding Financial Instruments, to the
extent such instruments are authorized by section 851(b) of the Internal Revenue
Code, cash and cash items, including receivables, invested in obligations issued
by New Jersey, or in obligations that are free from state or local taxation
under New Jersey and federal laws such as obligations issued by the governments
of Puerto Rico, Guam or the Virgin Islands ("Municipal Securities"). Interest
income and gains realized by the New Jersey Fund upon disposition of obligations
and distributed to the shareholders are exempt from the New Jersey gross 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 gross income tax.

The New Jersey gross 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 gross 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.

24
<PAGE>

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

Underwriters

Distribution of Securities

The Fund and Seligman Advisors are parties to a Distributing Agreement dated
January 1, 1993 under which Seligman Advisors acts as the exclusive agent for
distribution of shares of the Fund. Seligman Advisors accepts orders for the
purchase of Fund shares, which are offered continuously. As general distributor
of the Fund's shares of beneficial interest, Seligman Advisors allows
reallowances to all dealers on sales of Class A shares, as set forth above under
"Dealer Reallowances." Seligman Advisors retains the balance of sales charges
and any CDSCs paid by investors.

Total sales charges paid by shareholders of Class A shares of the Fund for the
fiscal years ended September 30, 1998, 1997, and 1996 are shown below. Also
shown are the amounts of the Class A sales charges that were retained by
Seligman Advisors:.

Total Sales Charges Paid Amount of Class A Sales
by Shareholders Charges Retained by
Fiscal Year on Class A Shares Seligman Advisors
- ----------- ----------------- -----------------
1998 $73,037 $8,550
1997 96,284 11,430
1996 110,566 12,922

Compensation

Seligman Advisors, which is an affiliated person of Seligman, which is an
affiliated person of the Fund, received the following commissions and other
compensation from the Fund during its fiscal year ended September 30, 1998:

Compensation on
Net Underwriting Redemptions and
Discounts and Repurchases
Commissions (CDSC on Class A
(Class A Sales and Class D Brokerage Other
Charge Retained) Retained) Commissions Compensation
---------------- --------- ----------- ------------

$8,550 $492 $0 $0

Other Payments

Seligman Advisors shall pay broker/dealers, from its own resources, a fee on
purchases of Class A shares of $1,000,000 or more (NAV sales), calculated as
follows: 1.00% of NAV sales up to but not including $2 million; .80% of NAV
sales from $2 million up to but not including $3 million; .50% of NAV sales from
$3 million up to but not including $5 million; and .25% of NAV sales from $5
million and above. The calculation of the fee will be based on assets held by a
"single person," including an individual, members of a family unit comprising
husband, wife and minor children purchasing securities for their own account, or
a trustee or other fiduciary purchasing for a single fiduciary account or single
trust. Purchases made by a trustee or other fiduciary for a fiduciary account
may not be aggregated purchases made on behalf of any other fiduciary or
individual account.

Seligman Advisors shall also pay broker/dealers, from its own resources, a fee
on assets of certain investments in Class A shares of the Seligman mutual funds
participating in an "eligible employee benefit plan" that are attributable to
the particular broker/dealer. The shares eligible for the fee are those on which
an initial sales charge was not paid because either the participating eligible
employee benefit plan

25
<PAGE>

has at least (1) $500,000 invested in the Seligman mutual funds or (2) 50
eligible employees to whom such plan is made available. Class A shares
representing only an initial purchase of Seligman Cash Management Fund are not
eligible for the fee. Such shares will become eligible for the fee once they are
exchanged for shares of another Seligman mutual fund. The payment is based on
cumulative sales for each Plan during a single calendar year, or portion
thereof. The payment schedule, for each calendar year, is as follows: 1.00% of
sales up to but not including $2 million; .80% of sales from $2 million up to
but not including $3 million; .50% of sales from $3 million up to but not
including $5 million; and .25% of sales from $5 million and above.

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

Calculation of Performance Data

Class A

The annualized yield for the 30-day period ended September 30, 1998 for the
Fund's Class A shares was 3.73%. The annualized yield was computed by dividing
the Fund's net investment income per share earned during this 30-day period by
the maximum offering price per share (i.e., the net asset value plus the maximum
sales load of 4.75% of the net amount invested) on September 30, 1998, which was
the last day of this period. The average number of Class A shares of the Fund
was 7,943,192, which was the average daily number of shares outstanding during
the 30-day period that were eligible to receive dividends. Income was computed
by totaling the interest earned on all debt obligations during the 30-day period
and subtracting from that amount the total of all recurring expenses incurred
during the period. The 30-day yield was then annualized on a bond-equivalent
basis assuming semi-annual reinvestment and compounding of net investment
income.

The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for the Fund's Class A shares was 6.60%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above.
Then the portion of the yield attributable to securities the income of which was
exempt for federal and state income tax purposes was determined. This portion of
the yield was then divided by one minus 43.45% (which assumes the maximum
combined federal and state income tax rate for individual taxpayers that are
subject to New Jersey's gross 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 assumed maximum federal income tax rate for
individual taxpayers). These two calculations were then added to the portion of
the Class A shares' yield, if any, that was attributable to securities the
income of which was not tax-exempt.

The average annual total return for the Fund's Class A shares for the one-year
period ended September 30, 1998 was 3.66%. The average annual total return for
the Fund's Class A shares for the five-year period ended September 30, 1998 was
4.39%. The average annual total return for the Fund's Class A shares for the
ten-year period ended September 30, 1998 was 7.39%. These returns were computed
by assuming a hypothetical initial payment of $1,000 in Class A shares of the
Fund. From this $1,000, the

26
<PAGE>

maximum sales load of $47.50 (4.75% of public offering price) was deducted. It
was then assumed that all of the dividends and distributions by the Fund's Class
A shares over the relevant time period were reinvested. It was then assumed that
at the end of the one-year period, the five-year period, and the ten-year period
of the Fund, the entire amount was redeemed. The average annual total return was
then calculated by determining the annual rate required for the initial payment
to grow to the amount which would have been received upon redemption (i.e., the
average annual compound rate of return).

Class D

The annualized yield for the 30-day period ended September 30, 1998 for the
Fund's Class D shares was 3.17%.. The annualized yield was computed as for Class
A shares by dividing the Fund's net investment income per share earned during
this 30-day period by the maximum offering price per share (i.e., the net asset
value) on September 30, 1998 which was the last day of this period. The average
number of Class D shares of the Fund was 203,236, which was the average daily
number of shares outstanding during the 30-day period that were eligible to
receive dividends. Income was computed by totaling the interest earned on all
debt obligations during the 30-day period and subtracting from that amount the
total of all recurring expenses incurred during the period. The 30-day yield was
then annualized on a bond-equivalent basis assuming semi-annual reinvestment and
compounding of net investment income.

The tax equivalent annualized yield for the 30-day period ended September 30,
1998 for the Fund's Class D shares was 5.61%. The tax equivalent annualized
yield was computed as discussed above for Class A shares.

The average annual total return for the Fund's Class D shares for the one-year
period ended September 30, 1998 was 6.97%. The average annual total return for
the Fund's Class D shares for the period since inception through September 30,
1998 was 4.78%. These returns were computed by assuming a hypothetical initial
payment of $1,000 in Class D shares of the Fund and that all of the dividends
and distributions by the Fund's Class D shares over the relevant time period
were reinvested. It was then assumed that at the end of the one-year period and
the period since inception of the Fund, the entire amount was redeemed,
subtracting the 1% CDSC, if applicable

The tables below illustrate the total returns on a $1,000 investment in the
Fund's Class A and Class D shares for the ten years ended September 30, 1998 or
from the Class's inception through September 30, 1998, assuming investment of
all dividends and capital gain distributions.

27
<PAGE>

Class A

<TABLE>
<CAPTION>
Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/89 $ 979 $--- $68 $1,047
9/30/90 956 9 134 1,099
9/30/91 1,022 15 216 1,253
9/30/92 1,056 18 300 1,374
9/30/93 1,124 41 402 1,567
9/30/94 1,009 54 437 1,500
9/30/95 1,035 79 533 1,647
9/30/96 1,036 80 619 1,735
9/30/97 1,031 137 705 1,873

9/30/98 1,062 162 816 2,040 103.98%

</TABLE>

Class D

<TABLE>
<CAPTION>
Value of Value of Total Value
Year Initial Capital Gain Value of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/94 $919 $--- $ 26 $ 945
9/30/95 941 15 72 1,028
9/30/96 943 15 117 1,075
9/30/97 938 51 162 1,151

9/30/98 965 65 213 1,243 24.34%

</TABLE>

- ----------
(1) For the ten-year period ended September 30, 1998 for Class A shares; and
from commencement of operations for Class D shares on February 1, 1994.

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

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

Seligman waived its fees and reimbursed certain expenses during some of the
periods above, which positively affected the performance results presented.

Financial Statements

The Fund's Annual Report to Shareholders for the fiscal year ended September 30,
1998 contains a schedule of the investments of the Fund as of September 30,
1998, as well as certain other financial information as of that date. The
financial statements and notes included in the Annual Report, and the
Independent Auditors' Report thereon, are incorporated herein by reference. The
Annual Report will be furnished, without charge, to investors who request copies
of this SAI.

General Information

Rule 18f-2 under the 1940 Act provides that any matter required to be submitted
by the provisions of the 1940 Act or applicable state law, or otherwise, to be
submitted to the holders of the outstanding voting securities of an investment
company such as the Fund shall not be deemed to have been effectively acted

28
<PAGE>

upon unless approved by the holders of a majority of the outstanding shares of
each class or series affected by such matter. Rule 18f-2 further provides that a
class or series shall be deemed to be affected by a matter unless it is clear
that the interests of each class or Series in the matter are substantially
identical or that the matter does not affect any interest of such class or
Series. However, the Rule exempts the selection of independent public
accountants, the approval of principal distributing contracts and the election
of directors from the separate voting requirements of the Rule.

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

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

29
<PAGE>

Appendix A

Moody's Investors Service, Inc. ("Moody's")
Municipal Bonds

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

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

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

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

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

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

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

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

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

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

30
<PAGE>

Municipal Notes

Moody's ratings for municipal notes and other short-term loans are designated
Moody's Investment Grade (MIG). This distinction is in recognition of the
differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are judged to be of adequate quality, carrying specific risk but having
protection commonly regarded as required of an investment security and not
distinctly or predominantly speculative.

Commercial Paper

Moody's Commercial Paper Ratings are opinions of the ability of issuers to repay
punctually promissory senior debt obligations not having an original maturity in
excess of one year. Issuers rated "Prime-1" or "P-1" indicates the highest
quality repayment capacity of the rated issue.

The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.

The designation "Prime-3" or "P-3" indicates that the issuer has an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.

Issues rated "Not Prime" do not fall within any of the Prime rating categories.

Standard & Poor's Corporation ("S&P")
Municipal Bonds

AAA: Municipal bonds rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.

AA: Municipal bonds rated AA have a very high degree of safety and very strong
capacity to pay interest and repay principal and differ from the highest rated
issues only in small degree.

A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.

BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree of
safety and capacity to pay interest and re-pay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
re-pay principal for bonds in this category than for bonds in higher rated
categories.

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

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speculation. While such bonds will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.

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

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

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

Municipal Notes

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

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

Commercial Paper

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

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

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

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

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

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

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

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

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

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Appendix B

RISK FACTORS REGARDING INVESTMENTS IN
NEW JERSEY MUNICIPAL SECURITIES

Some of the significant financial considerations relating to the investments of
the New Jersey 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.

Business investment expenditures and consumer spending have increased
substantially in New Jersey. Capital and consumer spending may continue to rise
due to the sustained character of economic growth and the interest-sensitive
homebuilding industry may continue to provide stimulus in New Jersey. It is
expected that the employment and income growth that has and is taking place will
lead to further growth in consumer outlays. Reasons for continued optimism in
New Jersey include increasing employment levels and a higher-than-national level
of per capita personal income. Also, several expansions of existing
hotel-casinos and plans for several new casinos in Atlantic City will mean
additional job creation.

While growth is likely to be slower than in the nation, the locational
advantages that have served New Jersey well for many years will still be there.
Structural changes that have been going on for years can be expected to
continue, with job creation concentrated most heavily in the service industries.

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 1995 was $569.2 million, for fiscal year 1996 was $442.0
million and for fiscal year 1997 was 280.5 million. For fiscal year 1998, the
balance in the undesignated General Fund is estimated to be $143.9 million,
subject to change upon completion of the year-end audit. The estimated balance
for fiscal year 1999 is $198.9 million, based on the amounts contained in the
fiscal year 1999 Appropriations Act. The fund balances are available for
appropriation in succeeding fiscal years.

Should revenues be less than the amount anticipated in the budget for a fiscal
year, the Governor may by statutory authority prevent any expenditure under any
appropriation. No supplemental appropriation may be enacted after adoption of an
appropriation act except where there are sufficient revenues on hand or
anticipated to meet such appropriation. In the past when actual revenues have
been less than the amount anticipated in the budget, the Governor has exercised
plenary powers leading to, among other actions, a hiring freeze for all New
Jersey departments and discontinuation of programs for which appropriations were
budgeted but not yet spent.

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.

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The aggregate outstanding general obligation bonded indebtedness of New Jersey
as of June 30, 1998 was $3.5729 billion. The appropriation for the debt service
obligation on outstanding indebtedness is $501.1 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. In fiscal
year 1999 the amount appropriated to this purpose is $615.6 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 imbalances which occur in the
collection and disbursement of the General Fund and Property Tax Relief Fund
revenues. Such tax and revenue anticipation notes do not constitute a general
obligation of New Jersey or a debt or liability within the meaning of the New
Jersey Constitution. Such notes constitute special obligations of New Jersey
payable solely from moneys on deposit in the General Fund and Property Tax
Relief Fund and are legally available for such payment.

"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 obligations" 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 of June 30, 1998.

Maximum Annual Debt Service
Outstanding Subject to Moral Obligation
----------- ---------------------------

New Jersey Housing and Mortgage $372,859,400.58 $35,677,988.61
Finance Agency

South Jersey Port Corporation 76,675,000.00 7,002,815.00

Higher Education Assistance 208,550,000.00 38,897,070.00
Authority --------------- --------------

$658,084,400.58 $81,577,873.61
=============== ==============

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 previously provided the South
Jersey Port Corporation (the "Corporation") with funds to cover all debt service
and property tax requirements, when earned revenues are anticipated to be
insufficient to cover these obligations. For calendar years 1990 through 1998,
New Jersey has made appropriations totaling $47,785,848.25 which covered
deficiencies in revenues of the Corporation, for debt service and property tax
payments.

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Higher Education Assistance Authority. The Higher Education Assistance Authority
("HEAA") has not had a revenue deficiency which required New Jersey to
appropriate funds to meet its "moral obligation". It is anticipated that the
HEAA's revenues will be sufficient to cover debt service on its bonds.

Obligations Guaranteed by New Jersey. The New Jersey Sports and Exposition
Authority ("NJSEA") has issued New Jersey guaranteed bonds of which $111,910,000
are outstanding as of June 30, 1998. To date, the NJSEA has not had a revenue
deficiency requiring New Jersey to make debt service payments pursuant to its
guarantee. It is anticipated that the NJSEA's revenues will continue to be
sufficient to pay debt service on these bonds without recourse to New Jersey's
guarantee.

Obligations Supported by New Jersey Revenue Subject to Annual Appropriation. New
Jersey has entered into a number of leases and contracts described below
(collectively, the "Agreements") with several governmental authorities to secure
the financing of various New Jersey projects. Under the terms of the Agreements,
New Jersey has agreed to make payments equal to the debt service on, and other
costs related to, the obligations sold to finance the projects. New Jersey's
obligation to make payments under the Agreements is subject to and dependent
upon annual appropriations being made by the New Jersey Legislature for such
purposes. The New Jersey Legislature has no legal obligation to enact such
appropriations, but has done so to date for all such obligations.

New Jersey Economic Development Authority. Pursuant to legislation, the New
Jersey Economic Development Authority ("EDA") has been authorized to issue
Economic Recovery Bonds, State Pension Funding Bonds and Market Transition
Facility Bonds. The Economic Recovery Bonds have been issued pursuant to
legislation enacted during 1992 to finance various economic development
purposes. Pursuant to that legislation, the EDA and the New Jersey Treasurer
entered into an agreement through which the 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 subject to appropriation by the New Jersey Legislature.

The State Pension Funding Bonds have been issued pursuant to legislation enacted
in June 1997 to pay a portion of New Jersey's unfunded accrued pension liability
for its retirement system, which together with amounts derived from the
revaluation of pension assets pursuant to companion legislation enacted at the
same time, will be sufficient to fully fund the unfunded accrued pension
liability.

The Market Transition Facility Bonds have been issued pursuant to legislation
enacted in June 1994 to pay the current and anticipated liabilities and expenses
of the Market Transition Facility, which issued private passenger automobile
insurance policies for drivers who could not be insured by private insurance
companies on a voluntary basis.

In addition, New Jersey has entered into a number of leases with the EDA
relating to the financing of certain real property, office buildings and
equipment for (i) the New Jersey Performing Arts Center; (ii) Liberty State Park
in the City of Jersey City; (iii) various office buildings located in Trenton
known as the Trenton Office Complex; (iv) a facility located in Trenton; and (v)
certain energy saving equipment installed in various New Jersey office
buildings. The rental payments required to be made by New Jersey under these
lease agreements are sufficient to pay debt service on the bonds issued by the
EDA to finance the acquisition and construction of such projects and other
amounts payable to the EDA, including certain administrative expenses of the
EDA.

New Jersey Building Authority. Legislation enacted in 1981 established the New
Jersey Building Authority ("NJBA") to undertake the acquisition, construction,
renovation and rehabilitation of various New Jersey office buildings, historic
buildings, and correctional facilities. The NJBA finances the cost of such
projects through the issuance of bonds, the payment of debt service on which is
made pursuant to a lease between the NJBA and New Jersey.

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New Jersey Educational Facilities Authority. The New Jersey Educational
Facilities Authority issues bonds pursuant to three separate legislative
programs, enacted in 1993 and 1997, to finance (i) the purchase of equipment to
be leased to institutions of higher learning; (ii) grants to New Jersey's public
and private institutions of higher education for the development, construction
and improvement of instructional, laboratory, communication and research
facilities; and (iii) grants to public and private institutions of higher
education to develop a technology infrastructure within and among the State's
institutions of higher education.

New Jersey Sports and Exposition Authority. Legislation enacted in 1992
authorizes the New Jersey Sports and Exposition Authority (the "NJSEA") to issue
bonds for various purposes payable from a contract between the NJSEA and the New
Jersey Treasurer (the "NJSEA State Contract"). Pursuant to the NJSEA State
Contract, the NJSEA undertakes certain projects and the New Jersey Treasurer
credits to the NJSEA amounts from the General Fund sufficient to pay debt
service and other costs related to the bonds.

State Transportation System Bonds. In July 1994, New Jersey created the New
Jersey Transportation Trust Fund Authority (the "TTFA"), an instrumentality of
New Jersey pursuant to 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 its transportation system.
Pursuant to the TTFA Act, the principal amount of the TTFA's bonds, notes or
other obligations which may be issued in any fiscal year generally may not
exceed $700 million plus amounts carried over from prior fiscal years. The debt
issued by the TTFA are special obligations of the TTFA payable from a contract
among the TTFA, the New Jersey Treasurer and the Commissioner of Transportation.

New Jersey Transit Corporation Hudson-Bergen Light Rail Transit System. The TTFA
has entered into a Standby Deficiency Agreement (the "Standby Deficiency
Agreement") with the trustee for grant anticipation notes (see "GANS") issued by
New Jersey Transit Corporation ("NJT") for the financing of the construction of
the Hudson-Bergen Light Rail Transit System. The GANS are primarily payable from
federal grant monies. To the extent that the GANS are not paid by NJT from
federal grant monies, the GANS are payable by the TTFA pursuant to the Standby
Deficiency Agreement. To date, federal grant payments have been sufficient such
that the TTFA has not been required to make payments pursuant to the Standby
Deficiency Agreement.

State of New Jersey Certificates of Participation. Beginning in April 1984, New
Jersey, acting through the Director of the Division of Purchase and Property,
has 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. Certificates of Participation in such
lease purchase agreements have been issued. A Certificate of Participation
represents a proportionate interest of the owner thereof in the lease payments
to be made by New Jersey under the terms of the lease purchase agreement.

New Jersey Supported School and County College Bonds. Legislation provides for
future appropriations for New Jersey Aid to local school districts equal to debt
service on bonds issued by such local school districts for construction and
renovation of school facilities (P.L. 1968, c. 177; P.L. 1971, c. 10; and P.L.
1978, c. 74) and for New Jersey Aid to counties equal to debt service on bonds
issued by counties for construction of county college facilities (P.L. 1971, c
12, as amended). The New Jersey Legislature has no legal obligations to make
such appropriations, but has done so to date for all obligations issued under
these laws.

Community Mental Health Loan Program. The EDA issues revenue bonds from time to
time on behalf of non-profit community mental health service providers. The
payment of debt service on these revenue bonds as well as the payment of certain
other provider expenses is made by New Jersey pursuant to service contracts
between the State Department of Human Services and these providers. The
contracts have one year terms, subject to annual renewal.

Line of Credit for Equipment Purchases. New Jersey finances the acquisition of
certain equipment, services and real property to be used by various New Jersey
departments through a line of credit.

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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 system (the "Unfunded Accrued Pension
Liability"), which together with amounts derived from the revaluation of pension
assets pursuant to companion legislation enacted at the same time, will be
sufficient to fully fund the Unfunded Accrued Pension Liability. The Unfunded
Accrued Pension Liability represents pension benefits earned in prior years
which, pursuant to standard actuarial practices, are not yet fully funded. 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.

Municipal Finance. New Jersey's local finance system is regulated by various
statutes designated 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 of Local Government Services in the Department of
Community Affairs (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 fails to adopt 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 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. 40A: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.

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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. 40A:2-1 et seq.) 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
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 deduction") 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, of
New Jersey required certain municipalities and permits all other municipalities
to adopt the New Jersey fiscal year in place of the 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 may then issue
Fiscal Year Adjustment Bonds to finance the deficit on a permanent basis.

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 districts 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
State-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 et seq. (the "School Intervention Act"). The State-operated school
district, 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 State-operated school district in the city of

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Jersey City. Similarly, on August 7, 1991, the New Jersey Board of Education
ordered the creation of a State-operated school district in the City of
Paterson, and on July 5, 1995 the creation of a State-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 for 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 New Jersey
Commissioner of Education (the "Commissioner") to request 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 any 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 to the Commissioner only if the Commissioner determines that
additional funds are required to provide a thorough and efficient education.

In State-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
State-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 New Jersey in the fiscal year in which the
expenditure are made subject to the availability of appropriations.

School District Bonds. School district bonds and temporary notes are issued in
conformity with N.J.S.A. 18A:24-1 et seq. (the "School Bond Law"), which closely
parallels the Local Bond Law (for further information relating to the Local Bond
Law, see "MUNICIPAL FINANCE-Counties and Municipalities" herein). Although
school districts are exempted from the 5 percent down payment provision
generally applied to bonds issued by municipalities and counties, they are
subject to debt limits (which vary depending on the type of school system
provided) and to New Jersey regulation of their borrowing. The debt limitation
on school district bonds depends upon the classification of the school district,
but may be as high as 4 percent of the average equalized valuation basis on the
constituent municipality. In certain cases involving school districts in cities
with populations exceeding 150,000, the debt limit is 8 percent of the average
equalized valuation basis of the constituent municipality, and in cities with
population 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 for projects in a State 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

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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 by 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 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, 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 $327,981,850 by various school districts as of June 30, 1998 and
$932,410,709 by various municipalities as of June 30, 1998.

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

40
<PAGE>

become due. 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 over
creation of new authorities and special districts as well as their dissolution.
The Local Finance Board 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 a 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 of the Division of Local
Government Services reviews and approves annual budgets of authorities and
special districts.

Litigation. At any given time, there are various numbers of claims and cases
pending against the State of New Jersey, New Jersey 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.).
New Jersey does not formally estimate its reserve representing potential
exposure for these claims and cases. New Jersey is unable to estimate its
exposure for these claims and cases.

New Jersey 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 tort litigation against New Jersey must be preceded
by a notice of claim, which affords New Jersey 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. An independent study estimated an aggregate
potential exposure of $85,300,000 for tort and medical malpractice claims
pending as of December 31, 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. New Jersey is unable to
estimate its exposure for these claims.

Other lawsuits presently pending or threatened in New Jersey has the potential
for either a significant loss of revenue or a significant unanticipated
expenditures include the following:

Interfaith Community Organization v. Shinn, a suit filed by a coalition of
churches and church leaders in Hudson County against the Governor, the
Commissioners of the Department of Environmental Protection and the Department
of Health, concerning chromium contamination in Liberty State Park in Jersey
City.

American Trucking Associations, Inc. and Tri-State Motor Transit Co. v. State of
New Jersey, challenging the constitutionality of annual hazardous and solid
waste licensure fees collected by the Department of Environmental Protection,
seeking permanent injunction enjoining future collection of fees and refund of
all renewal fees, fines and penalties collected.

41
<PAGE>

Buena Regional Commercial Township et al. v. New jersey Department of Education
et al. This lawsuit was filed on behalf of 17 rural school districts seeking the
same type of relief as has been mandated to be provided to the poor urban school
districts in Abbot v. Burke, which included, without limitation, sufficient
funds to allow the school districts to spend at the average of wealthy suburban
school districts, to implement additional programs and to upgrade school
facilities. The Buena school districts are seeking to be treated as special
needs districts and to receive parity funding the with Abbot school districts as
a remedial measure. They also are seeking additional funding as may be necessary
to provide an educational equivalent to that being provided in the Abbot
districts.

Berner Stabaus, et al. v. State of New Jersey, et al. Plaintiffs, 25 middle
income school districts, have filed a complaint alleging that New Jersey's
system of funding for their schools is violative of the constitutional rights of
equal protection and a thorough and efficient education.

Affiliated FM Insurance Company v. State of New Jersey, an action by certain
members of the New Jersey Property-Liability Insurance Guaranty Association
challenging the constitutionality of assessments used for the Market Transition
Fund and seeking repayment of assessments paid since 1990. On July 28, 1997, the
court denied plaintiff's application for emergent relief, denied New Jersey's
motion for summary disposition and granted plaintiff's motion to accelerate. The
Appellate Division has affirmed the assessment.
Appellant's petition for certification to the New Jersey Supreme Court has been
denied.

C.F. v. Terhune (formerly Fauver) a class action in federal district court by
prisoners with serious mental disorders who are confined within the facilities
of the New Jersey Department of Corrections seeking injunctive relief in the
form of changes to the manner in which the mental health services are provided
to inmates.

Cleary v. Waldman, the plaintiffs claim that the Medicare Catastrophic Coverage
Act, providing funds to spouses of institutionalized individuals sufficient
funds to live in the community, requires that a certain system be used to
provide the funds and another system is being used instead. Estimate of exposure
if the Court were to find for the plaintiffs are in the area of $50 million per
year from both New Jersey and Federal sources combined. Plaintiffs motion for a
preliminary injunction was denied and is being appealed.
Subsequently, plaintiffs filed for class certification which was granted.

United Hospitals v. State of New Jersey 18 New Jersey hospitals are challenging
the Medicaid reimbursements made since February 1995 claiming that New Jersey
failed to comply with certain federal requirements, the reimbursements
regulations are arbitrary, capricious and unreasonable, rates were incorrectly
calculated, the hospitals were denied due process, the Medicaid reimbursement
provisions violate the New Jersey Constitution, and Medicaid State Plan was
violated by the New Jersey Department of Human Services implementation of
hospital rates in 1995 and 1996.

Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Incorporated, the
plaintiff is suing Mirage Resorts and New Jersey in an attempt to enjoin their
efforts to build a highway and tunnel funded by Mirage Resorts and $55 million
in bonds collateralized by future casino obligations, claiming that the project
violates the New Jersey Constitution provision that requires all revenues the
state receives from gaming operations to benefit the elderly and disabled. The
plaintiff also claims (i) the failure to disclose this constitutional infirmity
is a material omission within the meaning of Rule 10B-5 of the Securities and
Exchange Act of 1934, (ii) the defendants have sought to avoid the requirements
of the Clean Water Act, Clean Air Act, Federal Highway Act and the New Jersey
Coastal Area Facility Review Act. On May 1, 1997, the federal district court
granted the defendants' motion to dismiss and the Third Circuit has affirmed the
District Court's determinations. In a related action, State of New Jersey v.
Trump Hotels & Casino Resorts, Inc., New Jersey filed a declaratory judgment
action seeking a declaration that the use of certain funds New Jersey statutory
provisions existed that permitted use of certain funds to be used for other
purposes than the elderly or disabled. Declaratory judgment was entered in favor
of New Jersey on May 14, 1997 and the Appellate Division has affirmed the
decision on April 8, 1998.

42
<PAGE>

United Alliance v. State of New Jersey, plaintiffs allege that the Casino
Reinvestment Development Authority funding mechanisms are illegal including the
gross receipts tax, the parking tax, and the Atlantic City fund. This matter has
been placed on the inactive list. Five additional cases have been filed in
opposition to the road and tunnel project which also contain related challenges.
Merolla and Brandy v. Casino Reinvestment Development Authority, Middlesex
County v. Casino Reinvestment Development Authority, Gallagher v. Casino
Reinvestment Development Authority and George Harms v. State of New Jersey.
Summary judgment has been granted in favor of the New Jersey or its agencies in
Merolla, Middlesex and Gallagher but the plaintiffs have filed an appeal.

Blecker v. State of New Jersey, a class action filed on behalf of providers of
Medicare Part B services to Qualified Medicare Beneficiaries seeking
reimbursement for Medicare co-insurance and deductibles not paid by the New
Jersey Medicaid program from 1988 to February 10, 1995. Plaintiffs claim a
breach of contract and violation of federal civil rights laws. On August 11,
1997, New Jersey filed a motion to dismiss the matter and on September 15, 1997,
it filed a motion for summary judgement. Both motions were granted on April 3,
1998 and the plaintiff has filed an appeal.

Camden County Energy Recovery Associates v. New Jersey Department of
Environmental Protection, the plaintiff owns and operates a resource facility in
Camden County and has filed suit seeking to have the solid waste reprocurement
process halted to clarify bid specification. The court did not halt the bid
process but did require clarifications. Co-defendant Pollution Control Financing
Authority of Camden County counterclaimed, seeking reformation of the contract
between it and the plaintiff and cross-claimed against New Jersey for
contribution and indemnification.

Communications Workers of America, et al. v. James A. DiEleuterio, Jr., et al.
Appellants in this case have filed an appeal from the decision of the New Jersey
Treasurer to award a contract for the design, construction, and operation and
maintenance of the New Jersey motor vehicle inspection system. New Jersey
estimates that unless the new inspection system is operational by December 12,
1999, New Jersey may be exposed to significant federal sanctions, including the
loss of federal transportation funds and the federal imposition of stricter
pollution standards that will restrict economic development in New Jersey.

Sojourner A. et al. v. Dept. of Human Services. The plaintiffs in this action
filed a complaint and motion for preliminary injunction, seeking damages and
declaratory and injunctive relief overturning, on New Jersey Constitutional
grounds, the "family cap" provisions of the New Jersey Work First New Jersey Act
N.J.S.A. 44:10-1 et seq

43
<PAGE>

Appendix C

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

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

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

The Seligman Complex:

...Prior to 1900

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

...1900-1910

o Helps Congress finance the building of the Panama Canal.

...1910s

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

...1920s

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

...1930s

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

44
<PAGE>

...1940s

o Helps shape the Investment Company Act of 1940.
o Leads in the purchase and subsequent sale to the public of Newport News
Shipbuilding and Dry Dock Company, a prototype transaction for the
investment banking industry.
o Assumes management of National Investors Corporation, today Seligman Growth
Fund, Inc.
o Establishes Whitehall Fund, Inc., today Seligman Income Fund, Inc.

...1950-1989

o Develops new open-end investment companies. Today, manages more than 40
mutual fund portfolios.
o Helps pioneer state-specific, municipal bond funds, today managing a
national and 18 state-specific municipal funds.
o Establishes J. & W. Seligman Trust Company and J. & W. Seligman Valuations
Corporation.
o Establishes Seligman Portfolios, Inc., an investment vehicle offered
through variable annuity products.

...1990s

o Introduces Seligman Select Municipal Fund, Inc. and Seligman Quality
Municipal Fund, Inc., two closed-end funds that invest in high quality
municipal bonds.
o In 1991 establishes a joint venture with Henderson plc, of London, known as
Seligman Henderson Co., to offer global investment products.
o Introduces to the public Seligman Frontier Fund, Inc., a small
capitalization mutual fund.
o Launches Seligman Henderson Global Fund Series, Inc., which today offers
five separate series: Seligman Henderson International Fund, Seligman
Henderson Global Smaller Companies Fund, Seligman Henderson Global
Technology Fund, Seligman Henderson Global Growth Opportunities Fund and
Seligman Henderson Emerging Markets Growth Fund.
o Launches Seligman Value Fund Series, Inc., which currently offers two
separate series: Seligman Large-Cap Value Fund and Seligman Small-Cap Value
Fund.

<PAGE>
To the Shareholders

Seligman New Jersey Municipal Fund posted strong results for its fiscal year
ended September 30, 1998. Although the growth of the US economy slowed from its
record pace, the expansion continued. Inflation and interest rates reached their
lowest levels in a quarter century, and unemployment was at its lowest level
since 1970.

Despite ongoing strength in the US, economic turmoil spread throughout the rest
of the world. The Asian financial crisis worsened, Japan failed to resolve its
banking problems, Russia's economy became chaotic, and economic crises loomed
throughout much of Latin America, particularly in Brazil. Fears of risk in
nearly all types of financial assets drove investors out of the equity markets
and into the relative safety and quality of investments such as US Treasury
bonds, often a haven from a turbulent stock market. This "flight to quality"
helped create an attractive environment for municipal bonds.

Major factors influencing the market for municipal bonds over the year were the
prolonged Treasury bond rally and heavy issuance of municipal securities.
Municipal bond holders fared well as interest rates generally declined over this
time period. Nonetheless, the performance of the municipal market lagged that of
the Treasury bond market, as investors focused on quality because of concerns
about financial instability. Treasury bond prices rose sharply over the 12-month
period, sending yields significantly lower. At one point in the period, selected
municipal obligations traded at the same yield as Treasuries, even though
municipals offered more favorable tax treatment.

Looking ahead, we see the favorable climate for municipal bonds continuing. Low
inflation and a growing economy should serve to protect the value of municipal
investments. Fewer new issues may be entering the market, which could tighten
the supply/demand balance. This could improve overall total rate-of-return
prospects. Also, although the US economy continues to grow, this growth is
slowing, and the global situation is forcing the Federal Reserve into a more
benign strategy on interest rates. The Fed has already cut short-term rates
twice, and we expect more cuts until a semblance of international stability
emerges. Finally, the municipal market's record of safety and stability offers
further appeal to investors in these more troubled times, especially as equity
market volatility continues.

All in all, we feel the investment attractiveness of municipals remains
compelling. In this period of global economic uncertainty and low interest
rates, municipals are an appropriate alternative for those investors with
suitable investment requirements.

As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that when our plans are finalized and
all systems are tested, there will be no disruption in the services provided by
your Fund.

Thank you for your continued support of Seligman New Jersey Municipal Fund. We
look forward to serving your investment needs in the many years to come. A
discussion with your Portfolio Manager, performance overview, portfolio
holdings, and financial statements follow this letter.

By order of the Board of Directors,

/s/ William C. Morris
- ---------------------
William C. Morris
Chairman

/s/ Brian T. Zino
-----------------
Brian T. Zino
President

October 30, 1998

<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles

Q. What economic factors influenced Seligman New Jersey Municipal Fund in the
last 12 months?

A. The continuing combination of low inflation, low unemployment, and steady
economic growth throughout the past 12 months sustained what became one of
the nation's longest peacetime economic expansions. This contributed to the
overall improvement of the financial condition of America's states, cities,
and municipalities. Over the past year, credit rating upgrades significantly
outnumbered rating downgrades. These upgrades enhanced the overall
creditworthiness of the municipal marketplace.

But, by the end of your Fund's fiscal year, there was widespread expectation
that the US may be unable to avoid the economic slowdown that has already
gripped much of the world. While many economists were calling a recession
unlikely, the fact that they were including its potential in their forecasts
implied that the ongoing domestic economic expansion would not continue. In
the final months of the fiscal year, turmoil in world markets began to
contribute to a modest slowdown in the pace of US economic growth, and
prevented an acceleration in the rate of inflation. In September, the
Federal Reserve Board lowered the federal funds rate by one-quarter of one
percent. With a warning that growing fear among investors and lenders was
threatening the nation's economic expansion, the Fed unexpectedly cut
interest rates again in October, the first time in four and a half years
that the central bank had changed interest-rate policy outside one of its
normally scheduled meetings. This unusual timing suggested that the Fed
believed that the domestic economy is beginning to deteriorate as the
worldwide financial crisis gains momentum, and that a credit shortage may be
developing that could further curb growth. Fed officials have hinted that
more interest-rate reductions will ensue if the global financial turmoil
escalates. Declining US equity markets reflected these fears, as investors
sold stocks in favor of the relative safety and quality of US Treasury
bonds, which are often considered a haven from a volatile stock market.

A TEAM APPROACH

Seligman New Jersey Municipal Fund is managed by the Seligman Municipals Team,
headed by Thomas G. Moles. Mr. Moles is assisted in the management of the Fund
by a group of seasoned professionals who are responsible for research and
trading consistent with the Fund's investment objective.

[PHOTO]
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion, Debra
McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)

<PAGE>
Interview With Your Portfolio Manager,
Thomas G. Moles

Q. What market factors influenced Seligman New Jersey Municipal Fund in the
last 12 months?

A. Overall, Seligman New Jersey Municipal Fund ended its fiscal year on a
positive note. During the period, long-term municipal yields fluctuated
within a narrow range, decreasing by almost one-half of a point. The
declining interest-rate environment led to rising prices for the majority of
holdings and competitive performance results for the Fund's net asset value.

However, the municipal market underperformed the US Treasury market during
the 12-month period. The ongoing strength in the economy over the year
caused the supply of Treasury bonds to shrink, as the federal government
needed to borrow less after running its first budget surplus in 29 years.
But, the solid economy and low interest rates caused the supply of municipal
bonds to grow. The net reduction in Treasury financing and the increasing
municipal bond issuance was compounded by the increased investor demand for
Treasuries. These factors caused the decline in Treasury yields to
significantly outpace the drop in municipal yields. Because of these
factors, long-term municipal bonds have not been as attractive, relative to
long-term Treasuries, since 1986, when proposed tax legislation threatened
the tax-exempt status of municipal securities.

Q. What was your investment strategy?

A. Throughout the 12-month period, the long-term interest-rate outlook was
positive, and Seligman New Jersey Municipal Fund was positioned to benefit
from the declining interest-rate environment. The Seligman Municipals Team
engaged in duration-extension trades, selling shorter-term holdings and
replacing them with long-term, current-coupon bonds. Current-coupon bonds
have coupon rates that are at or near current market rates. Generally, when
long-term bond yields decline, the prices appreciate more than those of
shorter-term bonds.

During the past 12 months, we also improved the call protection of the
portfolios. As the bonds within the portfolio mature, older holdings
approach their optional call dates (a callable bond can be redeemed by the
issuer, prior to maturity, on specified dates and at predetermined prices).
Declining interest rates increase the risk that these bonds will be called
by the issuer. The lower interest-rate environment over the 12-month period
prompted many municipal issuers to retire outstanding, higher-coupon debt.
Additionally, as a direct result of the significant increase in refunding
volume, many of the portfolio's holdings were advance-refunded, which had a
positive impact on performance. In general, when a municipal bond is
refunded, total return performance is improved, and the bond's rating is
often upgraded.

Q. What is your outlook?

A. Long-term municipal yields have fallen to levels not seen in many years.
Municipal securities continue to offer a significant yield advantage
compared to the after-tax returns of other fixed-income investments.
Further, as the yield spread between municipal and Treasury bonds
normalizes, municipal market performance should improve, relative to the
Treasury market. Finally, the municipal market's record of safety and
stability may become more appealing as volatility persists in the US equity
markets. Consequently, we remain optimistic about the long-term prospects
for the municipal bond market, and for Seligman New Jersey Municipal Fund.

<PAGE>
Performance Overview and Portfolio Summary

This chart compares a $10,000 hypothetical investment made in Seligman New
Jersey Municipal Fund Class A shares with and without the initial 4.75% maximum
sales charge, for the 10-year period ended September 30, 1998, to a $10,000
hypothetical investment made in the Lehman Brothers Municipal Bond Index (Lehman
Index) for the same period. The performance of Seligman New Jersey Municipal
Fund Class D shares is not shown in this chart but is included in the table on
page 5. It is important to keep in mind that the Lehman Index does not include
any fees or sales charges and does not reflect state-specific bond market
performance. The table on page 5 also includes relevant portfolio
characteristics.

With Sales Charge Without Sales Charge Lehman Index

9/30/88 9,523 10,000 10,000
12/31/88 9,822 10,315 10,185
3/31/89 9,918 10,415 10,252
6/30/89 10,543 11,071 10,859
9/30/89 10,466 10,990 10,867
12/31/89 10,860 11,405 11,284
3/31/90 10,836 11,379 11,335
6/30/90 11,100 11,657 11,600
9/30/90 10,994 11,545 11,607
12/31/90 11,596 12,177 12,107
3/31/91 11836 12,429 12,381
6/30/91 12,082 12,688 12,645
9/30/91 12,530 13,158 13,136
12/31/91 12,876 13,521 13,578
3/31/92 12,858 13,502 13,619
6/30/92 13,431 14,104 14,136
9/30/92 13,745 14,434 14,511
12/31/92 14,033 14,736 14,775
3/31/93 14,574 15,305 15,323
6/30/93 15,145 15,904 15,824
9/30/93 15,672 16,457 16,359
12/31/93 15,769 16,560 16,588
3/31/94 14,881 15,627 15,677
6/30/94 14,968 15,718 15,851
9/30/94 15,006 15,758 15,959
12/31/94 14,799 15,541 15,729
3/31/95 15,802 16,594 16,841
6/30/95 16,114 16,922 17,247
9/30/95 16,472 17,298 17,744
12/31/95 17,102 17,960 18,475
3/31/96 16,806 17,649 18,251
6/30/96 16,979 17,830 18,392
9/30/96 17,356 18,226 18,815
12/31/96 17,684 18,570 19,295
3/31/97 17,588 18,470 19,250
6/30/97 18,149 19,059 19,914
9/30/97 18,737 19,676 20,516
12/31/97 19,263 20,229 21,072
3/31/98 19,457 20,432 21,314
6/30/98 19,785 20,777 21,638
9/30/98 20,398 21,421 22,302

The performance of Class D shares will be greater than or less than the
performance shown for Class A shares, based on the differences in sales charges
and fees paid by shareholders.

Performance data quoted represent changes in prices and assume that all
distributions within the period are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.

<PAGE>
Performance Overview and Portfolio Summary

INVESTMENT RESULTS PER SHARE

TOTAL RETURNS
For Periods Ended September 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------
CLASS D
SINCE
SIX ONE FIVE 10 INCEPTION
MONTHS* YEAR YEARS YEARS 2/1/94
--------- ------ ------- ------- ------------
<S> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (0.16)% 3.66% 4.39% 7.39% n/a
Without Sales Charge 4.84 8.87 5.41 7.92 n/a

CLASS D**
With 1% CDSC 3.27 6.97 n/a n/a n/a
Without CDSC 4.27 7.97 n/a n/a 4.78%
LEHMAN INDEX*** 4.64 8.71 6.40 8.35 6.29+
</TABLE>

<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1998

9/30/98 3/31/98 9/30/97 DIVIDENDS0 CAPITAL GAIN0 SEC YIELD00
-------- -------- -------- ----------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
CLASS A $7.78 $7.59 $7.56 CLASS A $0.346 $0.081 3.73%
CLASS D 7.86 7.68 7.64 CLASS D 0.289 0.081 3.17
</TABLE>

<TABLE>
<CAPTION>
HOLDINGS BY MARKET SECTOR++ MOODY'S/S&P RATINGS++
<S> <C> <C> <C>
Revenue Bonds 81% Aaa/AAA 53%
General Obligation Bonds 19 Aa/AA 18
A/A 20
Baa/BBB 9
</TABLE>

WEIGHTED AVERAGE MATURITY 24.2 years

- ------------------
* Returns for periods of less than one year are not annualized.

** Return figures reflect any change in price and assume all distributions
within the period are invested in additional shares. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class D shares are calculated with and
without the effect of the 1% contingent deferred sales charge ("CDSC"),
charged on redemptions made within one year of the date of purchase. A
portion of the Fund's income may be subject to applicable state and local
taxes, and any amount may be subject to the federal alternative minimum tax.

*** The Lehman Index is an unmanaged index that does not include any fees or
sales charges and does not reflect state-specific bond market performance.
Investors cannot invest directly in an index.

+ From 1/31/94.

0 Represents per share amount paid or declared for the year ended September
30, 1998.

00 Current yield, representing the annualized yield for the 30-day period ended
September 30, 1998, has been computed in accordance with SEC regulations and
will vary.

++ Percentages based on market values of long-term holdings at September 30,
1998.

<PAGE>
Portfolio of Investments
September 30, 1998
<TABLE>
<CAPTION>
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 $2,782,100

1,000,000 Camden County, NJ Health Systems Improvement Authority Rev. (Catholic
Health East), 5% due 11/15/2028 ...................................... Aaa/AAA 1,006,960

3,000,000 Howell Township, NJ GOs, 6.80% due 1/1/2014 ............................. Aaa/AAA 3,305,370

3,000,000 Middletown, NJ Board of Education School GOs, 5.80% due 8/1/2019 ........ Aaa/AAA 3,286,590

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 2,191,100

3,000,000 New Jersey Economic Development Authority Gas Facilities Rev.
(NUI Corporation Project), 5.70% due 6/1/2032* ....................... Aaa/AAA 3,223,170

2,900,000 New Jersey Economic Development Authority Sewage Facilities Rev.
(Anheuser-Busch Project), 5.85% due 12/1/2030* ....................... A1/A+ 3,173,963

1,000,000 New Jersey Economic Development Authority Water Facilities Rev.
(Middlesex Water Co. Project), 5.20% due 10/1/2022.................... Aaa/AAA 1,017,010

3,000,000 New Jersey Economic Development Authority Water Facilities Rev.
(New Jersey American Water Co., Inc.), 5 3/8% due 5/1/2032* .......... Aaa/AAA 3,112,350

3,000,000 New Jersey Educational Facilities Financing Authority Rev.
(Institute for Advanced Study), 5% due 7/1/2021....................... Aaa/AA+ 3,032,100

2,000,000 New Jersey Educational Facilities Financing Authority Rev.
(Princeton University), 6% due 7/1/2024 .............................. Aaa/AAA 2,218,780

1,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(St. Clare's Riverside Medical Center), 5 3/4% due 7/1/2014 .......... Aaa/AAA 1,082,920

1,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(The Medical Center at Princeton), 5% due 7/1/2028 ................... Aaa/AAA 1,007,000

3,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Hackensack University Medical Center), 5.20% due 1/1/2028 ........... Aaa/AAA 3,064,350

3,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Holy Name Hospital), 6% due 7/1/2025 ................................ NR/BBB+ 3,187,860

2,250,000 New Jersey Health Care Facilities Financing Authority Rev. (AHS
Hospital Corporation), 5% due 7/1/2027 ............................... Aaa/AAA 2,264,715

690,000 New Jersey Housing & Mortgage Finance Agency (Home Mortgage
Purchase Rev.), 7 7/8% due 10/1/2016 ................................ Aaa/AAA 696,983

220,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
7.65% due 10/1/2016 .................................................. Aaa/AAA 229,772
<FN>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.

* Interest income earned from this security is subject to the federal
alternative minimum tax.
</FN>
See Notes to Financial Statements.
</TABLE>
6

<PAGE>
Portfolio of Investments
September 30, 1998
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
- ---------- ------------------- ------------ -----------
<S> <C> <C> <C>
$1,500,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
6% due 10/1/2021* .................................................... Aaa/AAA $1,601,505

250,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
7.70% due 10/1/2029* ................................................. Aaa/AAA 259,930

3,000,000 New Jersey State GOs, 5 5/8% due 7/15/2015 .............................. Aa1/AA+ 3,259,620

3,000,000 Port Authority of New York & New Jersey Consolidated Rev.,
5 3/4% due 6/15/2030 ................................................. A1/AA- 3,224,460

2,000,000 Puerto Rico Highway & Transportation Authority Rev., 5 1/2% due 7/1/2036 Baa1/A 2,180,920

3,200,000 Rutgers State University, NJ, 5.20% due 5/1/2027......................... A1/AA 3,289,056

2,500,000 Salem County, NJ Improvement Authority Rev. (Correctional Facility
& Courthouse Annex), 5.70% due 5/1/2017 .............................. Aaa/AAA 2,660,950

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- 2,707,750

1,750,000 South Jersey Port Corporation, NJ Marine Terminal Rev., 6 7/8% due 1/1/2020 NR/A+ 1,780,503

1,250,000 South Jersey Port Corporation, NJ Marine Terminal Rev., 5.60% due 1/1/2023 NR/A+ 1,297,012
-----------
TOTAL MUNICIPAL BONDS (Cost $57,442,953)-- 98.1% ...................................................... 62,144,799

VARIABLE RATE DEMAND NOTES (Cost $200,000)-- 0.3% ..................................................... 200,000

OTHER ASSETS LESS LIABILITIES-- 1.6% .................................................................. 976,091
-----------
NET ASSETS-- 100.0% ................................................................................... $63,320,890
===========
<FN>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.

* Interest income earned from this security is subject to the federal alternative minimum tax.
</FN>
See Notes to Financial Statements.
</TABLE>
7

<PAGE>
Statement of Assets and Liabilities
September 30, 1998
<TABLE>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (Cost $57,442,953).......................... $62,144,799
Short-term holdings (Cost $200,000)............................ 200,000 $62,344,799
----------
Cash................................................................................. 103,397
Interest receivable.................................................................. 1,021,226
Receivable for securities sold....................................................... 88,255
Receivable for Capital Stock sold.................................................... 10,712
Expenses prepaid to shareholder service agent........................................ 9,038
Other................................................................................ 853
-----------
TOTAL ASSETS......................................................................... 63,578,280
-----------
LIABILITIES:
Dividends payable.................................................................... 98,042
Payable for Capital Stock repurchased................................................ 31,350
Accrued expenses, taxes, and other................................................... 127,998
-----------
TOTAL LIABILITIES.................................................................... 257,390
-----------
NET ASSETS........................................................................... $63,320,890
===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($.001 par value; 100,000,000 shares authorized; 8,141,043
shares outstanding):
Class A........................................................................... $ 7,940
Class D........................................................................... 201
Additional paid-in capital........................................................... 57,863,025
Undistributed net realized gain...................................................... 747,878
Net unrealized appreciation of investments........................................... 4,701,846
-----------
NET ASSETS........................................................................... $63,320,890
===========
NET ASSET VALUE PER SHARE:
CLASS A ($61,738,501 / 7,939,842 shares)............................................. $7.78
=====
CLASS D ($1,582,389 / 201,201 shares)................................................ $7.86
=====
</TABLE>
- ------------------
See Notes to Financial Statements.

<PAGE>
Statement of Operations
For the Year Ended September 30, 1998
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:

INTEREST........................................................................................ $3,514,055

EXPENSES:
Management fee................................................................ $ 315,590
Distribution and service fees................................................. 150,403
Shareholder account services.................................................. 89,399
Auditing and legal fees....................................................... 41,032
Shareholder reports and communications........................................ 28,193
Registration.................................................................. 15,143
Custody and related services.................................................. 10,564
Directors' fees and expenses.................................................. 2,240
Miscellaneous................................................................. 3,985
----------
TOTAL EXPENSES.................................................................................. 656,549
----------
NET INVESTMENT INCOME........................................................................... 2,857,506

NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments.............................................. 795,284
Net change in unrealized appreciation of investments.......................... 1,665,711
----------
NET GAIN ON INVESTMENTS......................................................................... 2,460,995
----------
INCREASE IN NET ASSETS FROM OPERATIONS.......................................................... $5,318,501
==========
- ------------------
See Notes to Financial Statements.
</TABLE>
9

<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
OPERATIONS:
1998 1997
----------- -----------
<S> <C> <C>
Net investment income................................................................. $ 2,857,506 $ 3,190,601
Net realized gain on investments...................................................... 795,284 640,851
Net change in unrealized appreciation of investments.................................. 1,665,711 1,107,067
----------- -----------
INCREASE IN NET ASSETS FROM OPERATIONS................................................ 5,318,501 4,938,519
----------- -----------
DISTRIBUTIONS TO SHAREHOLDERS:
Net investment income:
Class A............................................................................ (2,793,695) (3,147,677)
Class D............................................................................ (63,811) (42,924)
Net realized gain on investments:
Class A............................................................................ (662,511) (2,166,159)
Class D............................................................................ (13,845) (33,218)
----------- -----------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS............................................. (3,533,862) (5,389,978)
----------- -----------
</TABLE>

<TABLE>
<CAPTION>
SHARES
------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------
CAPITAL SHARE TRANSACTIONS: 1998 1997
----------- -----------
<S> <C> <C> <C> <C>
Net proceeds from sale of shares:
Class A........................................ 351,084 945,721 2,673,614 7,009,688
Class D........................................ 35,932 63,366 277,146 479,673
Shares issued in payment of dividends:
Class A........................................ 211,791 243,739 1,609,925 1,811,306
Class D........................................ 6,154 4,274 47,336 32,136
Exchanged from associated Funds:
Class A........................................ 376,982 411,620 2,858,633 3,035,982
Class D........................................ 74,609 2,882 573,703 22,069
Shares issued in payment of gain distributions:
Class A........................................ 66,337 215,373 496,199 1,595,916
Class D........................................ 1,655 3,939 12,516 29,503
----------- ----------- ----------- -----------
Total............................................. 1,124,544 1,890,914 8,549,072 14,016,273
----------- ----------- ----------- -----------
Cost of shares repurchased:
Class A........................................ (1,024,527) (1,964,212) (7,783,891) (14,557,171)
Class D........................................ (84,855) (54,046) (653,515) (408,164)
Exchanged into associated Funds:
Class A........................................ (322,964) (290,897) (2,454,147) (2,146,414)
Class D........................................ -- (2,553) -- (19,210)
----------- ----------- ----------- -----------
Total............................................. (1,432,346) (2,311,708) (10,891,553) (17,130,959)
----------- ----------- ----------- -----------
DECREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS............................. (307,802) (420,794) (2,342,481) (3,114,686)
========== ========== ---------- ----------
DECREASE IN NET ASSETS................................................................ (557,842) (3,566,145)

NET ASSETS:
Beginning of year..................................................................... 63,878,732 67,444,877
----------- -----------
END OF YEAR........................................................................... $63,320,890 $63,878,732
=========== ===========
- ------------------
See Notes to Financial Statements.
</TABLE>

<PAGE>
Notes to Financial Statements

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

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

A. SECURITY VALUATION --All municipal securities and other short-term 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, 1998, distribution and service fees were the only
class-specific expenses.

E. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends are declared daily and paid
monthly. Other distributions paid by the Fund are recorded on the
ex-dividend date. The treatment for financial statement purposes of
distributions made to shareholders during the year from net investment
income or net realized gains may differ from their ultimate treatment for
federal income tax purposes. These differences are caused primarily by
differences in the timing of the 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,
1998, amounted to $14,639,775 and $17,505,975, respectively.

At September 30, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation of investments
amounted to $4,701,846.

4. MANAGEMENT FEE, DISTRIBUTION SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities.

<PAGE>
Notes to Financial Statements

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 Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $8,550 for sales of Class A
shares, after commissions of $64,487 paid to dealers.

The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to distribution of its shares. Under the Plan, with
respect to Class A shares, service organizations can enter into agreements with
the Distributor and receive a continuing fee of up to 0.25% on an annual basis,
payable quarterly, of the average daily net assets of the Class A shares
attributable to the particular service organizations for providing personal
services and/or the maintenance of shareholder accounts. The Distributor charges
such fees to the Fund pursuant to the Plan. For the year ended September 30,
1998, fees incurred aggregated $133,429, or 0.22% per annum of the average daily
net assets of Class A shares.

Under the Plan, with respect to Class D shares, service organizations can
enter into agreements with the Distributor and receive a continuing fee for
providing personal services and/or the maintenance of shareholder accounts of up
to 0.25% on an annual basis of the average daily net assets of the Class D
shares for which the organizations are responsible; and fees for providing other
distribution assistance of up to 0.75% on an annual basis of such average daily
net assets. Such fees are paid monthly by the Fund to the Distributor pursuant
to the Plan. For the year ended September 30, 1998, fees incurred under the Plan
amounted to $16,974, or 1% per annum of the average daily net assets of Class D
shares.

The Distributor is entitled to retain any CDSC imposed on redemptions of
Class D shares occurring within one year of purchase and on certain redemptions
of Class A shares occurring within 18 months of purchase. For the year ended
September 30, 1998, such charges amounted to $492.

Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended September 30, 1998,
Seligman Services, Inc. received commissions of $362 from the sale of shares of
the Fund. Seligman Services, Inc. also received distribution and service fees of
$10,296, pursuant to the Plan.

Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $89,399 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. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at September 30, 1998, of $36,073
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.

5. COMMITTED LINE OF CREDIT -- Effective July 1, 1998, the Fund entered into a
joint $800 million committed line of credit that is shared by substantially all
funds in the Seligman Group of Investment Companies. The Fund's borrowings are
limited to 10% of its net assets. Borrowings pursuant to the credit facility are
subject to interest at a rate equal to the overnight federal funds rate plus
0.50% on an overnight basis. The Fund incurs a commitment fee of 0.08% per annum
on its share of the unused portion of the credit facility. The credit facility
may be drawn upon only for temporary purposes and is subject to certain other
customary restrictions. The credit facility commitment expires one year from the
date of the agreement but is renewable with the consent of the participating
banks. To date, the Fund has not borrowed from the credit facility.

12
<PAGE>
Financial Highlights

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

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

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

----------------------------------------------------
1998 1997 1996 1995 1994
----- ----- ----- ----- -----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR........................ $7.56 $7.60 $7.59 $7.40 $8.24
----- ----- ----- ----- -----
Net investment income..................................... 0.35 0.36 0.39 0.39 0.41
Net realized and unrealized investment gain (loss)........ 0.30 0.21 0.01 0.29 (0.74)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS............ 0.65 0.57 0.40 0.68 (0.33)
Dividends paid or declared................................ (0.35) (0.36) (0.39) (0.39) (0.41)
Distributions from net gain realized...................... (0.08) (0.25) -- (0.10) (0.10)
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE................ 0.22 (0.04) 0.01 0.19 (0.84)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF YEAR.............................. $7.78 $7.56 $7.60 $7.59 $7.40
===== ===== ===== ===== =====

TOTAL RETURN BASED ON NET ASSET VALUE: 8.87% 7.96% 5.37% 9.77% (4.25)%

RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets............................ 1.02% 1.06% 1.02% 1.01% 0.90%
Net investment income to average net assets............... 4.54% 4.90% 5.06% 5.29% 5.24%
Portfolio turnover........................................ 23.37% 20.22% 25.65% 4.66% 12.13%
NET ASSETS, END OF YEAR (000s omitted).................... $61,739 $62,597 $66,293 $73,561 $73,942
Without management fee waiver:**
Net investment income per share........................ $0.39 $0.40
Ratios:
Expenses to average net assets......................... 1.06% 1.07%
Net investment income to average net assets............ 5.24% 5.07%

- ------------------
See footnotes on page 14.
</TABLE>
13

<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------
YEAR ENDED SEPTEMBER 30, 2/1/94*
TO
----------------------------------------------------------
1998 1997 1996 1995 9/30/94
----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD.................... $7.64 $7.68 $7.67 $7.48 $8.14
----- ----- ----- ----- -----
Net investment income................................... 0.29 0.31 0.33 0.33 0.23
Net realized and unrealized investment gain (loss)...... 0.30 0.21 0.01 0.29 (0.66)
----- ----- ----- ----- -----
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS.......... 0.59 0.52 0.34 0.62 (0.43)
Dividends paid or declared.............................. (0.29) (0.31) (0.33) (0.33) (0.23)
Distributions from net gain realized.................... (0.08) (0.25) -- (0.10) --
----- ----- ----- ----- -----
NET INCREASE (DECREASE) IN NET ASSET VALUE.............. 0.22 (0.04) 0.01 0.19 (0.66)
----- ----- ----- ----- -----
NET ASSET VALUE, END OF PERIOD.......................... $7.86 $7.64 $7.68 $7.67 $7.48
===== ===== ===== ===== =====
TOTAL RETURN BASED ON NET ASSET VALUE: 7.97% 7.10% 4.56% 8.79% (5.47)%

RATIOS/SUPPLEMENTAL DATA:

Expenses to average net assets.......................... 1.80% 1.83% 1.79% 1.89% 1.75%+
Net investment income to average net assets............. 3.76% 4.13% 4.29% 4.45% 4.37%+
Portfolio turnover...................................... 23.37% 20.22% 25.65% 4.66% 12.13%++
NET ASSETS, END OF PERIOD (000s omitted)................ $1,582 $1,282 $1,152 $1,190 $986
Without management fee waiver:**

Net investment income per share...................... $0.33 $0.22
Ratios:
Expenses to average net assets....................... 1.94% 1.87%+
Net investment income to average net assets.......... 4.40% 4.25%+
<FN>
- ------------------
* 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.
</FN>
See Notes to Financial Statements.
</TABLE>
14

<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, 1998, the related statements of operations for the year then ended
and of changes in net assets for each of the years in the two-year period then
ended, and the financial highlights for each of the periods presented. These
financial statements and financial highlights are the responsibility of the
Fund'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, 1998 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, 1998, the results of its operations,
the changes in its net assets, and the financial highlights for the respective
stated periods, in conformity with generally accepted accounting principles.

DELOITTE & TOUCHE LLP

New York, New York
October 30, 1998

<PAGE>
Board of Directors

JOHN R. GALVIN 2, 4
Dean, Fletcher School of Law and Diplomacy
at Tufts University
Director, Raytheon Company

ALICE S. ILCHMAN 3, 4
Trustee, Committee for Economic Development
Chairman, The Rockefeller Foundation

FRANK A. MCPHERSON 2, 4
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center

JOHN E. MEROW 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
Director, Commonwealth Industries, Inc.
Director, New York Presbyterian Hospital

BETSY S. MICHEL 2, 4
Trustee, The Geraldine R. Dodge Foundation
Chairman of the Board of Trustees, St. George's School

WILLIAM C. MORRIS 1
Chairman
Chairman of the Board, J. & W. Seligman & Co.
Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation

JAMES C. PITNEY 3, 4
Retired Partner, Pitney, Hardin, Kipp & Szuch,
Law Firm

JAMES Q. RIORDAN 3, 4
Director, KeySpan Energy Corporation
Trustee, Committee for Economic Development
Director, Public Broadcasting Service

RICHARD R. SCHMALTZ 1
Managing Director, Director of Investments,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College

ROBERT L. SHAFER 3, 4
Retired Vice President, Pfizer Inc.

JAMES N. WHITSON 2, 4
Director and Consultant, Sammons Enterprises, Inc.
Director, CommScope, Inc.
Director, C-SPAN

BRIAN T. ZINO 1
President
President, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
Director, ICI Mutual Insurance Company

Director Emeritus
FRED E. BROWN
Director and Consultant, J. & W. Seligman & Co. Incorporated

- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee

<PAGE>
Executive Officers

WILLIAM C. MORRIS
Chairman

BRIAN T. ZINO
President

THOMAS G. MOLES
Vice President

LAWRENCE P. VOGEL
Vice President

THOMAS G. ROSE
Treasurer

FRANK J. NASTA
Secretary

FOR MORE INFORMATION

MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017

GENERAL COUNSEL
Sullivan & Cromwell

INDEPENDENT AUDITORS
Deloitte & Touche LLP

GENERAL DISTRIBUTOR
Seligman Advisors, Inc.
100 Park Avenue
New York, NY 10017

SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017

IMPORTANT TELEPHONE NUMBERS

(800) 221-2450 Shareholder Services

(212) 682-7600 Outside the
United States

(800) 622-4597 24-Hour
Automated
Telephone Access Service

<PAGE>
Glossary of Financial Terms

CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in the fund's portfolio. For tax purposes,
these profits may be taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.

CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.

COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.

CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC expires after a fixed time period).

DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).

DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.

EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.

INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.

MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).

MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.

NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC.
(NASD) -- A self-regulatory body with authority over firms that distribute
mutual funds.

NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.

OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.

PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.

PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.

SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.

SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.

STATEMENT OF ADDITIONAL INFORMATION -- A document that contains updated or more
detailed information about an investment company and that supplements the
prospectus. It is available at no charge upon request.

TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The Average Annual Total
Return represents the average annual compounded rate of return for the periods
presented.

YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.

- -----------------
Adapted from the Investment Company Institute's 1998 Mutual Fund Fact Book.

<PAGE>
SELIGMAN ADVISORS, INC.
an affiliate of

[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED

ESTABLISHED 1864

This report is intended only for the information of shareholders or those who
have received the offering prospectus covering shares of Capital Stock of
Seligman New Jersey Municipal Fund, Inc., which contains information about the
sales charges, management fee, and other costs. Please read the prospectus
carefully before investing or sending money.

TECNJ2 9/98

SELIGMAN

New Jersey
Municipal Fund, Inc.

Annual Report
September 30, 1998

Providing Income
Exempt From Regular
Income Tax

<PAGE>
FILE NO. 33-13401
811-5126

PART C. OTHER INFORMATION

Item 23. Exhibits
- -------- --------

All Exhibits have been previously filed and are incorporated herein
by reference, except Exhibits marked with an asterisk (*) which are filed
herewith.

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

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

(c) Copy of Specimen Stock Certificate for Class A shares. (Incorporated by
reference to Registrant's Pre-Effective Amendment No. 1, filed on
January 11, 1988.)

(c)(1) Copy of Specimen Stock Certificate for Class D Shares. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 11, filed January
31, 1994.)

(d) Management Agreement between the Registrant and J. & W. Seligman & Co.
Incorporated. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14, filed on January 29, 1997.)

(e) Distributing Agreement between the Registrant and Seligman Advisors,
Inc. (formerly, Seligman Financial Services, Inc.) (Incorporated by
reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)

(e)(1) Sales Agreement between Dealers and Seligman Advisors, Inc. (formerly,
Seligman Financial Services, Inc.) (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)

(f) Matched Accumulation Plan of J. & W. Seligman & Co. Incorporated.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
14, filed on January 29, 1997.)

(f)(1) *Deferred Compensation Plan for Directors of Seligman New Jersey
Municipal Fund, Inc.

(g) Custodian Agreement between Registrant and Investors Fiduciary Trust
Company. (Incorporated by reference to Registrant's Post-Effective
Amendment No. 14, filed on January 29, 1997.)

(h) Not applicable.

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

(j) *Consent of Independent Auditors.

(j)(1) *Consent of New Jersey Counsel.

(k) Not applicable.

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

(m) Amended Administration, Shareholder Services and Distribution Plan and
Form of Agreement of Registrant. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 14, filed on January 29,
1997.)

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

(o) Copy of Multiclass Plan entered into by Registrant pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)
<PAGE>

FILE NO. 33-13401
811-5126

PART C. OTHER INFORMATION (CONTINUED)

Other Exhibits: Powers of Attorney. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 15 filed on January 27, 1998.)

Item 24. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT - None.
- --------

Item 25. INDEMNIFICATION
- --------

Reference is made to the provisions of Articles Twelfth and
Thirteenth of Registrant's Amended and Restated Articles of
Incorporation filed as Exhibit 24(b)(1) and Article VII of
Registrant's Amended and Restated By-Laws filed as Exhibit 24(b)(2)
to Registrant's Post-Effective Amendment No. 14 to the Registration
Statement.

Insofar as indemnification for liability arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or
otherwise, the registrant has been advised by the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a
director, officer or controlling person of the registrant in the
successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the
securities being registered, the registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication
of such issue.

Item 26. BUSINESS AND OTHER CONNECTIONS OF INVESTMENT ADVISER - J. & W.
- -------- Seligman & Co. Incorporated, a Delaware corporation ("Manager"), is
the Registrant's investment manager. The Manager also serves as
investment manager to seventeen associated investment companies.
They are Seligman Capital Fund, Inc., Seligman Cash Management Fund,
Inc., Seligman Common Stock Fund, Inc., Seligman Communications and
Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman
Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc.,
Seligman Municipal Fund Series, Inc., Seligman Municipal Series
Trust, Seligman Pennsylvania Municipal Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman
Select Municipal Fund, Inc., Seligman Value Fund Series, Inc. and
Tri-Continental Corporation.

The Manager has an investment advisory service division which
provides investment management or advice to private clients. The
list required by this Item 28 of officers and directors of the
Manager, together with information as to any other business,
profession, vocation or employment of a substantial nature engaged
in by such officers and directors during the past two years, is
incorporated by reference to Schedules A and D or Form ADV, filed by
the Manager pursuant to the Investment Advisers Act of 1940 (SEC
File No. 801-15798) on March 25, 1998.

Item 27. PRINCIPAL UNDERWRITERS
- --------
(a) The names of each investment company (other than the Registrant) for
which each principal underwriter currently distributing securities
of the Registrant also acts as a principal underwriter, depositor or
investment adviser, are:

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

<PAGE>
FILE NO. 33-13401
811-5126

PART C. OTHER INFORMATION (CONTINUED)

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

Seligman Advisors, Inc.
As of December 31, 1998
-----------------------

<S> <C> <C> <C>
(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 None
FRED E. BROWN* Director Director
Emeritus
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
EDWARD F. LYNCH* Senior Vice President, National None
Sales Director
JAMES R. BESHER Senior Vice President, Divisional None
14000 Margaux Lane Sales Director
Town & Country, MO 63017
GERALD I. CETRULO, III Senior Vice President, Sales None
140 West Parkway
Pompton Plains, NJ 07444
JONATHAN G. EVANS Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
T. WAYNE KNOWLES Senior Vice President, None
104 Morninghills Court Divisional Sales Director
Cary, NC 27511
JOSEPH LAM Senior Vice President, Regional None
Seligman International Inc. Director, Asia
Suite 1133, Central Building
One Pedder Street
Central Hong Kong
BRADLEY W. LARSON Senior Vice President, Sales None
367 Bryan Drive
Alamo, CA 94526
RICHARD M. POTOCKI Senior Vice President, Regional None
Seligman International UK Limited Director, Europe and the Middle East
Berkeley Square House 2nd Floor
Berkeley Square
London, United Kingdom W1X 6EA
BRUCE M. TUCKEY Senior Vice President, Sales None
41644 Chathman Drive
Novi, MI 48375
ANDREW S. VEASEY Senior Vice President, Sales None
14 Woodside
Rumson, NJ 07760
J. BRERETON YOUNG* Senior Vice President, National None
Accounts Manager
PETER J. CAMPAGNA Vice President, Regional Retirement None
1130 Green Meadow Court Plans Manager
Acworth, GA 30102

</TABLE>
<PAGE>
FILE NO. 33-13401
811-5126

PART C. OTHER INFORMATION (CONTINUED)
<TABLE>
<CAPTION>

Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<S> <C> <C> <C>

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
MATTHEW A. DIGAN* Senior Vice President, Director of None
Mutual Fund Marketing
MASON S. FLINN Vice President, Regional Retirement None
159 Varennes Plans Manager
San Francisco, CA 94133
ROBERT T. HAUSLER* Senior Vice President, Senior None
Portfolio Specialist
MARSHA E. JACOBY* Vice President, Offshore Business None
Manager
WILLIAM W. JOHNSON* Vice President, Order Desk None
MICHELLE L. MCCANN (RAPPA)* Senior Vice President, Director of None
Retirement Plans
SCOTT H. NOVAK* Senior Vice President, Insurance None

RONALD W. POND* Vice President, Portfolio Advisor None
TRACY A. SALOMON* Vice President, Retirement Marketing None
MICHAEL R. SANDERS* Vice President, Product Manager None
Managed Money Services
HELEN SIMON* Vice President, Sales None
Administration Manager
GARY A. TERPENING* Vice President, Director of Business None
Development
CHARLES L. VON BREITENBACH, II* Senior Vice President, Director of None
Managed Money Services
JOAN M. O'CONNELL Vice President, Regional Retirement None
3707 5th Avenue #136 Plans Manager
San Diego, CA 92103
CHARLES E. WENZEL Vice President, Regional Retirement None
703 Greenwood Road Plans Manager
Wilmington, DE 19807
JEFFERY C. PLEET* Vice President, Regional Retirement None
Plans Manager
RICHARD B. CALLAGHAN Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
BRADFORD C. DAVIS Regional Vice President None
255 4th Avenue, #2
Kirkland, WA 98033
CHRISTOPHER J. DERRY Regional Vice President None
2380 Mt. Lebanon Church Road
Alvaton, KY 42122
KENNETH DOUGHERTY Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
EDWARD S. FINOCCHIARO Regional Vice President None
120 Screenhouse Lane
Duxbury, MA 02332
MICHAEL C. FORGEA Regional Vice President None
32 W. Anapamu Street # 186
Santa Barbara, CA 93101
</TABLE>

PART C. OTHER INFORMATION (CONTINUED)

Seligman Advisors, Inc.
As of December 31, 1998
-----------------------
<S> <C> <C> <C>
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
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
MICHAEL K. LEWALLEN Regional Vice President None
908 Tulip Poplar Lane
Birmingham, AL 35244
JUDITH L. LYON Regional Vice President None
163 Haynes Bridge Road, Ste 205
Alpharetta, CA 30201
STEPHEN A. MIKEZ Regional Vice President None
11786 E. Charter Oak
Scottsdale, AZ 85259
TIM O'CONNELL Regional Vice President None
14872 Summerbreeze Way
San Diego, CA 92128
THOMAS PARNELL Regional Vice President None
5250 Greystone Drive #107
Inver Grove Heights, MN 55077
DAVID K. PETZKE Regional Vice President None
2714 Winding Trail Place
Boulder, CO 80304
NICHOLAS ROBERTS Regional Vice President None
200 Broad Street, Apt. 2225
Stamford, CT 06901
DIANE H. SNOWDEN Regional Vice President None
11 Thackery Lane
Cherry Hill, NJ 08003
CRAIG PRICHARD Regional Vice President None
300 Spyglass Drive
Fairlawn, OH 44333
STEVE WILSON Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
EUGENE P. SULLIVAN Regional Vice President None
8 Charles Street, Apt. 603
Baltimore, MD 21201
KELLI A. WIRTH DUMSER Regional Vice President None
8618 Hornwood Court
Charlotte, NC 28215

</TABLE>

<PAGE>

FILE NO. 33-13401
811-5126
PART C. OTHER INFORMATION (CONTINUED)
<TABLE>
<CAPTION>

</TABLE>

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

Item 28. LOCATION OF ACCOUNTS AND RECORDS
- --------

Custodian: Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105 and
Seligman New Jersey Municipal Fund, Inc.
100 Park Avenue
New York, NY 10017

Item 29. MANAGEMENT SERVICES - NOT APPLICABLE.
- --------

Item 30. UNDERTAKINGS - The Registrant undertakes: (1) if requested to do so
- -------- by the holders of at least ten percent of its outstanding shares, to
call a meeting of shareholders for the purpose of voting upon the
removal of a director or directors and to assist in communications
with other shareholders as required by Section 16(c) of the
Investment Company Act of 1940; and (2) to furnish to each person to
whom a prospectus is delivered, a copy of the Registrant's latest
annual report to shareholders, upon request and without charge.

<PAGE>

FILE NO. 33-13401
811-5126

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, and the
Investment Company Act of 1940, the Registrant certifies that it meets all of
the requirements for effectiveness of this Post-Effective Amendment pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 18 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 28th day of January, 1999.

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. 18 to the Registration Statement has been signed
below by the following persons in the capacities indicated on January 28, 1999.

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 ) /s/ BRIAN T. ZINO
Betsy S. Michel, Director ) ---------------------------------
* Brian T. Zino, Attorney-In-Fact
James C. Pitney, Director )
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. 18 TO THE
REGISTRATION STATEMENT ON FORM N-1A

EXHIBIT INDEX

Form N-1A Item No. Description
------------------ -----------

23(f)(1) Deferred Compensation Plan for Directors

23(j) Consent of Independent Auditors

23(j)(1) Consent of New Jersey Counsel

23(n) Financial Data Schedules

<PAGE>
DEFERRED COMPENSATION PLAN FOR DIRECTORS

SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
("FUND")

1. ELECTION TO DEFER PAYMENTS. Any member of the Board of Directors
(herein, a "Director") of the Fund may elect to have payment of that Director's
annual retainer or meeting fees or both for Board service deferred as provided
in this Plan. The election shall be made in writing prior to, and to take effect
from, the beginning of a calendar year. For any Director in the year in which
this Plan is adopted or for a person elected a director in other than the last
calendar month of a year, the election shall be made within 30 days after that
event and prior to, and to take effect from, the beginning of the calendar
quarter next ensuing after that event. Elections shall continue in effect until
terminated in writing, any such termination to take effect on the first day of
the calendar year beginning after receipt of the notice of termination. An
election shall be irrevocable as to payments deferred in conformity with that
election.

2. DEFERRED PAYMENT ACCOUNT. Each deferred retainer or fee shall be
credited at the time when it otherwise would have been payable to an account to
be established in the name of the Director on the books of the Fund (the
"Deferred Payment Account") adjusted for notional investment experience as
hereinafter described.

3. RETURN ON DEFERRED PAYMENT ACCOUNT BALANCE. (a) For purposes of
measuring the investment return on his Deferred Payment Account, the Director
may elect to have the aggregate amount of his deferred compensation (or a
specified portion thereof) receive a return (i) at a rate equal to the return
earned on three-month U.S. Treasury Bills at the beginning of each calendar
quarter (the "Treasury Bill Rate") and such interest shall be credited to the
account quarterly at the end of each calendar quarter, or (ii) at a rate of
return (positive or negative) equal to the rate of return on the shares of any
of the registered investment companies managed by J. & W. Seligman & Co.
Incorporated ("Seligman") or any other entity controlling, controlled by, or
under common control with (as such terms are defined in the Investment Company
Act of 1940) Seligman (each, a "Notional Fund"), assuming reinvestment of
dividends and distributions from the Notional Funds. (b) A Director may amend
his designation of investment return as of the end of each calendar quarter by
giving written notice to the President of the Fund at least 30 days prior to the
end of such calendar quarter. A timely change to a Director's designation of
investment return shall become effective on the first day of the calendar
quarter following receipt by the President of the Fund (the "President").

4. NOTIONAL INVESTMENT EXPERIENCE. Amounts credited to a Deferred Payment
Account shall be periodically adjusted for notional investment experience. In
each case such notional investment experience shall be determined by treating
the Deferred

<PAGE>

Payment Account as though an equivalent dollar amount had been invested and
reinvested in one or more of the Notional Funds. The Notional Funds used as a
basis for determining notional investment experience with respect to any
Director's Deferred Payment Account shall be designated by the Director in
writing by instrument of election substantially in the form attached hereto as
Exhibit C and may be changed prospectively by similar written election effective
as of the first day of any calendar quarter. The President may from time to time
limit the Notional Funds available for purposes of such election. If at any time
any Notional Fund that has previously been designated by a Director as a
notional investment shall cease to exist or shall be unavailable for any reason,
or if the Director fails to designate one or more Notional Funds pursuant to
this Section 4, the President may, at his discretion and upon notice to the
Director, treat any amounts notionally invested in such Notional Fund (whether
representing past amounts credited to a Director's Deferred Payment Account or
subsequent fee deferrals or both) as having been invested at the Treasury Bill
Rate, only until such time as the Director shall have made another investment
election in accordance with the foregoing procedures. Deferred Payment Accounts
shall continue to be adjusted for notional investment experience until
distributed in full in accordance with the distribution method elected by the
Director pursuant to Section 5 hereof.

5. PAYMENT OF DEFERRED AMOUNTS. All amounts credited to an account
pursuant to any election by the Director made as provided in Section 1 hereof
shall be paid to the Director

(a) in, or beginning in, the calendar year following the calendar
year in which the Director ceases to be a Director of the
Fund, or

(b) in, or beginning in, the calendar year following the earlier
of the calendar year in which the Director ceases to be a
Director of the Fund or attains age 70,

and shall be paid

(d) in 10 or fewer installments, payable on the first day of each
year commencing with the calendar year in which payment is to
begin, all as the Director shall specify in making the
election. If the payment is to be made in installments, the
amount of each installment shall be equal to a fraction of the
total of the amounts in the account at the date of the payment
the numerator of which shall be one and the denominator of
which shall be the then remaining number of unpaid
installments (including the installment then to be paid). If
the Director dies at any time before all amounts in the
account have been paid, such amounts shall be paid at that
time in a lump sum to the beneficiary or beneficiaries
designated by the Director in writing to receive such payments
or in the absence of such a designation to the estate of the
Director.
<PAGE>

The Board of Directors may, in the case of an unforseeable emergency, at its
sole discretion accelerate the payment of any unpaid amount for any or all
Directors. For purposes of this paragraph, an unforseeable emergency is severe
financial hardship to the Director resulting from a sudden and unexpected
illness or accident of the Director or of a dependent (as defined in section
152(a) of the Internal Revenue Code) of the Director, loss of the Director's
property due to casualty, or other similar extraordinary and unforseeable
circumstances arising as a result of events beyond the control of the Director.
Payment due to an unforseeable emergency may not be made to the extent that such
hardship is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise; (ii) by liquidation of the Director's assets, to the
extent the liquidation of such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under the Plan. Examples of what
are not considered to be unforseeable emergencies include the need to send a
Director's child to college or the desire to purchase a home. Withdrawals of
amounts because of an unforseeable emergency are only permitted to the extent
reasonably necessary to satisfy the emergency need.

6. ASSIGNMENT. No deferred amount or unpaid portion thereof may be
assigned or transferred by the Director except by will or the laws of descent
and distribution.

7. WITHHOLDING TAXES. The Fund shall deduct from all payments any federal,
state or local taxes and other charges required by law to be withheld with
respect to such payments.

8. NATURE OF RIGHTS; NONALIENATION. A Director's rights to deferred payment
under the Plan shall be solely those of an unsecured general creditor of the
Fund, and any payments by the Fund pursuant to the Plan will be made solely from
the Fund's general assets and property. The Fund will be under no obligation to
purchase, hold or dispose of any investment for the specific benefit of any
Director but, if the Fund should choose to purchase shares of any Notional Fund
in order to cover all or a portion of its obligations under the Plan, then such
investments will continue to be a part of the general assets and property of the
Fund. A Director's rights under the Plan may not be transferred, assigned,
pledged or otherwise alienated, and any attempt by the Director to do so shall
be null and void.

9. STATUS OF DIRECTOR. Nothing in the Plan nor any election hereunder
shall be construed as conferring on any Director the right to remain a Director
of the Fund or to receive fees at any particular rate.

10. AMENDMENT AND ACCELERATION. The Board of Directors may at any time at
its sole discretion amend or terminate this Plan, provided that no such
amendment or termination shall adversely affect the right of Directors to
receive deferred amounts credited to their account.

<PAGE>

11. ADMINISTRATION. The Plan shall be administered by the President or by
such person or persons as the President may designate to carry out
administrative functions hereunder. The President shall have complete discretion
to interpret and administer the Plan in accordance with its terms, and his
determinations shall be binding on all persons.

Amended as of March 19, 1998

CONSENT OF INDEPENDENT AUDITORS

Seligman New Jersey Municipal Fund, Inc.:

We consent to the use in Post-Effective Amendment No. 18 to Registration
Statement No. 33-13401 of our report dated October 30, 1998, appearing in the
Annual Report to Shareholders for the year ended September 30, 1998,
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 25, 1999

MCCARTER & ENGLISH, LLP
ATTORNEYS AT LAW
FOUR GATEWAY CENTER
100 MULBERRY STREET
P.O. BOX 652
NEWARK, NJ 07101-0652

December 18, 1998

Seligman New Jersey Municipal Fund, Inc.
100 Park Avenue
New York, NY 10017

Dear Ladies and Gentlemen:

With respect to Post-Effective Amendment No 18 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 Commission remains
unchanged. I enclose the appropriate changes. In addition, I enclose a copy of
the New Special considerations Section on a diskette.

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.

Sincerely,

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

JBB/AJC
Enclosure

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<NAME> SELIGMAN NEW JERSEY MUNICIPAL FUND CL A
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<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 57643
<INVESTMENTS-AT-VALUE> 62345
<RECEIVABLES> 1129
<ASSETS-OTHER> 103
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<APPREC-INCREASE-CURRENT> 1666
<NET-CHANGE-FROM-OPS> 5318
<EQUALIZATION> 0
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<DISTRIBUTIONS-OF-GAINS> (662)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 728<F1>
<NUMBER-OF-SHARES-REDEEMED> (1347)<F1>
<SHARES-REINVESTED> 278<F1>
<NET-CHANGE-IN-ASSETS> (558)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 748
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 308<F1>
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<AVERAGE-NET-ASSETS> 61405<F1>
<PER-SHARE-NAV-BEGIN> 7.56<F1>
<PER-SHARE-NII> .35<F1>
<PER-SHARE-GAIN-APPREC> .30<F1>
<PER-SHARE-DIVIDEND> (.35)<F1>
<PER-SHARE-DISTRIBUTIONS> (.08)<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.78<F1>
<EXPENSE-RATIO> 1.02<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data are fund level.
</FN>

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<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-30-1998
<PERIOD-END> SEP-30-1998
<INVESTMENTS-AT-COST> 57643
<INVESTMENTS-AT-VALUE> 62345
<RECEIVABLES> 1129
<ASSETS-OTHER> 103
<OTHER-ITEMS-ASSETS> 1
<TOTAL-ASSETS> 63578
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 257
<TOTAL-LIABILITIES> 257
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 57871
<SHARES-COMMON-STOCK> 201<F1>
<SHARES-COMMON-PRIOR> 168<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 748
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 4702
<NET-ASSETS> 1582<F1>
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 94<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> (30)<F1>
<NET-INVESTMENT-INCOME> 64<F1>
<REALIZED-GAINS-CURRENT> 795
<APPREC-INCREASE-CURRENT> 1666
<NET-CHANGE-FROM-OPS> 5318
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (64)<F1>
<DISTRIBUTIONS-OF-GAINS> (14)<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 110<F1>
<NUMBER-OF-SHARES-REDEEMED> (85)<F1>
<SHARES-REINVESTED> 8<F1>
<NET-CHANGE-IN-ASSETS> (558)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 748
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 8<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 30<F1>
<AVERAGE-NET-ASSETS> 1696<F1>
<PER-SHARE-NAV-BEGIN> 7.64<F1>
<PER-SHARE-NII> .29<F1>
<PER-SHARE-GAIN-APPREC> .30<F1>
<PER-SHARE-DIVIDEND> (.29)<F1>
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<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
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</FN>

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