33-13401
811-5126
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- --------------------------------------------------------------------------------
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. __ |_|
Post-Effective Amendment No. 20 |X|
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 |X|
Amendment No. 22 |X|
- --------------------------------------------------------------------------------
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
(Exact name of registrant as specified in charter)
- --------------------------------------------------------------------------------
100 PARK AVENUE, NEW YORK, NEW YORK 10017
(Address of principal executive offices)
- --------------------------------------------------------------------------------
Registrant's Telephone Number: 212-850-1864 or
Toll-Free 800-221-2450
- --------------------------------------------------------------------------------
THOMAS G. ROSE, Treasurer
100 Park Avenue
New York, New York 10017
(Name and address of agent for service)
- --------------------------------------------------------------------------------
It is proposed that this filing will become effective
(check the appropriate box).
|_| immediately upon filing pursuant to paragraph (b)
|X| on January 31, 2000 pursuant to paragraph (b)
|_| 60 days after filing pursuant to paragraph (a)(1)
|_| on (date) pursuant to paragraph (a)(1)
|_| 75 days after filing pursuant to paragraph (a)(2)
|_| 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-ffective amendment.
<PAGE>
S E L I G M A N
---------------
MUNICIPAL FUNDS
Seligman Municipal Fund
Series, Inc.
Seligman Municipal
Series Trust
Seligman New Jersey
Municipal Fund, Inc.
Seligman Pennsylvania
Municipal Fund Series
The Securities and Exchange Commission has neither approved nor disapproved
these Funds, and it has not determined the prospectus to be accurate or
adequate. Any representation to the contrary is a criminal offense.
An investment in these Funds or any other fund cannot provide a complete
investment program. The suitability of an investment in a Fund should be
evaluated based on the investment objective, strategies and risks described in
this Prospectus, 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.
MUNI-1 2/2000
[GRAPHIC]
PROSPECTUS
FEBRUARY 1, 2000
------------
Seeking
Income
Exempt From
Regular
Income Tax
managed by
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
Table of Contents
The Funds
A discussion of the investment strategies, risks, performance and expenses of
the Funds.
Overview of the Funds 1
National Fund 4
California High-Yield Fund 6
California Quality Fund 8
Colorado Fund 10
Florida Fund 12
Georgia Fund 14
Louisiana Fund 16
Maryland Fund 18
Massachusetts Fund 20
Michigan Fund 22
Minnesota Fund 24
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 42
Shareholder Information
Deciding Which Class of Shares
to Buy 43
Pricing of Fund Shares 45
Opening Your Account 45
How to Buy Additional Shares 46
How to Exchange Shares Among
the Seligman Mutual Funds 46
How to Sell Shares 47
Important Policies That May Affect
Your Account 48
Dividends and Capital Gain
Distributions 49
Taxes 49
Financial Highlights 50
How to Contact Us 60
For More Information back cover
TIMES CHANGE ... VALUES ENDURE
<PAGE>
The Funds
Overview of the Funds
This Prospectus contains information about four separate funds, which together
offer 19 investment options:
Seligman Municipal Fund Series offers the following 13 series:
<TABLE>
<S> <C> <C>
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
</TABLE>
Seligman Municipal Series Trust offers the following four series:
<TABLE>
<S> <C>
California High-Yield Fund Florida Fund
California Quality Fund North Carolina Fund
</TABLE>
Seligman New Jersey Municipal Fund, Inc. (New Jersey Fund)
Seligman Pennsylvania Municipal Fund Series (Pennsylvania Fund)
INVESTMENT OBJECTIVES
Each Fund has its own investment objective(s). 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
objective(s).
PRINCIPAL INVESTMENT STRATEGIES
Each Fund also has its own investment strategies and risks.
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.
Alternative
Minimum Municipal securities are issued by state and local
Tax (AMT): governments, their agencies and authorities, as well as
A tax imposed on territories and possessions of the United States, and
certain types of the District of Columbia. Municipal bonds are issued to
income to ensure obtain funds to finance various public or private
that all projects, to meet general expenses, and to refinance
taxpayers pay at outstanding debt.
least a minimum
amount of taxes.
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 strategies
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.
1
<PAGE>
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.
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.
A Fund may, from time to time, take temporary defensive positions that are
inconsistent with its principal strategies in seeking to minimize extreme
volatility caused by adverse market, economic, or other conditions. This could
prevent that Fund from achieving its objective(s).
PRINCIPAL RISKS
Below is a description of investment risks that apply to the Funds. More
specific risks that apply to individual Funds are included in the individual
Fund descriptions in the pages that follow.
The value of your investment in a Fund will fluctuate with fluctuations in the
value of the Fund's investment portfolio. You may experience a decline in the
value of your investment and you could lose money if you sell your shares at a
price lower than you paid for them.
The principal factors that may affect the value of a Fund's portfolio are
changes in interest rates and the credit worthiness of a Fund's portfolio
holdings, as described below:
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 that
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. Further, revenue bonds held by a Fund may be downgraded
or may default on payment if revenues from their underlying facilities
decline.
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 each Fund's 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 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.
2
<PAGE>
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.
Further, if certain securities or market sectors represented in a Fund's
portfolio do not perform as expected, that Fund's net asset value may
decline.
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.
PAST PERFORMANCE
Each Fund offers three Classes of shares. The performance information presented
for each Fund provides some indication of the risks of investing in that Fund
by showing how the performance of Class A shares has varied year to year, as
well as how the performance of each Class 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 among each Fund's
Classes of shares due to their different fees and expenses.
FEES AND EXPENSES
The fees and expenses 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 your account. 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
<PAGE>
National Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The National Fund uses the following investment strategies to pursue its
investment objective:
The National Fund invests at least 80% of its net assets in municipal
securities of states, territories, and possessions of the United States, 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.
SPECIFIC RISKS
In respect of the National Fund's risks, please refer to the "Principal Risks"
section on page 2 of this Prospectus.
4
<PAGE>
National Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. 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.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.76% 5.47% 5.50% -- --
Class C n/a n/a n/a -7.61% --
Class D -6.90 5.56 n/a -- 2.46%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.82%
91 11.47%
92 7.88%
93 14.10%
94 -9.95%
95 20.10%
96 3.33%
97 10.38%
98 5.67%
99 -5.26%
Best calendar quarter return: 8.25% - quarter ended 3/31/95.
Worst calendar quarter return: -8.20% - quarter ended 3/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .23% .23%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.73% 1.73%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
5
<PAGE>
California High-Yield Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The California High-Yield Fund uses the following investment strategies to
pursue its investment 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.
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
California High-Yield Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
6
<PAGE>
California High-Yield Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.00
91 10.48
92 9.53
93 9.91
94 -2.79
95 14.55
96 5.52
97 8.72
98 6.18
99 -5.26
Best calendar quarter return: 6.48% - quarter ended 3/31/95.
Worst calendar quarter return: -2.34% - quarter ended 12/31/99.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.70% 4.73% 5.60% -- --
Class C n/a n/a n/a -8.28% --
Class D -7.15 4.74 n/a -- 3.18%
Lehman Brothers
Municipal Bond
Index 2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.74% 1.74%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
7
<PAGE>
California Quality Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The California Quality Fund uses the following investment strategies to pursue
its investment objective:
The California Quality Fund invests at least 80% of its net assets in
California municipal securities that are within the three highest ratings of
Moody's (Aaa, Aa, or A) or S&P (AAA, AA, or A) on the date of purchase.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
California Quality Fund is subject to the following risk:
. 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, economic factors,
natural disasters, and the possibility of credit problems, such as the 1994
bankruptcy of Orange County.
8
<PAGE>
California Quality Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.57
91 11.22
92 8.49
93 12.61
94 -8.30
95 19.79
96 3.91
97 8.80
98 6.26
99 -6.10
Best calendar quarter return: 8.97% - quarter ended 3/31/95.
Worst calendar quarter return: -6.63% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.62% 5.19% 5.51% -- --
Class C n/a n/a n/a -8.26% --
Class D -7.87 5.21 n/a -- 2.49%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) ...................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .22% .22% .22%
----- ----- -----
Total Annual Fund Operating Expenses.............. .82% 1.72% 1.72%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 373 636 1,024 2,110
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 273 636 1,024 2,110
Class D 175 542 933 2,030
</TABLE>
9
<PAGE>
Colorado Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Colorado Fund uses the following investment strategies to pursue its
investment objectives:
The Colorado Fund invests at least 80% of its net assets in Colorado municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Colorado Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. The State is sensitive to national and international business cycles.
Changing demographics, resulting in possible labor shortages and an increase
in the cost of living and doing business in Colorado, could negatively
affect its economy. Turmoil in the world economy, especially in recent years
in Asia, has the potential to dramatically affect Colorado's economy.
10
<PAGE>
Colorado Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.05
91 9.40
92 7.67
93 11.11
94 -5.13
95 13.96
96 3.39
97 7.52
98 5.80
99 -5.26
Best calendar quarter return: 6.34% - quarter ended 3/31/95.
Worst calendar quarter return: -4.87% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.79% 3.89% 4.66% -- --
Class C n/a n/a n/a -8.14% --
Class D -6.89 3.92 n/a -- 2.01%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
11
<PAGE>
Florida Fund
INVESTMENT OBJECTIVE
The Florida Fund seeks high income exempt from regular federal income taxes
consistent with preservation of capital and with consideration given to capital
gain.
PRINCIPAL INVESTMENT STRATEGIES
The Florida Fund uses the following investment strategies to pursue its
investment objective:
The Florida Fund invests at least 80% of its net assets in Florida municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Florida Fund is subject to the following risks:
. 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 factors,
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 the trends in the tourism and
construction industries.
12
<PAGE>
Florida Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.46
91 10.62
92 9.07
93 13.52
94 -5.52
95 16.67
96 2.76
97 9.33
98 5.67
99 -4.89
Best calendar quarter return: 7.00% - quarter ended 3/31/95.
Worst calendar quarter return: -5.99% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.35% 4.67% 5.64% -- --
Class C n/a n/a n/a -7.51% --
Class D -6.38 4.90 n/a -- 2.81%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .28% .28% .28%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.03% 1.78% 1.78%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $575 $787 $1,017 $1,675
Class C 379 655 1,055 2,174
Class D 281 560 964 2,095
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $575 $787 $1,017 $1,675
Class C 279 655 1,055 2,174
Class D 181 560 964 2,095
</TABLE>
13
<PAGE>
Georgia Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Georgia Fund uses the following investment strategies to pursue its
investment objectives:
The Georgia Fund invests at least 80% of its net assets in Georgia municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Georgia Fund is subject to the following risks:
. 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, economic factors, 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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 7.01
91 10.97
92 9.00
93 12.21
94 -7.64
95 19.16
96 3.86
97 9.02
98 5.94
99 -5.04
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.53% 5.26% 5.66% -- --
Class C n/a n/a n/a -7.80% --
Class D -6.76 5.36 n/a -- 2.81%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
15
<PAGE>
Louisiana Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Louisiana Fund uses the following investment strategies to pursue its
investment objectives:
The Louisiana Fund invests at least 80% of its net assets in Louisiana
municipal securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Louisiana Fund is subject to the following risks:
. 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, economic factors,
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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total
Returns Calendar Years
[GRAPH]
90 6.86
91 11.38
92 7.83
93 11.45
94 -5.89
95 17.10
96 3.49
97 8.45
98 5.93
99 -4.62
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.20% 4.81% 5.46% -- --
Class C n/a n/a n/a -7.18% --
Class D -6.27 4.89 n/a -- 2.70%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .24% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .84% 1.74% 1.74%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
17
<PAGE>
Maryland Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Maryland Fund uses the following investment strategies to pursue its
investment objectives:
The Maryland Fund invests at least 80% of its net assets in Maryland municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Maryland Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Because the Fund favors investing in revenue bonds, including revenue bonds
issued on behalf of health-care providers, 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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.15
91 10.47
92 8.24
93 11.93
94 -5.48
95 16.84
96 3.66
97 8.09
98 5.85
99 -3.34
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -7.97% 4.99% 5.53% -- --
Class C n/a n/a n/a -6.26% --
Class D -4.79 5.11 n/a -- 2.97%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)..................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................. 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................. .50% .50% .50%
Distribution and/or
Service (12b-1) Fees........................... .10% 1.00% 1.00%
Other Expenses.................................. .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses............ .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Year 5 Year 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
19
<PAGE>
Massachusetts Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Massachusetts Fund uses the following investment strategies to pursue its
investment objectives:
The Massachusetts Fund invests at least 80% of its net assets in Massachusetts
municipal securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Massachusetts Fund is subject to the following risks:
. 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,
economic factors, 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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.42
91 12.97
92 9.08
93 11.52
94 -4.43
95 15.20
96 4.14
97 8.68
98 6.55
99 -6.73
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -11.11% 4.30% 5.50% -- --
Class C n/a n/a n/a -9.02% --
Class D -8.47 4.35 n/a -- 2.51%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .23% .23% .23%
----- ----- -----
Total Annual Fund Operating Expenses.............. .83% 1.73% 1.73%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
21
<PAGE>
Michigan Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Michigan Fund uses the following investment strategies to pursue its
investment objectives:
The Michigan Fund invests at least 80% of its net assets in Michigan municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Michigan Fund is subject to the following risks:
. 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, economic factors,
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 may 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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.85
91 12.01
92 9.31
93 11.48
94 -4.84
95 15.78
96 3.74
97 8.73
98 6.12
99 -3.80
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.38% 4.89% 5.73% -- --
Class C n/a n/a n/a -6.50% --
Class D -5.59 4.91 n/a -- 2.90%
Lehman Brothers
Municipal Bond
Index -2.06 6.42 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load) ...................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .22% .22% .22%
----- ----- -----
Total Annual Fund Operating Expenses.............. .82% 1.72% 1.72%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 373 636 1,024 2,110
Class D 275 542 933 2,030
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $555 $724 $ 908 $1,440
Class C 273 636 1,024 2,110
Class D 175 542 933 2,030
</TABLE>
23
<PAGE>
Minnesota Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Minnesota Fund uses the following investment strategies to pursue its
investment objectives:
The Minnesota Fund invests at least 80% of its net assets in Minnesota
municipal securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities, subject to
applicable requirements. Under these circumstances, the Fund may not achieve
its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Minnesota Fund is subject to the following risks:
. 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, economic factors,
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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.52
91 7.53
92 7.67
93 13.49
94 -2.54
95 11.41
96 3.39
97 7.02
98 6.43
99 -4.15
Best calendar quarter return: 5.00% - quarter ended 3/31/95.
Worst calendar quarter return: -3.23% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.69% 3.64% 5.02% -- --
Class C n/a n/a n/a -7.01% --
Class D -5.92 3.70 n/a -- 2.33%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .24% .24% .24%
----- ----- -----
Total Annual Fund Operating Expenses.............. .84% 1.74% 1.74%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 375 643 1,034 2,131
Class D 277 548 944 2,052
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $557 $730 $ 919 $1,463
Class C 275 643 1,034 2,131
Class D 177 548 944 2,052
</TABLE>
25
<PAGE>
Missouri Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Missouri Fund uses the following investment strategies to pursue its
investment objectives:
The Missouri Fund invests at least 80% of its net assets in Missouri municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Missouri Fund is subject to the following risks:
. 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, economic factors,
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, particularly on the economy of
the St. Louis metropolitan area.
26
<PAGE>
Missouri Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.93%
91 11.37%
92 7.25%
93 11.40%
94 -6.32%
95 16.95%
96 3.71%
97 8.08%
98 5.77%
99 -5.59%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.08% 4.50% 5.21% -- --
Class C n/a n/a n/a -8.10% --
Class D -7.35 4.55 n/a -- 2.32%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .27% .27% .27%
----- ----- -----
Total Annual Fund Operating Expenses.............. .87% 1.77% 1.77%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 378 652 1,050 2,163
Class D 280 557 959 2,084
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $560 $739 $ 934 $1,497
Class C 278 652 1,050 2,163
Class D 180 557 959 2,084
</TABLE>
27
<PAGE>
New Jersey Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The New Jersey Fund uses the following investment strategies to pursue its
investment objective:
The New Jersey Fund invests at least 80% of its net assets in New Jersey
municipal securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the New
Jersey Fund is subject to the following risks:
. 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, economic factors,
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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.78%
91 11.04%
92 8.99%
93 12.37%
94 -6.15%
95 15.57%
96 3.40%
97 8.93%
98 6.00%
99 -5.58%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.07% 4.42% 5.40% -- --
Class C n/a n/a n/a -8.19% --
Class D -7.08 4.64 n/a -- 2.62%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .32% .32% .32%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.07% 1.82% 1.82%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $579 $799 $1,037 $1,719
Class C 383 667 1,075 2,216
Class D 285 573 985 2,137
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $579 $799 $1,037 $1,719
Class C 283 667 1,075 2,216
Class D 185 573 985 2,137
</TABLE>
29
<PAGE>
New York Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The New York Fund uses the following investment strategies to pursue its
investment objectives:
The New York Fund invests at least 80% of its net assets in New York municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the New
York Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. New York City and certain localities outside New York City have experienced
financial problems in the past. Recurrence of these problems may affect the
fiscal health of the State.
30
<PAGE>
New York Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 4.18%
91 13.53%
92 9.31%
93 13.26%
94 -7.93%
95 19.31%
96 3.83%
97 10.04%
98 6.86%
99 -5.64%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.08% 5.54% 5.84% -- --
Class C n/a n/a n/a -8.10% --
Class D -7.50 5.57 n/a -- 2.88%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .10% 1.00% 1.00%
Other Expenses.................................... .21% .21% .21%
----- ----- -----
Total Annual Fund Operating Expenses.............. .81% 1.71% 1.71%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 372 633 1,019 2,099
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 272 633 1,019 2,099
Class D 174 539 928 2,019
</TABLE>
31
<PAGE>
North Carolina Fund
INVESTMENT OBJECTIVE
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.
PRINCIPAL INVESTMENT STRATEGIES
The North Carolina Fund uses the following investment strategies to pursue its
investment objective:
The North Carolina Fund invests at least 80% of its net assets in North
Carolina municipal securities rated investment- grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the
payment on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20%
of its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
North Carolina Fund is subject to the following risks:
. 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,
economic factors, 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 this matter, pressure on
state revenues may be ongoing.
32
<PAGE>
North Carolina Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 2.80%
91 10.63%
92 8.15%
93 12.98%
94 -7.35%
95 19.56%
96 2.71%
97 8.75%
98 5.81%
99 -5.02%
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 12/31/99
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
SINCE SINCE SINCE
ONE FIVE INCEPTION INCEPTION INCEPTION
YEAR YEARS 8/27/90 5/27/99 2/1/94
----- ----- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.48% 5.05% 5.47% -- --
Class C n/a n/a n/a -7.41% --
Class D -6.62 5.29 n/a -- 2.75%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 7.09(1) -2.59(2) 4.67(3)
</TABLE>
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 5/31/99.
(3) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or
Service (12b-1) Fees............................. .25% 1.00% 1.00%
Other Expenses.................................... .31% .31% .31%
----- ----- -----
Total Annual Fund Operating Expenses.............. 1.06% 1.81% 1.81%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $578 $796 $1,032 $1,708
Class C 382 664 1,070 2,205
Class D 284 569 980 2,127
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $578 $796 $1,032 $1,708
Class C 282 664 1,070 2,205
Class D 184 569 980 2,127
</TABLE>
33
<PAGE>
Ohio Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Ohio Fund uses the following investment strategies to pursue its
investment objectives:
The Ohio Fund invests at least 80% of its net assets in Ohio municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the
payment on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20%
of its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Ohio Fund is subject to the following risks:
. 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, economic factors,
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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.58%
91 11.31%
92 8.43%
93 11.64%
94 -4.91%
95 15.23%
96 3.77%
97 8.39%
98 5.89%
99 -4.65%
Best calendar quarter return: 6.47% - quarter ended 3/31/95.
Worst class quarter return; -4.89% - quarter ended. 3/31/94
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.22% 4.50% 5.47% -- --
Class C n/a n/a n/a -7.38% --
Class D -6.37 4.60 n/a -- 2.67%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or Service (12b-1) Fees.......... .10% 1.00% 1.00%
Other Expenses.................................... .21% .21% .21%
----- ----- -----
Total Annual Fund Operating Expenses.............. .81% 1.71% 1.71%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 372 633 1,019 2,099
Class D 274 539 928 2,019
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $554 $721 $ 903 $1,429
Class C 272 633 1,019 2,099
Class D 174 539 928 2,019
</TABLE>
35
<PAGE>
Oregon Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The Oregon Fund uses the following strategies to pursue its objectives:
The Oregon Fund invests at least 80% of its net assets in Oregon municipal
securities rated investment-grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Oregon Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Oregon's economy continues to be affected by the technology manufacturing,
forest products, and agricultural industries, which have all declined in
recent years due to declining exports to Asia.
36
<PAGE>
Oregon Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.50%
91 10.82%
92 7.78%
93 10.90%
94 -4.56%
95 14.55%
96 3.81%
97 9.05%
98 6.09%
99 -3.95%
Best calendar quarter return: 6.15% - quarter ended 3/31/95.
Worst calendar quarter return: -4.48% - quarter ended 3/31/94.
Average Annual Total Returns
Periods Ended 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -8.55% 4.71% 5.41% -- --
Class C n/a n/a n/a -6.97% --
Class D -5.86 4.74 n/a -- 2.87%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- ------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)....................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a %
of offering price)............................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating Expenses for Fiscal 1999
----------------------------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................... .50% .50% .50%
Distribution and/or Service (12b-1) Fees.......... .10% 1.00% 1.00%
Other Expenses.................................... .26% .26% .26%
----- ----- -----
Total Annual Fund Operating Expenses.............. .86% 1.76% 1.76%
===== ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $559 $736 $ 929 $1,485
Class C 377 649 1,045 2,152
Class D 279 554 954 2,073
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $559 $736 $ 929 $1,485
Class C 277 649 1,045 2,152
Class D 179 554 954 2,073
</TABLE>
37
<PAGE>
Pennsylvania Fund
INVESTMENT OBJECTIVE
The Pennsylvania Fund seeks high income exempt from regular federal income tax
and Pennsylvania income taxes consistent with preservation of capital.
PRINCIPAL INVESTMENT STRATEGIES
The Pennsylvania Fund uses the following investment strategies to pursue its
investment 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.
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.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
Pennsylvania Fund is subject to the following risks:
. 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, economic factors,
natural disasters, and the possibility of credit problems.
. Pennsylvania and various of its political subdivisions, including the City of
Philadelphia and the City of Scranton, have in the past, encountered
financial difficulties due to slowdowns in the pace of economic activity and
other factors.
38
<PAGE>
Pennsylvania Fund
PAST PERFORMANCE
The Class A annual total returns presented in the bar chart do not reflect the
effect of any sales charges. If these charges were included, the returns would
be lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 5.35%
91 11.29%
92 9.32%
93 12.91%
94 -7.03%
95 18.01%
96 3.44%
97 8.70%
98 6.14%
99 -5.19%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
----- ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -9.70% 4.92% 5.52% -- --
Class C n/a n/a n/a -7.77% --
Class D -6.82 5.11 n/a -- 2.65%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
---------------- --------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load).................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a
% of offering price).......................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................ .50% .50% .50%
Distribution and/or
Service (12b-1) Fees.......................... .25% 1.00% 1.00%
Other Expenses................................. .46% .46% .46%
--------- ----- -----
Total Annual Fund Operating Expenses........... 1.21% 1.96% 1.96%
========= ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $592 $841 $1,108 $1,871
Class C 397 709 1,147 2,362
Class D 299 615 1,057 2,285
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $592 $841 $1,108 $1,871
Class C 297 709 1,147 2,362
Class D 199 615 1,057 2,285
</TABLE>
39
<PAGE>
South Carolina Fund
INVESTMENT OBJECTIVES
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.
PRINCIPAL INVESTMENT STRATEGIES
The South Carolina Fund uses the following investment strategies to pursue its
investment objectives:
The South Carolina Fund invests at least 80% of its net assets in South
Carolina municipal securities rated investment- grade when purchased.
The Fund generally invests in long-term quality municipal bonds. The Fund
favors investing in revenue bonds, which pay interest and principal from
revenues derived from a particular facility or class of facilities. Revenue
bonds generally offer a higher yield than general obligation bonds, the payment
on which is secured by the general taxing power of the issuer.
In abnormal market conditions, the Fund may temporarily invest more than 20% of
its assets in taxable investment-grade fixed-income securities. Under these
circumstances, the Fund may not achieve its investment objective.
SPECIFIC RISKS
In addition to the principal risks stated on page 2 of this Prospectus, the
South Carolina Fund is subject to the following risks:
. 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,
economic factors, 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 in recent years through
June 30, 1993. These 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 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 lower. The average annual total returns presented in the table do reflect
the effect of the applicable sales charges. Both the bar chart and table assume
that all dividends and capital gain distributions were reinvested. Past
performance does not indicate future results.
Class A Annual Total Returns
Calendar Years
[GRAPH]
90 6.01%
91 11.52%
92 8.39%
93 11.71%
94 -6.70%
95 17.65%
96 3.93%
97 8.72%
98 5.73%
99 -5.59%
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 12/31/99
<TABLE>
<CAPTION>
CLASS C CLASS D
SINCE SINCE
ONE FIVE TEN INCEPTION INCEPTION
YEAR YEARS YEARS 5/27/99 2/1/94
------ ----- ----- --------- ---------
<S> <C> <C> <C> <C> <C>
Class A -10.07% 4.79% 5.37% -- --
Class C n/a n/a n/a -8.06% --
Class D -7.22 4.89 n/a -- 2.55%
Lehman Brothers
Municipal Bond
Index -2.06 6.92 6.89 -2.59(1) 4.67(2)
</TABLE>
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 5/31/99.
(2) From 1/31/94.
FEES AND EXPENSES
<TABLE>
<CAPTION>
Shareholder Fees Class A Class C Class D
- ---------------- --------- ------- -------
<S> <C> <C> <C>
Maximum Sales Charge (Load)..................... 4.75% 2% 1%
Maximum Sales Charge (Load) on Purchases (as a
% of offering price)........................... 4.75%(/1/) 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% 1%
<CAPTION>
Annual Fund Operating
Expenses for Fiscal 1999
- ------------------------
<S> <C> <C> <C>
(as a percentage of average net assets)
Management Fees................................. .50% .50% .50%
Distribution and/or
Service (12b-1) Fees........................... .10% 1.00% 1.00%
Other Expenses.................................. .23% .23% .23%
--------- ----- -----
Total Annual Fund Operating Expenses............ .83% 1.73% 1.73%
========= ===== =====
</TABLE>
(/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:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 374 639 1,029 2,121
Class D 276 545 939 2,041
If you did not sell your shares at the end of each period, your expenses would
be:
<CAPTION>
1 Year 3 Years 5 Years 10 Years
------ ------- ------- --------
<S> <C> <C> <C> <C>
Class A $556 $727 $ 914 $1,452
Class C 274 639 1,029 2,121
Class D 176 545 939 2,041
</TABLE>
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.
J. & W. Seligman & Co. Incorporated (Seligman), 100 Park Avenue, New York, New
York 10017, is the manager of each Fund. 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 20 US registered
investment companies, which offer more than 50 investment portfolios with
approximately $27.4 billion in assets as of December 31, 1999. Seligman also
provides investment management or advice to institutional or other accounts
having an aggregate value at December 31, 1999, of approximately $11.3 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.
Affiliates of Seligman:
Seligman Advisors, Inc.:
Each Fund's general
distributor; responsible
for accepting orders for
purchases and sales of Fund
shares.
Seligman 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
Year 2000
January 1, 2000 has come and gone. Participants in the financial services
industry, including Seligman and SDC, have substantially completed programs
designed to ensure that their computer systems properly process
and calculate date-related information in the Year 2000 and beyond. To
date, the Funds have not experienced any Year 2000-related problems, and
the Funds believe that the systems on which they rely will continue to
function properly, but this is not guaranteed. The Funds, like
other investment companies, financial and business organizations and
individuals around the world, could be adversely affected if the computer
systems on which they rely (including the systems of their third-party
service providers) fail to interpret data properly because of Year 2000
issues, including any impact on the issuers of securities in which the
Funds invest. A Year 2000 problem yet to be identified or anticipated by
those issuers, or identified but not adequately addressed, could adversely
impact a Fund's performance.
Portfolio Management
The Funds are managed by the Seligman Municipals Team, headed by Mr. Thomas
G. Moles. Mr. Moles, a Managing Director of Seligman, has been Vice
President and Portfolio Manager of the Funds since their inception. He is
also President and Portfolio Manager of Seligman Quality Municipal Fund,
Inc. and Seligman Select Municipal Fund, Inc., two closed-end investment
companies.
42
<PAGE>
Shareholder Information
Deciding Which Class of Shares to Buy
Each of the Fund's Classes represents an interest in the same portfolio of
investments. However, each Class has its own sales charge schedule, and its
ongoing 12b-1 fees may differ from other Classes. When deciding which Class of
shares to buy, you should consider, among other things:
. The amount you plan to invest.
. How long you intend to remain invested in the Fund, or another Seligman
mutual fund.
. 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.
. 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
. Initial sales charge on Fund purchases, as set forth below:
<TABLE>
<CAPTION>
Sales Charge Regular Dealer
Sales Charge as a % Discount
Amount as a % of Net as a % of
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.
. Annual 12b-1 fee (for shareholder services) of up to 0.25%.
. No sales charge on reinvested dividends or capital gain distributions.
. Certain employer-sponsored defined contribution-type plans can purchase
shares with no initial sales charge.
Class C
. 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 $100,000 1.00% 1.01% 1.00%
$100,000 - $249,999 0.50 0.50 0.50
$250,000 -
$1,000,000(/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/) Your purchase of Class C shares must be for less than $1,000,000
because if you invest $1,000,000 or more you will pay less in fees and
charges if you buy Class A shares.
. A 1% CDSC on shares sold within eighteen months of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No automatic conversion to Class A shares, so you will be subject to
higher ongoing 12b-1 fees indefinitely.
. No sales charge on reinvested dividends or capital gain distributions.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
43
<PAGE>
Class D*
. No initial sales charge on purchases.
. A 1% CDSC on shares sold within one year of purchase.
. Annual 12b-1 fee (for distribution and shareholder services) of 1.00%.
. No CDSC when you sell shares purchased with reinvested dividends or
capital gain distributions.
* Class D shares are not available to all investors. You may purchase
Class D shares only if (1) you already own Class D shares of the Fund
or another Seligman mutual fund, (2) if your financial advisor of
record maintains an omnibus account at SDC, or (3) pursuant to a 401(k)
or other retirement plan program for which Class D shares are already
available or for which the sponsor requests Class D shares because the
sales charge structure of Class D shares is comparable to the sales
charge structure of the other funds offered under the program.
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.
The Board of Directors or Trustees, as applicable, believes that no conflict of
interest currently exists between a Fund's Class A, Class C 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 the 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.
44
<PAGE>
Pricing of Fund Shares
When you buy or sell shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be included in the purchase price for Class A shares.
Purchase or sale orders received by an authorized dealer or financial advisor
by the close of regular trading on the New York Stock Exchange (NYSE) (normally
4:00 p.m. Eastern time) and accepted by Seligman Advisors before the close of
business (5:00 p.m. Eastern time) on the same day will be executed at the
Class's NAV calculated as of the close of regular trading on the NYSE on that
day. 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
NAV: broker/dealer or financial advisor after the close of
Computed regular trading on the NYSE, or is accepted by Seligman
separately for Advisors after the close of business, the order will be
each Class of a executed at the Class's NAV calculated as of the close
Fund by dividing of regular trading on the next NYSE trading day. When
that Class's you sell shares, you receive the Class's per share NAV,
share of the less any applicable CDSC.
value of the net
assets of the The NAV of a Fund's shares is determined each day,
Fund (i.e., its Monday through Friday, on days that the NYSE is open
assets less for trading. Because of their higher 12b-1 fees, the
liabilities) by NAV of Class C shares and Class D shares will generally
the total number be lower than the NAV of Class A shares of a Fund.
of outstanding
shares of the
Class.
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.
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 or lower
minimum investments. Ask your financial advisor if any of these programs apply
to you. Class D shares are not available to all investors. For more
information, see "Deciding Which Class of Shares to Buy-Class D."
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:
.Regular (non-retirement) accounts: $1,000
.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 quarterly and annual
statements detailing your transactions in the Fund and the other Seligman funds
you own under the same account number. Duplicate account statements will be
sent to you free of charge for the current year and most recent prior year.
Copies of year-end statements for prior years are available for a fee of $10
per year, per account, with a maximum charge of $150 per account request. Send
your request and a check for the fee to SDC.
If you want to be able to buy, sell, or exchange shares by telephone, you
should complete an
application when you open your account. This will prevent you from having to
complete a
supplemental election form (which may require a signature guarantee) at a later
date.
45
<PAGE>
How to Buy Additional Shares
After you have made your initial investment, there are many options available
to make additional purchases of Fund shares. Subsequent purchases must be for
$100 or more.
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 02940-9766
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.
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, or Class C
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 a Fund. If you wish to
use this service, contact SDC or your financial advisor to obtain the
necessary forms. Because your bank may charge you a penalty, it is not
normally advisable to withdraw CD assets before maturity.
Dividends From Other Investments. You may have your dividends from other
companies paid to the Fund. (Dividend checks must include your name, account
number, Fund name and Class of shares.)
Direct Deposit. You may buy Fund shares electronically with funds from your
employer, the IRS or any other institution that provides direct deposit. Call
SDC for more information.
Seligman Time Horizon MatrixSM. (Requires an initial total investment of
$10,000.) This is a needs-based investment process, designed to help you and
your financial advisor plan to seek your long-term financial goals. It
considers your financial needs, and helps frame a personalized asset
allocation strategy around the cost of your future commitments and the time
you have to meet them. Contact your financial advisor for more information.
Seligman HarvesterSM. 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 Among 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 or Class C shares of
Seligman Cash Management Fund to buy
shares of the same class 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). You should read and understand a fund's
prospectus before investing. Some funds may not offer all classes of shares.
46
<PAGE>
How to Sell Shares
The easiest way to sell Fund shares is by phone. If you have telephone
services, you may be able use this service to sell Fund shares. Restrictions
apply to certain types of accounts. Please see "Important Policies That May
Affect Your Account."
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 sell shares to the Fund through a broker/dealer or your financial
advisor. The Fund does not charge any fees or expenses, other than any
applicable CDSC, for this transaction; however, the dealer or financial
advisor may charge a service fee. Contact your financial advisor for more
information.
You may always send a written request to sell Fund shares; however, it may
take longer to get your money.
As an additional measure to protect you and the Fund, SDC may confirm written
redemption requests that are (1) for $25,000 or more, or (2) directed to be
paid to an alternate payee or sent to an address other than the address of
record, with you or your financial advisor by telephone before sending your
money. This will not affect the date on which your redemption request is
actually processed.
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 the account owner; 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 need to provide additional documents to sell shares if you are:
.a corporation;
.an executor or administrator;
.a trustee or custodian; or
.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 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 dollar 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 C shares
and Class D shares and reinvest your dividends and capital gain distributions,
you may annually withdraw 10%, respectively, of the value of your Fund account
(at the time of election) without a CDSC.
Check Redemption Service. If you have at least $25,000 in a Fund, you may ask
SDC to provide checks which may be drawn against your account in amounts of
$500 or more. You may elect this service on your initial application or
contact SDC for the appropriate forms to establish this service. If you own
Class A shares that were bought at NAV because of the size of your purchase,
or if you own Class B shares, check redemptions may be subject to a CDSC. If
you own Class D or Class C shares, you may use this service only with respect
to shares that you have held for at least one year or eighteen months,
respectively.
47
<PAGE>
Important Policies That May Affect Your Account
To protect you and other shareholders, each Fund reserves the right to:
. 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.
. Refuse any request to buy Fund shares;
. Reject any request received by telephone;
. Suspend or terminate telephone services;
. Reject a signature guarantee that SDC believes may be fraudulent;
. Close your fund account if its value falls below $500;
. Close your account if it does not have a certified taxpayer identification
number.
Telephone Services
You and your broker/dealer or financial representative or 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:
. Sell uncertificated shares (up to $50,000 per day, payable to account
owner(s) and mailed to address of record);
. Exchange shares between funds;
. Change dividend and/or capital gain distribution options;
. Change your address;
. 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 (which may
require a signature guarantee).
Restrictions apply to certain types of accounts:
. Trust accounts on which the current trustee is not listed may not sell
Fund shares by phone.
. Corporations may not sell Fund shares by phone.
. IRAs may only exchange Fund shares or request address changes by phone.
. 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 elec-
tion 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.
48
<PAGE>
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.
You may elect to:
(1) reinvest both dividends and capital gain
Dividend: distributions;
(2) receive dividends in cash and reinvest capital gain
A payment by a distributions; or
mutual fund,
usually derived
from the fund's
net investment
income
(dividends and
interest earned
on portfolio
securities less
expenses).
(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.
Capital Gain Cash dividends or capital gain distributions will be
Distribution: sent by check to your address of record or, if you have
A payment to current ACH bank information on file, directly
mutual fund deposited into your predesignated bank account within
shareholders 3-4 business days from the payable date.
which represents
profits realized
on the sale of
securities in a
Fund's
portfolio.
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 C shares and 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.
Ex-dividend
Date:
The day on which
any declared
distributions
(dividends or
capital gains)
are deducted
from the Fund's
assets before it
calculates
its NAV.
Taxes
The Funds intend to pay dividends that are exempt from regular income tax. A
Fund may invest a portion of its assets in securities that generate income that
is not exempt from federal or state income tax. Income exempt from federal tax
may be subject to state and local tax. If you would like more specific
information on the possible tax consequences of investing in a particular Fund,
you should read that Fund's Statement of Additional Information.
Dividends paid by the Funds are taxable to you as ordinary income. 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 a Fund holds its assets.
When you sell Fund shares, any gain or loss you realize will generally be
treated as a long-term capital gain or loss if you held your shares for more
than one year, or as a short-term capital gain or loss if you held your shares
for one year or less. However, if you sell Fund shares on which a long-term
capital gain distribution has been received and you held the shares for six
months or less, any loss you realize will be treated as a long-term capital
loss to the extent that it offsets the long-term capital gain distribution.
An exchange of Fund shares is a sale and may result in a gain or loss for
federal income tax purposes.
Each January, you will be sent information on the tax status of any
distributions made during the previous calendar year. Because each
shareholder's situation is unique, you should always consult your tax advisor
concerning the effect income taxes may have on your individual investment.
49
<PAGE>
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 a Fund, assuming you reinvested all of 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 reports, along with the financial statements, are included in each Fund's
Annual Report, which is available upon request.
NATIONAL FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
------------------------------------------------- -----------
Year ended September 30, 5/27/99(**)
------------------------------------------------- to
1999 1998 1997 1996 1995 9/30/99
------- -------- ------- ------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $8.32 $8.01 $7.70 $7.58 $7.18 $8.08
------- -------- ------- ------- -------- ------
Income from investment
operations:
Net investment income... 0.39 0.39 0.39 0.40 0.40 0.11
Net gains or losses on
securities (both
realized and
unrealized)............ (0.64) 0.31 0.31 0.12 0.40 (0.40)
------- -------- ------- ------- -------- ------
Total from investment
operations............. (0.25) 0.70 0.70 0.52 0.80 (0.29)
------- -------- ------- ------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
Distributions from
capital gains.......... -- -- -- -- -- --
------- -------- ------- ------- -------- ------
Total distributions..... (0.39) (0.39) (0.39) (0.40) (0.40) (0.11)
------- -------- ------- ------- -------- ------
Net asset value, end of
period................. $7.68 $8.32 $8.01 $7.70 $7.58 $7.68
======= ======== ======= ======= ======== ======
Total Return: (3.11)% 9.00 % 9.40 % 6.97 % 11.48 % (3.38)%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $90,296 $101,909 $97,481 $98,767 $104,184 $115
Ratio of expenses to
average
net assets............. 0.83% 0.80% 0.84% 0.80% 0.86% 1.74%+
Ratio of net income to
average
net assets............. 4.83% 4.82% 5.05% 5.19% 5.46% 4.10%+
Portfolio turnover
rate................... 13.37% 18.00% 20.63% 33.99% 24.91% 13.37%++
<CAPTION>
CLASS D
--------------------------------------------
Year ended September 30,
--------------------------------------------
1999 1998 1997 1996 1995
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $8.31 $8.02 $7.70 $7.57 $7.18
-------- -------- -------- -------- --------
Income from investment
operations:
Net investment income... 0.32 0.32 0.32 0.33 0.32
Net gains or losses on
securities (both
realized and
unrealized)............ (0.63) 0.29 0.32 0.13 0.39
-------- -------- -------- -------- --------
Total from investment
operations............. (0.31) 0.61 0.64 0.46 0.71
-------- -------- -------- -------- --------
Less distributions:
Dividends from net
investment income...... (0.32) (0.32) (0.32) (0.33) (0.32)
Distributions from
capital gains.......... -- -- -- -- --
-------- -------- -------- -------- --------
Total distributions..... (0.32) (0.32) (0.32) (0.33) (0.32)
-------- -------- -------- -------- --------
Net asset value, end of
period................. $7.68 $8.31 $8.02 $7.70 $7.57
======== ======== ======== ======== ========
Total Return: (3.85)% 7.76 % 8.56 % 6.13 % 10.17 %
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $8,079 $7,392 $2,279 $4,826 $1,215
Ratio of expenses to
average
net assets............. 1.73% 1.71% 1.75% 1.67% 1.95%
Ratio of net income to
average
net assets............. 3.93% 3.91% 4.15% 4.27% 4.40%
Portfolio turnover
rate................... 13.37% 18.00% 20.63% 33.99% 24.91%
</TABLE>
- -------------
See footnotes on page 59.
50
<PAGE>
CALIFORNIA HIGH-YIELD FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period.............. $6.80 $6.61 $6.50 $6.47 $6.30 $6.62 $6.80 $6.61 $6.51 $6.48 $6.31
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.31 0.32 0.34 0.36 0.37 0.09 0.25 0.26 0.28 0.30 0.31
Net gains or losses on
securities (both
realized and
unrealized)............ (0.50) 0.22 0.20 0.05 0.17 (0.33) (0.49) 0.22 0.19 0.05 0.17
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.19) 0.54 0.54 0.41 0.54 (0.24) (0.24) 0.48 0.47 0.35 0.48
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.31) (0.32) (0.34) (0.36) (0.37) (0.09) (0.25) (0.26) (0.28) (0.30) (0.31)
Distributions from
capital gains.......... (0.02) (0.03) (0.09) (0.02) -- -- (0.02) (0.03) (0.09) (0.02) --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.33) (0.35) (0.43) (0.38) (0.37) (0.09) (0.27) (0.29) (0.37) (0.32) (0.31)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $6.28 $6.80 $6.61 $6.50 $6.47 $6.29 $6.29 $6.80 $6.61 $6.51 $6.48
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.82)% 8.45% 8.74% 6.49% 8.85% (3.79)% (3.54)% 7.47% 7.60% 5.53% 7.78%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $57,807 $ 58,374 $52,883 $50,264 $51,504 $1,041 $7,658 $6,393 $3,320 $1,919 $1,277
Ratio of expenses to
average
net assets............. 0.84% 0.82% 0.87% 0.84% 0.90% 1.72%+ 1.74% 1.73% 1.77% 1.74% 1.91%
Ratio of net income to
average
net assets............. 4.71% 4.81% 5.26% 5.49% 5.84% 3.95%+ 3.81% 3.90% 4.36% 4.59% 4.84%
Portfolio turnover
rate................... 27.61% 10.75% 22.42% 34.75% 17.64% 27.61%++ 27.61% 10.75% 22.42% 34.75% 17.64%
CALIFORNIA QUALITY FUND
Per Share Data:*
Net asset value,
beginning
of period.............. $7.21 $6.99 $6.75 $6.65 $6.39 $6.75 $7.19 $6.97 $6.74 $6.63 $6.38
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.31 0.33 0.34 0.35 0.34 0.09 0.25 0.27 0.28 0.28 0.28
Net gains or losses on
securities (both
realized and
unrealized)............ (0.56) 0.25 0.24 0.11 0.32 (0.35) (0.56) 0.25 0.23 0.12 0.31
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.25) 0.58 0.58 0.46 0.66 (0.26) (0.31) 0.52 0.51 0.40 0.59
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.31) (0.33) (0.34) (0.35) (0.34) (0.09) (0.25) (0.27) (0.28) (0.28) (0.28)
Distributions from
capital gains.......... (0.23) (0.03) -- (0.01) (0.06) -- (0.23) (0.03) -- (0.01) (0.06)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.54) (0.36) (0.34) (0.36) (0.40) (0.09) (0.48) (0.30) (0.28) (0.29) (0.34)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $6.42 $7.21 $6.99 $6.75 $6.65 $6.40 $6.40 $7.19 $6.97 $6.74 $6.63
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.68)% 8.67% 8.87% 7.00% 10.85% (4.04)% (4.58)% 7.71% 7.75% 6.20% 9.61%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)......... $74,793 $87,522 $86,992 $95,560 $94,947 $ 10 $4,286 $2,302 $1,677 $1,645 $ 863
Ratio of expenses to
average
net assets............. 0.82% 0.77% 0.82% 0.79% 0.89% 1.72%+ 1.72% 1.68% 1.72% 1.69% 1.88%
Ratio of net income to
average
net assets............. 4.56% 4.75% 4.99% 5.11% 5.34% 3.80%+ 3.66% 3.84% 4.09% 4.21% 4.36%
Portfolio turnover
rate................... 20.24% 30.82% 12.16% 12.84% 11.24% 20.24%++ 20.24% 30.82% 12.16% 12.84% 11.24%
</TABLE>
- -------------
See footnotes on page 59.
51
<PAGE>
COLORADO FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $7.64 $7.42 $7.27 $7.30 $7.09 $7.47 $7.63 $7.42 $7.27 $7.29 $7.09
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.34 0.36 0.37 0.37 0.38 0.10 0.28 0.29 0.30 0.31 0.30
Net gains or losses on
securities
(both realized and
unrealized)............ (0.54) 0.22 0.15 (0.03) 0.21 (0.38) (0.54) 0.21 0.15 (0.02) 0.20
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.20) 0.58 0.52 0.34 0.59 (0.28) (0.26) 0.50 0.45 0.29 0.50
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.34) (0.36) (0.37) (0.37) (0.38) (0.10) (0.28) (0.29) (0.30) (0.31) (0.30)
Distributions from
capital gains.......... -- -- -- -- -- -- -- -- -- -- --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.34) (0.34) (0.37) (0.37) (0.38) (0.10) (0.28) (0.29) (0.30) (0.31) (0.30)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.10 $7.64 $7.42 $7.27 $7.30 $7.09 $7.09 $7.63 $7.42 $7.27 $7.29
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.67)% 8.03% 7.30% 4.76% 8.56% (3.93)% (3.57)% 6.90% 6.34% 3.95% 7.26%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $44,649 $45,583 $49,780 $52,295 $54,858 $60 $917 $344 $238 $255 $193
Ratio of expenses to
average net assets..... 0.87% 0.90% 0.90% 0.85% 0.93% 1.73%+ 1.77% 1.80% 1.81% 1.75% 2.02%
Ratio of net income to
average net assets..... 4.60% 4.80% 5.01% 5.07% 5.31% 3.85%+ 3.70% 3.90% 4.10% 4.17% 4.23%
Portfolio turnover
rate................... 7.91% 28.66% 3.99% 12.39% 14.70% 7.91%++ 7.91% 28.66% 3.99% 12.39% 14.70%
FLORIDA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.07 $7.80 $7.67 $7.71 $7.34 $ 7.83 $8.08 $7.81 $7.68 $7.72 $7.34
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.34 0.35 0.36 0.38 0.40 0.10 0.28 0.29 0.30 0.32 0.34
Net gains or losses on
securities
(both realized and
unrealized)............ (0.61) 0.34 0.23 0.04 0.37 (0.40) (0.60) 0.34 0.23 0.04 0.38
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.27) 0.69 0.59 0.42 0.77 (0.30) (0.32) 0.63 0.53 0.36 0.72
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.34) (0.35) (0.36) (0.38) (0.40) (0.10) (0.28) (0.29) (0.30) (0.32) (0.34)
Distributions from
capital gains.......... (0.05) (0.07) (0.10) (0.08) -- -- (0.05) (0.07) (0.10) (0.08) --
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.39) (0.42) (0.46) (0.46) (0.40) (0.10) (0.33) (0.36) (0.40) (0.40) (0.34)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.41 $8.07 $7.80 $7.67 $7.71 $7.43 $7.43 $8.08 $7.81 $7.68 $7.72
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.42)% 9.16% 8.01% 5.54% 10.87% (3.96)% (4.01)% 8.32% 7.18% 4.74% 10.07%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $37,606 $42,464 $42,024 $45,200 $49,030 $254 $1,843 $1,940 $1,678 $1,277 $603
Ratio of expenses to
average net assets***.. 1.03% 1.00% 1.04% 0.97% 0.72% 1.78%+ 1.78% 1.77% 1.81% 1.73% 1.66%
Ratio of net income to
average net assets***.. 4.38% 4.45% 4.70% 4.90% 5.38% 3.82%+ 3.63% 3.68% 3.93% 4.14% 4.53%
Portfolio turnover
rate................... 18.31% 6.73% 33.68% 18.53% 11.82% 18.31%++ 18.31% 6.73% 33.68% 18.53% 11.82%
</TABLE>
- -------------
See footnotes on page 59.
52
<PAGE>
GEORGIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.38 $8.12 $7.87 $7.81 $7.48 $8.17 $8.40 $8.13 $7.88 $7.82 $7.49
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.37 0.38 0.38 0.39 0.39 0.11 0.30 0.30 0.31 0.32 0.32
Net gains or losses on
securities
(both realized and
unrealized)............ (0.58) 0.29 0.28 0.11 0.43 (0.41) (0.59) 0.30 0.28 0.11 0.43
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.21) 0.67 0.66 0.50 0.82 (0.30) (0.29) 0.60 0.59 0.43 0.75
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.37) (0.38) (0.38) (0.39) (0.39) (0.11) (0.30) (0.30) (0.31) (0.32) (0.32)
Distributions from
capital gains.......... (0.05) (0.03) (0.03) (0.05) (0.10) -- (0.05) (0.03) (0.03) (0.05) (0.10)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.42) (0.41) (0.41) (0.44) (0.49) (0.11) (0.35) (0.33) (0.34) (0.37) (0.42)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.75 $8.38 $8.12 $7.87 $7.81 $7.76 $7.76 $8.40 $8.13 $7.88 $7.82
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.63)% 8.44% 8.65% 6.56% 11.66% (3.84)% (3.61)% 7.59% 7.67% 5.60% 10.58%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $42,692 $48,424 $50,614 $50,995 $57,678 $176 $2,318 $2,809 $2,640 $2,327 $2,079
Ratio of expenses to
average net assets***.. 0.87% 0.89% 0.89% 0.83% 0.91% 1.74%+ 1.77% 1.80% 1.79% 1.73% 1.90%
Ratio of net income to
average net assets***.. 4.59% 4.57% 4.82% 4.94% 5.26% 3.89%+ 3.69% 3.66% 3.92% 4.03% 4.28%
Portfolio turnover
rate................... 23.93% 2.92% 12.28% 16.24% 3.36% 23.93%++ 23.93% 2.92% 12.28% 16.24% 3.36%
LOUISIANA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.51 $8.28 $8.16 $8.14 $7.94 $8.19 $8.50 8.27 $8.16 $8.14 $7.94
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income... 0.39 0.41 0.41 0.42 0.43 0.11 0.32 0.33 0.34 0.35 0.35
Net gains or losses on
securities
(both realized and
unrealized)............ (0.59) 0.24 0.23 0.08 0.34 (0.39) (0.59) 0.24 0.22 0.08 0.34
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.20) 0.65 0.64 0.50 0.77 (0.28) (0.27) 0.57 0.56 0.43 0.69
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.41) (0.41) (0.42) (0.43) (0.11) (0.32) (0.33) (0.34) (0.35) (0.35)
Distributions from
capital gains.......... (0.11) (0.01) (0.11) (0.06) (0.14) -- (0.11) (0.01) (0.11) (0.06) (0.14)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.50) (0.42) (0.52) (0.48) (0.57) (0.11) (0.43) (0.34) (0.45) (0.41) (0.49)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.81 $8.51 $8.28 $8.16 $8.14 $7.80 $7.80 $8.50 $8.27 $8.16 $8.14
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (2.44)% 8.08% 8.17% 6.32% 10.30% (3.55)% (3.33)% 7.11% 7.07% 5.37% 9.17%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $51,543 $56,308 $56,199 $57,264 $61,988 $ -- $908 $837 $509 $389 $465
Ratio of expenses to
average net assets..... 0.84% 0.88% 0.86% 0.82% 0.89% 1.71%+ 1.74% 1.78% 1.76% 1.72% 1.91%
Ratio of net income to
average net assets..... 4.76% 4.86% 5.08% 5.15% 5.44% 4.00%+ 3.86% 3.96% 4.18% 4.25% 4.41%
Portfolio turnover
rate................... 8.67% 15.72% 16.08% 10.08% 4.82% 8.67%++ 8.67% 15.72% 16.08% 10.08% 4.82%
</TABLE>
- -------------
See footnotes on page 59.
53
<PAGE>
MARYLAND FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
------------------------------------------------ -----------
Year ended September 30, 5/27/99(**)
------------------------------------------------ to
1999 1998 1997 1996 1995 9/30/99
------- -------- -------- -------- -------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period.. $8.32 $8.14 $7.99 $7.96 $7.71 $8.13
------- -------- -------- -------- -------- ------
Income from investment
operations:
Net investment income... 0.39 0.40 0.40 0.40 0.41 0.11
Net gains or losses on
securities
(both realized and
unrealized)............ (0.50) 0.23 0.19 0.06 0.38 (0.33)
------- -------- -------- -------- -------- ------
Total from investment
operations............. (0.11) 0.63 0.59 0.46 0.79 (0.22)
------- -------- -------- -------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.39) (0.40) (0.40) (0.40) (0.41) (0.11)
Distributions from
capital gains.......... (0.03) (0.05) (0.04) (0.03) (0.13) --
------- -------- -------- -------- -------- ------
Total distributions..... (0.42) (0.45) (0.44) (0.43) (0.54) (0.11)
------- -------- -------- -------- -------- ------
Net asset value, end of
period................. $7.79 $8.32 $8.14 $7.99 $7.96 $7.80
======= ======== ======== ======== ======== ======
Total Return: (1.45)% 7.89% 7.64% 6.00% 10.90% (2.83)%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $49,523 $54,891 $52,549 $54,041 $56,290 $75
Ratio of expenses to
average net assets..... 0.87% 0.89% 0.90% 0.84% 0.96% 1.75%+
Ratio of net income to
average net assets..... 4.77% 4.82% 4.99% 5.05% 5.31% 4.04%+
Portfolio turnover
rate................... 1.80% 7.59% 14.79% 5.56% 3.63% 1.80%++
<CAPTION>
CLASS D
----------------------------------------
Year ended September 30,
----------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of period.. $8.33 $8.15 $7.99 $7.97 $7.72
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income... 0.31 0.32 0.33 0.33 0.33
Net gains or losses on
securities
(both realized and
unrealized)............ (0.50) 0.23 0.20 0.05 0.38
-------- ------- ------- ------- -------
Total from investment
operations............. (0.19) 0.55 0.53 0.38 0.71
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income...... (0.31) (0.32) (0.33) (0.33) (0.33)
Distributions from
capital gains.......... (0.03) (0.05) (0.04) (0.03) (0.13)
-------- ------- ------- ------- -------
Total distributions..... (0.34) (0.37) (0.37) (0.36) (0.46)
-------- ------- ------- ------- -------
Net asset value, end of
period................. $7.80 $8.33 $8.15 $7.99 $7.97
======== ======= ======= ======= =======
Total Return: (2.00)% 6.91% 6.80% 4.91% 9.75%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $2,775 $3,128 $2,063 $2,047 $630
Ratio of expenses to
average net assets..... 1.77% 1.80% 1.81% 1.72% 2.02%
Ratio of net income to
average net assets..... 3.87% 3.91% 4.08% 4.14% 4.27%
Portfolio turnover
rate................... 1.80% 7.59% 14.79% 5.56% 3.63%
MASSACHUSETTS FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.27 $7.99 $7.85 $7.91 $7.66 $7.96
------- -------- -------- -------- -------- ------
Income from investment
operations:
Net investment income... 0.36 0.38 0.40 0.41 0.42 0.10
Net gains or losses on
securities
(both realized and
unrealized)............ (0.75) 0.37 0.22 0.05 0.28 (0.49)
------- -------- -------- -------- -------- ------
Total from investment
operations............. (0.39) 0.75 0.62 0.46 0.70 (0.39)
------- -------- -------- -------- -------- ------
Less distributions:
Dividends from net
investment income...... (0.36) (0.38) (0.40) (0.41) (0.42) (0.10)
Distributions from
capital gains.......... (0.05) (0.09) (0.08) (0.11) (0.03) --
------- -------- -------- -------- -------- ------
Total distributions..... (0.41) (0.47) (0.48) (0.52) (0.45) (0.10)
------- -------- -------- -------- -------- ------
Net asset value, end of
period................. $7.47 $8.27 $7.99 $7.85 $7.91 $7.47
======= ======== ======== ======== ======== ======
Total Return: (4.85)% 9.80% 8.11% 5.97% 9.58% (5.02)%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $92,929 $109,328 $110,011 $109,872 $115,711 $228
Ratio of expenses to
average net assets..... 0.83% 0.80% 0.84% 0.80% 0.86% 1.73%+
Ratio of net income to
average net assets..... 4.56% 4.72% 5.06% 5.24% 5.51% 3.80%+
Portfolio turnover
rate................... 23.88% 13.41% 29.26% 26.30% 16.68% 23.88%++
Per Share Data:*
Net asset value,
beginning of period.... $8.26 $7.99 $7.84 $7.90 $7.66
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income... 0.29 0.31 0.33 0.34 0.34
Net gains or losses on
securities
(both realized and
unrealized)............ (0.74) 0.36 0.23 0.05 0.27
-------- ------- ------- ------- -------
Total from investment
operations............. (0.45) 0.67 0.56 0.39 0.61
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income...... (0.29) (0.31) (0.33) (0.34) (0.34)
Distributions from
capital gains.......... (0.05) (0.09) (0.08) (0.11) (0.03)
-------- ------- ------- ------- -------
Total distributions..... (0.34) (0.40) (0.41) (0.45) (0.37)
-------- ------- ------- ------- -------
Net asset value, end of
period................. $7.47 $8.26 $7.99 $7.84 $7.90
======== ======= ======= ======= =======
Total Return: (5.61)% 8.68% 7.29% 5.01% 8.33%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $2,934 $1,468 $1,245 $1,405 $809
Ratio of expenses to
average net assets..... 1.73% 1.71% 1.74% 1.70% 1.95%
Ratio of net income to
average net assets..... 3.66% 3.81% 4.16% 4.32% 4.47%
Portfolio turnover
rate................... 23.88% 13.41% 29.26% 26.30% 16.68%
</TABLE>
- -------------
See footnotes on page 59.
54
<PAGE>
MICHIGAN FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
------------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period... $8.83 $8.60 $8.46 $8.54 $8.28 $8.43 $8.82 $8.59 $8.45 $8.54 $8.28
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.40 0.41 0.43 0.45 0.46 0.11 0.32 0.33 0.36 0.37 0.37
Net gains or losses on
securities (both
realized and
unrealized)........... (0.63) 0.30 0.23 0.06 0.30 (0.40) (0.63) 0.30 0.23 0.05 0.30
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.23) 0.71 0.66 0.51 0.76 (0.29) (0.31) 0.63 0.59 0.42 0.67
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.40) (0.41) (0.43) (0.45) (0.46) (0.11) (0.32) (0.33) (0.36) (0.37) (0.37)
Distributions from
capital gains......... (0.16) (0.07) (0.09) (0.14) (0.04) -- (0.16) (0.07) (0.09) (0.14) (0.04)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.56) (0.48) (0.52) (0.59) (0.50) (0.11) (0.48) (0.40) (0.45) (0.51) (0.41)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $8.04 $8.83 $8.60 $8.46 $8.54 $8.03 $8.03 $8.82 $8.59 $8.45 $8.54
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.77)% 8.63% 8.16% 6.16% 9.56% (3.55)% (3.65)% 7.66% 7.19% 5.09% 8.36%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $125,560 $144,161 $143,370 $148,178 $151,589 $114 $2,074 $1,841 $1,845 $1,486 $1,172
Ratio of expenses to
average net assets.... 0.82% 0.79% 0.81% 0.78% 0.87% 1.73%+ 1.72% 1.70% 1.71% 1.68% 2.01%
Ratio of net income to
average net assets.... 4.73% 4.78% 5.13% 5.29% 5.50% 3.96%+ 3.83% 3.87% 4.23% 4.39% 4.40%
Portfolio turnover
rate.................. 3.73% 23.60% 10.98% 19.62% 20.48% 3.73%++ 3.73% 23.60% 10.98% 19.62% 20.48%
MINNESOTA FUND
Per Share Data:*
Net asset value,
beginning of period... $7.98 $7.79 $7.68 $7.82 $7.72 $7.72 $7.98 $7.79 $7.68 $7.82 $7.73
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.36 0.38 0.40 0.42 0.45 0.10 0.30 0.31 0.33 0.35 0.38
Net gains or losses on
securities (both
realized and
unrealized)........... (0.52) 0.20 0.11 (0.12) 0.11 (0.36) (0.52) 0.20 0.11 (0.12) 0.10
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.16) 0.58 0.51 0.30 0.56 (0.26) (0.22) 0.51 0.44 0.23 0.48
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.36) (0.38) (0.40) (0.42) (0.45) (0.10) (0.30) (0.31) (0.33) (0.35) (0.38)
Distributions from
capital gains......... (0.10) (0.01) -- (0.02) (0.01) -- (0.10) (0.01) -- (0.02) (0.01)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.46) (0.39) (0.40) (0.44) (0.46) (0.10) (0.40) (0.32) (0.33) (0.37) (0.39)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.36 $7.98 $7.79 $7.68 $7.82 $7.36 $7.36 $7.98 $7.79 $7.68 $7.82
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.09)% 7.68% 6.85% 3.99% 7.61% (3.47)% (2.96)% 6.71% 5.89% 3.06% 6.45%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $109,165 $121,374 $121,674 $126,173 $132,716 $ -- $1,856 $2,103 $1,799 $2,036 $2,237
Ratio of expenses to
average net assets.... 0.84% 0.81% 0.85% 0.81% 0.87% 1.74%+ 1.74% 1.72% 1.75% 1.71% 1.85%
Ratio of net income to
average net assets.... 4.71% 4.87% 5.21% 5.47% 5.89% 3.94%+ 3.81% 3.96% 4.31% 4.57% 4.92%
Portfolio turnover
rate.................. 9.74% 21.86% 6.88% 26.89% 5.57% 9.74%++ 9.74% 21.86% 6.88% 26.89% 5.57%
</TABLE>
- -------------
See footnotes on page 59.
55
<PAGE>
MISSOURI FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
-------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
-------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
------- ------- ------- ------- ------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.03 $7.82 $7.71 $7.70 $7.41 $7.68 $8.03 $7.82 $7.72 $7.70 $7.41
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.35 0.36 0.38 0.39 0.40 0.10 0.28 0.29 0.31 0.32 0.32
Net gains or losses on
securities
(both realized and
unrealized)............ (0.62) 0.28 0.19 0.08 0.36 (0.39) (0.62) 0.28 0.18 0.09 0.36
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.27) 0.64 0.57 0.47 0.76 (0.29) (0.34) 0.57 0.49 0.41 0.68
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.35) (0.36) (0.38) (0.39) (0.40) (0.10) (0.28) (0.29) (0.31) (0.32) (0.32)
Distributions from
capital gains.......... (0.12) (0.07) (0.08) (0.07) (0.07) -- (0.12) (0.07) (0.08) (0.07) (0.07)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.47) (0.43) (0.46) (0.46) (0.47) (0.10) (0.40) (0.36) (0.39) (0.39) (0.39)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.29 $8.03 $7.82 $7.71 $7.70 $7.29 $7.29 $8.03 $7.82 $7.72 $7.70
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.58)% 8.41% 7.70% 6.27% 10.67% (3.95)% (4.46)% 7.45% 6.60% 5.46% 9.49%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $43,437 $49,949 $52,766 $49,941 $51,169 $21 $617 $418 $474 $565 $515
Ratio of expenses to
average net assets***.. 0.87% 0.89% 0.89% 0.86% 0.88% 1.74%+ 1.77% 1.79% 1.80% 1.76% 1.98%
Ratio of net income to
average net assets***.. 4.50% 4.59% 4.93% 5.03% 5.31% 3.75%+ 3.60% 3.69% 4.02% 4.13% 4.23%
Portfolio turnover
rate................... 10.43% 21.26% 6.47% 8.04% 3.88% 10.43%++ 10.43% 21.26% 6.47% 8.04% 3.88%
NEW JERSEY FUND
Per Share Data:*
Net asset value,
beginning of period.... $7.78 $7.56 $7.60 $7.59 $7.40 $7.58 $7.86 $7.64 $7.68 $7.67 $7.48
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***.............. 0.33 0.35 0.36 0.39 0.39 0.09 0.27 0.29 0.31 0.33 0.33
Net gains or losses on
securities
(both realized and
unrealized)............ (0.55) 0.30 0.21 0.01 0.29 (0.36) (0.54) 0.30 0.21 0.01 0.29
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.22) 0.65 0.57 0.40 0.68 (0.27) (0.27) 0.59 0.52 0.34 0.62
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income...... (0.33) (0.35) (0.36) (0.39) (0.39) (0.09) (0.27) (0.29) (0.31) (0.33) (0.33)
Distributions from
capital gains.......... (0.10) (0.08) (0.25) -- (0.10) -- (0.10) (0.08) (0.25) -- (0.10)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.43) (0.43) (0.61) (0.39) (0.49) (0.09) (0.37) (0.37) (0.56) (0.33) (0.43)
------- ------- ------- ------- ------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.13 $7.78 $7.56 $7.60 $7.59 $7.22 $7.22 $7.86 $7.64 $7.68 $7.67
======= ======= ======= ======= ======= ====== ====== ====== ====== ====== ======
Total Return: (3.05)% 8.87% 7.96% 5.37% 9.77% (3.33)% (3.57)% 7.97% 7.10% 4.56% 8.79%
Ratios/Supplemental
Data:
Net assets, end of
period (in thousands).. $52,992 $61,739 $62,597 $66,293 $73,561 $127 $1,550 $1,582 $1,282 $1,152 $1,190
Ratio of expenses to
average net assets***.. 1.07% 1.02% 1.06% 1.02% 1.01% 1.82%+ 1.82% 1.80% 1.83% 1.79% 1.89%
Ratio of net income to
average net assets***.. 4.35% 4.54% 4.90% 5.06% 5.29% 3.71%+ 3.60% 3.76% 4.13% 4.29% 4.45%
Portfolio turnover
rate................... 5.55% 23.37% 20.22% 25.65% 4.66% 5.55%++ 5.55% 23.37% 20.22% 25.65% 4.66%
</TABLE>
- -------------
See footnotes on page 59.
56
<PAGE>
NEW YORK FUND
<TABLE>
<CAPTION>
CLASS A CLASS C
-------------------------------------------- -----------
Year ended September 30,
-------------------------------------------- 5/27/99(**)
1999 1998 1997 1996 1995 to 9/30/99
------- ------- ------- ------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of
period....................... $8.60 $8.28 $7.98 $7.86 $7.67 $8.14
------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income........ 0.38 0.40 0.41 0.42 0.42 0.11
Net gains or losses on
securities
(both realized and unrealized).. (0.69) 0.40 0.32 0.12 0.36 (0.44)
------- ------- ------- ------- ------- ------
Total from investment
operations................... (0.31) 0.80 0.73 0.54 0.78 (0.33)
------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income........... (0.38) (0.40) (0.41) (0.42) (0.42) (0.11)
Distributions from capital
gains....................... (0.21) (0.08) (0.02) -- (0.17) --
------- ------- ------- ------- ------- ------
Total distributions........... (0.59) (0.48) (0.43) (0.42) (0.59) (0.11)
------- ------- ------- ------- ------- ------
Net asset value, end of
period....................... $7.70 $8.60 $8.28 $7.98 $7.86 $7.70
======= ======= ======= ======= ======= ======
Total Return: (3.86)% 10.02% 9.45% 6.97% 10.93% (4.22)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $76,833 $76,833 $83,528 $82,719 $83,980 $189
Ratio of expenses to average
net assets................... 0.81% 0.81% 0.82% 0.77% 0.88% 1.69%+
Ratio of net income to average
net assets................... 4.63% 4.74% 5.09% 5.24% 5.52% 3.96%+
Portfolio turnover rate....... 11.85% 39.85% 23.83% 25.88% 34.05% 11.85%++
<CAPTION>
CLASS D
----------------------------------------
Year ended September 30,
----------------------------------------
1999 1998 1997 1996 1995
-------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value, beginning of
period....................... $8.60 $8.29 $7.98 $7.87 $7.67
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income........ 0.30 0.32 0.34 0.34 0.34
Net gains or losses on
securities
(both realized and unrealized).. (0.69) 0.39 0.33 0.11 0.37
-------- ------- ------- ------- -------
Total from investment
operations................... (0.39) 0.71 0.67 0.45 0.71
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income........... (0.30) (0.32) (0.34) (0.34) (0.34)
Distributions from capital
gains....................... (0.21) (0.08) (0.02) -- (0.17)
-------- ------- ------- ------- -------
Total distributions........... (0.51) (0.40) (0.36) (0.34) (0.51)
-------- ------- ------- ------- -------
Net asset value, end of
period....................... $7.70 $8.60 $8.29 $7.98 $7.87
======== ======= ======= ======= =======
Total Return: (4.73)% 8.88% 8.60% 5.86% 9.87%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $2,844 $2,182 $1,572 $1,152 $885
Ratio of expenses to average
net assets................... 1.71% 1.72% 1.73% 1.68% 1.96%
Ratio of net income to average
net assets................... 3.73% 3.83% 4.18% 4.33% 4.42%
Portfolio turnover rate....... 11.85% 39.85% 23.83% 25.88% 34.05%
NORTH CAROLINA FUND
Per Share Data:*
Net asset value, beginning of
period....................... $8.30 $8.05 $7.84 $7.74 $7.30 $7.97
------- ------- ------- ------- ------- ------
Income from investment
operations:
Net investment income***..... 0.35 0.36 0.37 0.37 0.39 0.10
Net gains or losses on
securities
(both realized and unrealized).. (0.59) 0.31 0.24 0.11 0.45 (0.38)
------- ------- ------- ------- ------- ------
Total from investment
operations................... (0.24) 0.67 0.61 0.48 0.84 (0.28)
------- ------- ------- ------- ------- ------
Less distributions:
Dividends from net
investment income........... (0.35) (0.36) (0.37) (0.37) (0.39) (0.10)
Distributions from capital
gains....................... (0.12) (0.06) (0.03) (0.01) (0.01) --
------- ------- ------- ------- ------- ------
Total distributions........... (0.47) (0.42) (0.40) (0.38) (0.40) (0.10)
------- ------- ------- ------- ------- ------
Net asset value, end of
period....................... $7.59 $8.30 $8.05 $7.84 $7.74 $7.59
======= ======= ======= ======= ======= ======
Total Return: (3.07)% 8.60% 8.01% 6.39% 11.92% (3.62)%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $27,224 $32,358 $32,684 $35,934 $37,446 $10
Ratio of expenses to average
net assets***................ 1.06% 1.05% 1.09% 1.05% 0.82% 1.80%+
Ratio of net income to average
net assets***................ 4.38% 4.41% 4.66% 4.75% 5.21% 3.77%+
Portfolio turnover rate....... 1.52% 20.37% 13.04% 15.12% 4.38% 1.52%++
Per Share Data:*
Net asset value, beginning of
period....................... $8.30 $8.05 $7.83 $7.74 $7.29
-------- ------- ------- ------- -------
Income from investment
operations:
Net investment income***..... 0.29 0.30 0.31 0.31 0.33
Net gains or losses on
securities
(both realized and unrealized).. (0.59) 0.31 0.25 0.10 0.46
-------- ------- ------- ------- -------
Total from investment
operations................... (0.30) 0.61 0.56 0.41 0.79
-------- ------- ------- ------- -------
Less distributions:
Dividends from net
investment income........... (0.29) (0.30) (0.31) (0.31) (0.33)
Distributions from capital
gains....................... (0.12) (0.06) (0.03) (0.01) (0.01)
-------- ------- ------- ------- -------
Total distributions........... (0.41) (0.36) (0.34) (0.32) (0.34)
-------- ------- ------- ------- -------
Net asset value, end of
period....................... $7.59 $8.30 $8.05 $7.83 $7.74
======== ======= ======= ======= =======
Total Return: (3.79)% 7.77% 7.33% 5.45% 11.19%
Ratios/Supplemental Data:
Net assets, end of period
(in thousands)............... $1,682 $1,456 $1,217 $1,232 $1,257
Ratio of expenses to average
net assets***................ 1.81% 1.82% 1.85% 1.81% 1.64%
Ratio of net income to average
net assets***................ 3.63% 3.64% 3.90% 3.99% 4.42%
Portfolio turnover rate....... 1.52% 20.37% 13.04% 15.12% 4.38%
</TABLE>
- -------------
See footnotes on page 59.
57
<PAGE>
OHIO FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------- ----------- ---------------------------------------
Year ended September 30, 5/27/99(**) Year ended September 30,
------------------------------------------------- to ---------------------------------------
1999 1998 1997 1996 1995 9/30/99 1999 1998 1997 1996 1995
-------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning
of period............. $8.37 $8.19 $8.09 $8.11 $7.90 $8.06 $8.41 $8.23 $8.13 $8.15 $7.92
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.38 0.40 0.42 0.43 0.44 0.11 0.31 0.33 0.35 0.36 0.36
Net gains or losses on
securities (both
realized and
unrealized)........... (0.60) 0.29 0.17 0.02 0.28 (0.38) (0.60) 0.29 0.17 0.02 0.30
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.22) 0.69 0.59 0.45 0.72 (0.27) (0.29) 0.62 0.52 0.38 0.66
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.38) (0.40) (0.42) (0.43) (0.44) (0.11) (0.31) (0.33) (0.35) (0.36) (0.36)
Distributions from
capital gains......... (0.13) (0.11) (0.07) (0.04) (0.07) -- (0.13) (0.11) (0.07) (0.04) (0.07)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.51) (0.51) (0.49) (0.47) (0.51) (0.11) (0.44) (0.44) (0.42) (0.40) (0.43)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.64 $8.37 $8.19 $8.09 $8.11 $7.68 $7.68 $8.41 $8.23 $8.13 $8.15
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.68)% 8.77% 7.54% 5.68% 9.59% (3.51)% (3.52)% 7.78% 6.57% 4.74% 8.67%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $135,034 $153,126 $154,419 $162,243 $170,191 $18 $1,327 $1,103 $1,160 $1,011 $660
Ratio of expenses to
average
net assets............ 0.81% 0.78% 0.81% 0.77% 0.84% 1.71%+ 1.71% 1.69% 1.71% 1.67% 1.93%
Ratio of net income to
average
net assets............ 4.78% 4.92% 5.19% 5.32% 5.56% 3.99%+ 3.88% 4.01% 4.29% 4.42% 4.48%
Portfolio turnover
rate.................. 6.07% 24.74% 11.76% 12.90% 2.96% 6.07%++ 6.07% 24.74% 11.76% 12.90% 2.96%
OREGON FUND
Per Share Data:*
Net asset value,
beginning of period... $8.05 $7.87 $7.65 $7.66 $7.43 $7.83 $8.04 $7.87 $7.64 $7.65 $7.43
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment
income***............. 0.35 0.36 0.38 0.40 0.40 0.10 0.28 0.29 0.31 0.33 0.33
Net gains or losses on
securities (both
realized and
unrealized)........... (0.52) 0.28 0.26 -- 0.25 (0.35) (0.51) 0.27 0.27 -- 0.24
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............ (0.17) 0.64 0.64 0.40 0.65 (0.25) (0.23) 0.56 0.58 0.33 0.57
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.35) (0.36) (0.38) (0.40) (0.40) (0.10) (0.28) (0.29) (0.31) (0.33) (0.33)
Distributions from
capital gains......... (0.05) (0.10) (0.04) (0.01) (0.02) -- (0.05) (0.10) (0.04) (0.01) (0.02)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions.... (0.40) (0.46) (0.42) (0.41) (0.42) (0.10) (0.33) (0.39) (0.35) (0.34) (0.35)
-------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................ $7.48 $8.05 $7.87 $7.65 $7.66 $7.48 $7.48 $8.04 $7.87 $7.64 $7.65
======== ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (2.16)% 8.48% 8.60% 5.27% 9.05% (3.32)% (2.92)% 7.37% 7.77% 4.33% 7.86%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands)........ $54,473 $57,601 $55,239 $57,345 $59,549 $ -- $2,231 $2,650 $1,678 $1,540 $1,495
Ratio of expenses to
average
net assets*** ........ 0.86% 0.88% 0.90% 0.86% 0.86% 1.73% + 1.76% 1.79% 1.80% 1.76% 1.83%
Ratio of net income to
average
net assets*** ........ 4.52% 4.60% 4.88% 5.18% 5.40% 3.77% + 3.62% 3.69% 3.98% 4.28% 4.41%
Portfolio turnover
rate.................. 12.28% 12.62% 19.46% 28.65% 2.47% 12.28%++ 12.28% 12.62% 19.46% 28.65% 2.47%
</TABLE>
- -------------
See footnotes on page 59.
58
<PAGE>
PENNSYLVANIA FUND
<TABLE>
<CAPTION>
CLASS A CLASS C CLASS D
------------------------------------------------ ----------- ---------------------------------------
Year ended September 30, Year ended September 30,
------------------------------------------------ 5/27/99(**) ---------------------------------------
1999 1998 1997 1996 1995 to 9/30/99 1999 1998 1997 1996 1995
------- -------- -------- -------- -------- ----------- ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Per Share Data:*
Net asset value,
beginning of period.... $8.24 $7.96 $7.82 $7.79 $7.55 $7.88 $8.23 $7.95 $7.81 $7.78 $7.54
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.34 0.35 0.36 0.38 0.38 0.10 0.28 0.29 0.30 0.32 0.31
Net gains or losses on
securities (both
realized and
unrealized)........... (0.60) 0.36 0.24 0.12 0.37 (0.39) (0.59) 0.36 0.24 0.12 0.37
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.26) 0.71 0.60 0.50 0.75 (0.29) (0.31) 0.65 0.54 0.44 0.68
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.34) (0.35) (0.36) (0.38) (0.38) (0.10) (0.28) (0.29) (0.30) (0.32) (0.31)
Distributions from
capital gains......... (0.15) (0.08) (0.10) (0.09) (0.13) -- (0.15) (0.08) (0.10) (0.09) (0.13)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.49) (0.43) (0.46) (0.47) (0.51) (0.10) (0.43) (0.37) (0.40) (0.41) (0.44)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.49 $8.24 $7.96 $7.82 $7.79 $7.49 $7.49 $8.23 $7.95 $7.81 $7.78
======= ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (3.38)% 9.20% 7.89% 6.57% 10.55% (3.84)% (3.99)% 8.36% 7.07% 5.76% 9.53%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands) ........ $25,142 $29,582 $30,092 $31,139 $33,251 $143 $856 $607 $816 $876 $426
Ratio of expenses to
average
net assets............. 1.21% 1.19% 1.19% 1.11% 1.21% 1.93%+ 1.96% 1.97% 1.96% 1.88% 2.23%
Ratio of net income to
average
net assets............. 4.25% 4.34% 4.60% 4.82% 5.05% 3.69%+ 3.50% 3.56% 3.83% 4.05% 4.10%
Portfolio turnover
rate................... 7.80% 13.05% 32.99% 4.56% 11.78% 7.80%++ 7.80% 13.05% 32.99% 4.56% 11.78%
SOUTH CAROLINA FUND
Per Share Data:*
Net asset value,
beginning of period.... $8.38 $8.16 $8.07 $7.97 $7.61 $8.08 $8.38 $8.16 $8.06 $7.97 $7.61
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Income from investment
operations:
Net investment income.. 0.38 0.39 0.40 0.41 0.41 0.11 0.30 0.31 0.33 0.34 0.34
Net gains or losses on
securities (both
realized and
unrealized)........... (0.64) 0.29 0.22 0.12 0.37 (0.42) (0.65) 0.29 0.23 0.11 0.37
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total from investment
operations............. (0.26) 0.68 0.62 0.53 0.78 (0.31) (0.35) 0.60 0.56 0.45 0.71
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Less distributions:
Dividends from net
investment income..... (0.38) (0.39) (0.40) (0.41) (0.41) (0.11) (0.30) (0.31) (0.33) (0.34) (0.34)
Distributions from
capital gains......... (0.07) (0.07) (0.13) (0.02) (0.01) -- (0.07) (0.07) (0.13) (0.02) (0.01)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Total distributions..... (0.45) (0.46) (0.53) (0.43) (0.42) (0.11) (0.37) (0.38) (0.46) (0.36) (0.35)
------- -------- -------- -------- -------- ------ ------ ------ ------ ------ ------
Net asset value, end of
period................. $7.67 $8.38 $8.16 $8.07 $7.97 $7.66 $7.66 $8.38 $8.16 $8.06 $7.97
======= ======== ======== ======== ======== ====== ====== ====== ====== ====== ======
Total Return: (3.32)% 8.66% 7.99% 6.82% 10.69% (4.01)% (4.32)% 7.68% 7.15% 5.73% 9.63%
Ratios/Supplemental
Data:
Net assets, end of
period
(in thousands) ........ $92,793 $106,328 $101,018 $108,163 $112,421 $335 $5,936 $5,594 $3,663 $2,714 $1,704
Ratio of expenses to
average
net assets ............ 0.83% 0.80% 0.84% 0.80% 0.88% 1.72%+ 1.73% 1.71% 1.75% 1.70% 1.85%
Ratio of net income to
average
net assets............. 4.65% 4.74% 5.04% 5.15% 5.38% 3.96%+ 3.75% 3.83% 4.13% 4.25% 4.40%
Portfolio turnover
rate................... 18.06% 16.63% -- 20.66% 4.13% 18.06%++ 18.06% 16.63% -- 20.66% 4.13%
</TABLE>
- -------------
* Per share amounts are based on average shares outstanding.
** Commencement of offering of Class C shares.
*** For periods prior to 1996 (1997 for the Florida Fund and the North Carolina
Fund), Seligman voluntarily waived a portion of its management fees. These
amounts reflect the effect of the waivers.
+ Annualized.
++ For the year ended September 30, 1999.
59
<PAGE>
How to Contact Us
<TABLE>
<S> <C> <C>
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
</TABLE>
24-hour automated 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.
60
<PAGE>
For More Information
The following information is available without charge upon request: Call
toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US. You
may also call these numbers to request other information about the Funds or to
make shareholder inquiries.
Statement of Additional Information (SAI) contains additional information about
the Fund. It is on file with the Securities and Exchange Commission, or SEC, and
is incorporated by reference into (is legally part of) this prospectus.
Annual/Semi-Annual Reports contain additional information about the Fund's
investments. In the Fund's annual report, you will find a discussion of the
market conditions and investment strategies that significantly affected the
Fund's performance during its last fiscal year.
SELIGMAN ADVISORS, INC.
an affiliate of
[LOGO]
J.& W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Information about the Fund, including the SAI, can be viewed and copied at the
SEC's Public Reference Room in Washington, DC. For information about the
operation of the Public Reference Room, call (202) 942-8090. The SAI,
Annual/Semi-Annual Reports and other information about the Fund are also
available on the EDGAR Database on the SEC's Internet site: http://www.sec.gov.
Copies of this information may be obtained, upon payment of a duplicating fee,
by electronic request at the following E-mail address: [email protected], or by
writing: Securities and Exchange Commission, Public Reference Section,
Washington, DC 20549-0102.
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, 2000
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 Seligman Municipal Funds,
dated February 1, 2000. 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 ............................................... 7
Control Persons and Principal Holders of Securities .................. 12
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 ...................................... 25
Financial Statements ................................................. 28
General Information................................................... 28
Appendix A ........................................................... 29
Appendix B ........................................................... 32
Appendix C ........................................................... 43
<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, as amended (1940 Act), the
identification of the issuer of municipal bonds or notes depends on the terms
and conditions of the obligation. If the assets and revenues of an agency,
authority, instrumentality or other political subdivision are separate from
those of the government creating the subdivision and the obligation is backed
only by the assets and revenues of the subdivision, such subdivision is regarded
as the sole issuer. Similarly, in the case of an industrial development revenue
bond or pollution control revenue bond, if only the assets and revenues of the
non-governmental user back the bond, the non-governmental
2
<PAGE>
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.
On September 16, 1999, the Board of Directors eliminated the non-fundamental
policy that prohibited the Fund, with respect to 75% of the value of its assets,
from purchasing 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.
However, the Fund remains subject to a non-fundamental policy which prohibits
the Fund, with respect to 50% of the value of its total assets, from purchasing
the securities of any one issuer if, as a result of such purchase, more than 5%
of the Fund's total assets (at market value) would be invested in the securities
of a single issuer (except for obligations issued or guaranteed by the US
Government or its agencies or instrumentalities) at the close of each quarter of
its taxable year.
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.
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.
3
<PAGE>
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, from 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.
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.
4
<PAGE>
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 (SEC) for an exemptive order relating to
such commitments and the valuation thereof. There can be no assurance that the
SEC 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 SEC.
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 (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 New Jersey personal income tax. Such interest,
however, may be subject to the federal alternative minimum tax.
Under normal market conditions, temporary investments in taxable securities will
be limited as a matter of fundamental policy to 20% of the value of 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
5
<PAGE>
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 its 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.
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 "New Jersey
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
6
<PAGE>
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, 1999 and 1998, were 5.55% and
23.37%, respectively. The Fund's portfolio turnover rate will not be a limiting
factor when the Fund deems it desirable to sell or purchase securities.
Management of the Fund
Board of Directors
The Board of Directors provides broad supervision over the affairs of the Fund.
Management Information
Directors and officers of the Fund, together with information as to their
principal business occupations during the past five years, are shown below. Each
Director who is an "interested person" of the Fund, as defined in the 1940 Act,
is indicated by an asterisk. Unless otherwise indicated, their addresses are 100
Park Avenue, New York, NY 10017.
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
William C. Morris* Director, Chairman Chairman, J. & W. Seligman & Co. Incorporated, Chairman and
(61) of the Board, Chief Chief Executive Officer, the Seligman Group of investment
Executive Officer companies; Chairman, Seligman Advisors, Inc, Seligman
and Chairman of the Services, Inc., and Carbo Ceramics Inc., ceramic proppants for
Executive Committee oil and gas industry; and Director, Seligman Data Corp.,
Kerr-McGee Corporation, diversified energy company. Formerly,
Director, Daniel Industries Inc., manufacturer of oil and gas
metering equipment.
</TABLE>
7
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Brian T. Zino* Director, President Director and President, J. & W. Seligman & Co. Incorporated;
(47) and Member of the President (with the exception of Seligman Quality Municipal
Executive Committee Fund, Inc. and Seligman Select Municipal Fund, Inc.) and
Director or Trustee, the Seligman Group of investment
companies; Chairman, Seligman Data Corp.; Member of the Board
of Governors of the Investment Company Institute and Director,
ICI Mutual Insurance Company, Seligman Advisors, Inc., and
Seligman Services, Inc.
Richard R. Schmaltz* Director and Member Director and Managing Director, Director of Investments, J. &
(59) of the Executive W. Seligman & Co. Incorporated; Director or Trustee, the
Committee Seligman Group of investment companies (except Seligman Cash
Management Fund, Inc.); Director, Seligman Henderson Co., and
Trustee Emeritus of Colby College. Formerly, Director,
Investment Research at Neuberger & Berman from May 1993 to
September 1996.
John R. Galvin Director Dean, Fletcher School of Law and Diplomacy at Tufts
(70) University; Director or Trustee, the Seligman Group of
Tufts University investment companies; Chairman Emeritus, American Council on
Packard Avenue, Germany; a Governor of the Center for Creative Leadership;
Medford, MA 02155 Director; Raytheon Co., electronics; National Defense
University; and the Institute for Defense Analysis. Formerly,
Director, USLIFE Corporation, life insurance; 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
(64) Trustee, the Seligman Group of investment companies; Trustee,
18 Highland Circle the Committee for Economic Development; and Chairman, The
Bronxville, NY 10708 Rockefeller Foundation, charitable foundation. Formerly,
Trustee, The Markle Foundation, philanthropic organization;
and Director, New York Telephone Company and International
Research and Exchange Board, intellectual exchanges.
</TABLE>
8
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
Frank A. McPherson Director Retired Chairman and Chief Executive Officer of Kerr-McGee
(66) 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.
John E. Merow Director Retired Chairman and Senior Partner, Sullivan & Cromwell, law
(70) firm; Director or Trustee, the Seligman Group of investment
125 Broad Street, companies; Director, Commonwealth Industries, Inc.,
New York, NY 10004 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, 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 investment
(57) companies; Trustee, The Geraldine R. Dodge Foundation,
P.O. Box 449 charitable foundation. Formerly, Chairman of the Board of
Gladstone, NJ 07934 Trustees of St. George's School (Newport, RI) and Director, the
National Association of Independent Schools (Washington, DC).
James C. Pitney Director Retired Partner, Pitney, Hardin, Kipp & Szuch, law firm;
(73) 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
(72) companies; Director, The Houston Exploration Company, oil
675 Third Avenue, exploration; The Brooklyn Museum, KeySpan Energy Corporation;
Suite 3004 and Public 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., pharmaceuticals; Director
(67) or Trustee, the Seligman Group of investment companies.
96 Evergreen Avenue, Formerly, Director, USLIFE Corporation, life insurer.
Rye, NY 10580
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
Name, Principal
(Age) and Position(s) Held Occupation(s) During
Address with Fund Past 5 Years
------- --------- ------------
<S> <C> <C>
James N. Whitson Director Director and Consultant, Sammons Enterprises, Inc., a
(64) diversified holding company; Director or Trustee, the Seligman
6606 Forestshire Drive Group of investment companies; Directors, C-SPAN, cable
Dallas, TX 75230 television, and CommScope, Inc., manufacturer of coaxial
cables. 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 Director and Managing Director, J. & W. Seligman & Co.
(57) Senior Portfolio Incorporated; Vice President and Senior Portfolio Manager,
Manager three other open-end investment companies in the Seligman Group
of investment companies; 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.
(43) Incorporated, Seligman Advisors, Inc., and Seligman Data Corp.;
Vice President, the Seligman Group of investment companies and
Seligman Services, Inc.; Vice President and Treasurer, Seligman
International, Inc., and Treasurer, Seligman Henderson Co.
Frank J. Nasta Secretary General Counsel, Senior Vice President, Law and Regulation and
(35) Corporate Secretary, J. & W. Seligman & Co. Incorporated;
Secretary, the Seligman Group of investment companies,
Seligman Advisors, Inc., Seligman Henderson Co., Seligman
Services, Inc., Seligman International, Inc. and Seligman Data
Corp.
Thomas G. Rose Treasurer Treasurer, the Seligman Group of investment companies and
(42) 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 Fund for
which no market valuation is available, and to elect or appoint officers of the
Fund to serve until the next meeting of the Board.
Directors and officers of the Fund are also directors and officers of some or
all of the other investment companies in the Seligman Group.
10
<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 $606 N/A $82,000
Alice S. Ilchman, Director 586 N/A 80,000
Frank A. McPherson, Director 606 N/A 80,000
John E. Merow, Director 606 N/A 80,000
Betsy S. Michel, Director 606 N/A 82,000
James C. Pitney, Director 566 N/A 74,000
James Q. Riordan, Director 586 N/A 80,000
Robert L. Shafer, Director 586 N/A 80,000
James N. Whitson, Director 586(3) N/A 80,000(3)
</TABLE>
- ----------
(1) For the Fund's fiscal year ended September 30, 1999.
(2) The Seligman Group of investment companies consists of twenty investment
companies.
(3) 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 certain of the investment
companies advised by J. & W. Seligman & Co. Incorporated (Seligman), 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, 1999 was $13,525.
Messrs. Merow and Pitney no longer defer current compensation; however, they
have accrued deferred compensation in the amounts of $21,313 and $6,518,
respectively, as of September 30, 1999.
The Fund may, but is not obligated to, purchase shares of the other funds in the
Seligman Group of investment companies to hedge its obligations in connection
with the deferred compensation plan.
Sales Charges
Class A shares of the Fund may be issued without a sales charge to present and
retired directors or trustees, officers, employees (and their family members) of
the Fund, the other investment companies in the Seligman Group, andSeligman 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 bySeligman 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.
Code of Ethics
Seligman, Seligman Advisors, Inc. (Seligman Advisors), their subsidiaries and
affiliates, and the Seligman Group of investment companies have adopted a Code
of Ethics that sets forth the circumstances under which officers, directors and
employees (collectively, Employees) are permitted to engage in personal
securities transactions. 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
11
<PAGE>
Director of Compliance, and sets forth a procedure of identifying, for
disciplinary action, those individuals who violate the Code of Ethics. The Code
of Ethics prohibits Employees (including all investment team members) from
purchasing or selling any security or an equivalent security that is being
purchased or sold by any client, or where the Employee intends, or knows of
another's intention, to purchase or sell a security on behalf of a client. The
Code also prohibits all Employees from acquiring securities in a private
placement or in an initial or secondary public offering unless an exemption has
been obtained from Seligman's Director of Compliance.
The Code of Ethics 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) that the portfolio manager or investment team
manages; (2) each Employee from engaging in short-term trading (a purchase and
sale or vice-versa within 60 days); and (3) each member of an investment team
from engaging in short sales of a security if, at that time, any client managed
by that team has a long position in that security. Any profit realized pursuant
to any of these prohibitions must be disgorged.
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 Employees are also required to disclose all
securities beneficially owned by them upon commencement of employment and at the
end of each calendar year.
A copy of the Code of Ethics is on public file with, and is available upon
request from, the SEC. You can access it through the SEC's Internet site,
http://www.sec.gov.
Control Persons and Principal Holders of Securities
Control Persons
As of January 7, 2000, 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 7, 2000, Merrill Lynch, Pierce, Fenner & Smith Incorporated for
the Benefit Of Its Customers, Attn. Fund Administration, 4800 Deer Lake Drive
East 3rd Floor, Jacksonville, FL 32246, owned of record 12.79% of the then
outstanding Class A shares of capital stock of the Fund and 30.95% of the then
outstanding Class D shares of capital stock of the Fund. As of the same date, ,
Betsy B. Shirley, Post Kennel Road, Box 159, Bernardsville, NJ 07924-0159, owned
of record 5.24% of the then outstanding Class A shares of capital stock of the
Fund, PaineWebber for the benefit of Sara P. Badger, 7 Crestview Drive, Somers
Point, NJ 08244, owned of record 47.79% of the then outstanding Class C shares
of capital stock of the Fund, Salomon Smith Barney Inc, For Accounts, 333 West
34th Street, 3rd Floor, New York, NY 10001, owned of record 26.96% and 25.25%,
respectively, of the then outstanding Class C shares of capital stock of the
Fund, Brice C. Nadler and Katalin I. Nadler Jt Ten, 4 Evergreen Avenue, Wharton,
NJ 07885-1033, owned of record 7.24% of the then outstanding Class D shares of
capital stock of the Fund, Marie Y. Celebre & Dominick G. Celebre Jt Ten, 748
Vaughn Avenue, Toms River, NJ 08753-4569, owned of record 5.31% of the then
outstanding Class D shares of capital stock of the Fund and Patricia Ann Barry
TOD, Patty Giordano & Gregory Powelson and Christopher & Kevin Powelson subject
to State TOD Rules, 9700 Atlantic Avenue Unit N-8, Wildwood Crest, NJ 08260,
owned of record 17.78% of the then outstanding Class D shares of capital stock
of the Fund.
Management Ownership
As of January 7, 2000, Directors and officers of the Fund as a group owned 1.34%
of the Fund's Class A capital stock then outstanding. As of the same date, no
Directors or officers of the Fund owned Class C or Class D shares of capital
stock.
12
<PAGE>
Investment Advisory and Other Services
Investment Manager
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, 1999, 1998
and 1997, the Fund paid Seligman management fees in the amount of $298,783,
$315,590 and $325,747, 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 recordkeeping 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 Board of Directors
to be fair and equitable.
The Management Agreement also provides that Seligman will not be liable to the
Fund for any error of judgment or mistake of law, or for any loss arising out of
any investment, or for any act or omission in performing its duties under the
Management Agreement, except for willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations and duties under the
Management Agreement.
The Management Agreement was unanimously approved by the Board of 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.
Principal Underwriter
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.
13
<PAGE>
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 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 and Class C shares of the Fund, as set forth below:
Class A shares:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
as a % of as a % of Net as a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $ 50,000 4.75% 4.99% 4.25%
$50,000 - $ 99,999 4.00 4.17 3.50
$100,000 - $249,999 3.50 3.63 3.00
$250,000 - $499,999 2.50 2.56 2.25
$500,000 - $999,999 2.00 2.04 1.75
$1,000,000 and over 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
Class C shares:
<TABLE>
<CAPTION>
Regular Dealer
Sales Charge Sales Charge Reallowance
as a % of as a % of Net as a % of
Amount of Purchase Offering Price(1) Amount Invested Offering Price
- ------------------ ----------------- --------------- --------------
<S> <C> <C> <C>
Less than $100,000 1.00% 1.01% 1.00%
$100,000 - $249,000 0.50 0.50 0.50
$250,000 - $1,000,000 0 0 0
</TABLE>
(1) "Offering Price" is the amount that you actually pay for Fund shares; it
includes the initial sales charge.
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 fiscal years ended
September 30, 1999, 1998 and 1997, Seligman Services received commissions of
$2,734, $362 and $2,451, respectively.
14
<PAGE>
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,
Class C, 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 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 are 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. This fee is 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, 1999 was $146,701, equivalent to .25% of the
Class A shares' average daily net assets.
Class C
Under the 12b-1 Plan, the Fund, with respect to Class C 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 C shares. This fee is used by Seligman Advisors as
follows: During the first year following the sale of Class C shares, a
distribution fee of .75% of the average daily net assets attributable to Class C
shares is used, along with any CDSC proceeds during the first eighteen months,
to (1) reimburse Seligman Advisors for its payment at the time of sale of Class
C shares of a 1.25% 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 C shares, a service fee of up to .25% of the average daily net assets
attributable to such Class C shares is used to reimburse Seligman Advisors for
its prepayment to Service Organizations at the time of sale of Class C shares of
a service fee of .25% of the net asset value of the Class C shares sold (for
shareholder services to be provided to Class C shareholders over the course of
the one year immediately following the sale). The payment of service fees to
Seligman Advisors is limited to amounts
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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 C
shares, the entire 12b-1 fee attributable to such Class C shares is paid to
Service Organizations for providing continuing shareholder services and
distribution assistance in respect of the Fund. The total amount paid by the
Fund to Seligman Advisors in respect of Class C shares from May 27, 1999
(inception) to September 30, 1999 was $253, equivalent to 1% per annum of the
Class C shares' average daily net assets.
The amounts expended by Seligman Advisors in any one year with respect to Class
C 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 C shares in one fiscal year to be paid from Class C 12b-1 fees 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, 1999, Seligman Advisors incurred $1,924 of unreimbursed
expenses in respect of the Fund's Class C shares. This amount is equal to 0.51%
of the net assets of Class C shares at September 30, 1999.
If the 12b-1 Plan is terminated in respect of Class C shares of the Fund, no
amounts (other than amounts accrued by not yet paid) would be owed by the Fund
to Seligman Advisors with respect to Class C shares.
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. This 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 such
Class D shares 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 .25% of the net asset value of the Class D shares sold (for shareholder
services to be provided to Class D shareholders over the course of the one year
immediately following the sale). The payment of service fees 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 the Fund. The
total amount paid by the Fund to Seligman Advisors in respect of Class D shares
for the fiscal year ended September 30, 1999 was $17,471 equivalent to 1% per
annum of the Class D shares' average daily net assets.
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 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, 1999 Seligman Advisors incurred $7,455 of unreimbursed
expenses in respect of the Fund's Class D shares. This amount is equal to .48%
of the net assets of Class D shares at September 30, 1999.
If the 12b-1 Plan is terminated in respect of Class D shares of the Fund, 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 the fiscal year ended
September 30, 1999, were spent on the following activities in the following
amounts:
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Class A Class C* Class D
------- -------- -------
Compensation to underwriters $ -0- $253 $ 3,747
Compensation to broker/dealers $146,701 $-0- $13,724
* From May 27, 1999 (inception) to September 30, 1999.
The 12b-1 Plan was approved on January 12, 1988 by the Board of 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 (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 was approved in respect of
Class C shares on May 20, 1999 by the Directors, including a majority of the
Qualified Directors, and became effective in respect of the Class C shares on
June 1, 1999. 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, 1999, 1998 and 1997, Seligman Services received
distribution and service fees of $11,293, $10,296 and $9,787, respectively, from
the Fund pursuant to the 12b-1 Plan.
Brokerage Allocation and Other Practices
Brokerage Transactions
For the fiscal years ended September 30, 1999, 1998 and 1997, 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 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, 1999, 1998 and 1997, 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.
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Regular Broker-Dealers
During the Fund's fiscal year ended September 30, 1999, the Fund did not acquire
securities of its regular brokers or dealers (as defined in Rule 10b-1 under the
1940 Act) or of its 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 three classes, designated Class A common stock,
Class C common stock, and Class D common stock. Each share of the Fund's Class
A, Class C, and Class D common 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 common stock.
Purchase, Redemption, and Pricing of Shares
Purchase of Shares
Class A
Class A shares may be purchased at a price equal to the next determined net
asset value per share, plus an initial sales charge.
Purchases of Class A shares by a "single person" (as defined below under
"Persons Entitled to Reductions") 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
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<PAGE>
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.
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
director or trustee or other fiduciary purchasing for a single fiduciary
account. Employee benefit plans qualified under Section 401 of the Internal
Revenue Code of 1986, as amended, organizations tax exempt under Section
501(c)(3) or (13) of the Internal Revenue Code, and non-qualified employee
benefit plans that satisfy uniform criteria are considered "single persons" for
this purpose. The uniform criteria are as follows:
1. Employees must authorize the employer, if requested by a Fund, to
receive in bulk and to distribute to each participant on a timely basis the Fund
prospectus, reports, and other shareholder communications.
2. Employees participating in a plan will be expected to make regular
periodic investments (at least annually). A participant who fails to make such
investments may be dropped from the plan by the employer or the Fund 12 months
and 30 days after the last regular investment in his account. In such event, the
dropped participant would lose the discount on share purchases to which the plan
might then be entitled.
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. Section 403(b) Plans
sponsored by public educational institutions are not eligible for net asset
value purchases based on the aggregate investment made by the plan or member of
eligible employees.
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 in the following instances:
(1) 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;
(2) to separate accounts established and maintained by an insurance company
which are exempt from registration under Section 3(c)(11) of the 1940 Act;
(3) to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with Seligman Advisors;
(4) to financial institution trust departments;
(5) to registered investment advisers exercising discretionary investment
authority with respect to the purchase of Fund shares;
19
<PAGE>
(6) 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;
(7) 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;
(8) to other investment companies in the Seligman Group in connection with a
deferred fee arrangement for outside directors;
(9) to certain "eligible employee benefit plans" as discussed above;
(10) to those partners and employees of outside counsel to the Fund or its
directors or trustees who regularly provide advice and services to the
Fund, to other funds managed by Seligman, or to their directors or
trustees; and
(11) in connection with sales pursuant to a 401(k) alliance program which has an
agreement with Seligman Advisors.
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.
Class C
Class C shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. Purchases of Class C shares by a
"single person" may be eligible for the reductions in initial sales charges
described above for Class A shares. Class C shares are subject to a CDSC of 1%
if the shares are redeemed within eighteen months of purchase, charged as a
percentage of the current net asset value or the original purchase price,
whichever is less.
Class D
Class D shares may be purchased at a price equal to the next determined net
asset value, without an initial sales charge. However, Class D shares are
subject to a CDSC of 1% if the shares are redeemed within one year of purchase,
charged as a percentage of the current net asset value or the original purchase
price, whichever is less.
Systematic Withdrawals. Class C and Class D shareholders who reinvest both their
dividends and capital gain distributions to purchase additional shares of the
Fund may use the Systematic Withdrawal Plan to withdraw up to 10% and 10%,
respectively, 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 C shares and 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
20
<PAGE>
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 C or 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 and Class C shares may be issued without an initial sales charge
in connection with the acquisition of cash and securities owned by other
investment companies. Any CDSC will be waived in connection with the redemption
of shares of a Fund if the Fund is combined with another Seligman mutual fund,
or in connection with a similar reorganization transaction.
Payment in Securities. In addition to cash, the Funds may accept securities in
payment for Fund shares sold at the applicable public offering price (net asset
value and, if applicable, any sales charge), although the Funds do not presently
intend to accept securities in payment for Fund shares. Generally, a Fund will
only consider accepting securities (l) to increase its holdings in a portfolio
security, or (2) if Seligman determines that the offered securities are a
suitable investment for the Fund and in a sufficient amount for efficient
management. Although no minimum has been established, it is expected that a Fund
would not accept securities with a value of less than $100,000 per issue in
payment for shares. A Fund may reject in whole or in part offers to pay for Fund
shares with securities, may require partial payment in cash for applicable sales
charges, and may discontinue accepting securities as payment for Fund shares at
any time without notice. The Funds will not accept restricted securities in
payment for shares. The Funds will value accepted securities in the manner
provided for valuing portfolio securities.
Offering Price
When you buy or sell Fund shares, you do so at the Class's net asset value (NAV)
next calculated after Seligman Advisors accepts your request. Any applicable
sales charge will be added to the purchase price for Class A shares and Class C
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 Directors, which uses
information with respect to transactions in
21
<PAGE>
bonds, quotations from bond dealers, market transactions in comparable
securities and various relationships between securities in determining value. In
the absence of such quotations, fair value will be determined in accordance with
procedures approved by the Directors. Short-term 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 and Class C shares are sold with a maximum initial
sales charge of 4.75% and 1.00%(1), respectively, and Class D shares are sold at
NAV(2). Using each Class's NAV at September 30, 1999, the maximum offering price
of the Fund's shares is as follows:
Class A
Net asset value per share....................................... $7.13
Maximum sales charge (4.75% of offering price).................. .36
---
Offering price to public........................................ $7.49
=====
Class C
Net asset value per share....................................... $7.22
Maximum sales charge (1.00% of offering price(1))............... .07
---
Offering price to public........................................ $7.29
=====
Class D
Net asset value and offering price per share(2) ................ $7.22
=====
- --------------
(1) In addition to the 1.00% front-end sales charge, Class C shares are subject
to a 1% CDSC if you redeem your shares within 18 months of purchase.
(2) Class D shares are also subject to a 1% CDSC if you redeem your shares
within one year of purchase.
Redemption in Kind
The procedures for selling Fund shares under ordinary circumstances are set
forth in the Prospectus. In unusual circumstances, payment may be postponed, or
the right of redemption postponed for more than seven days, if the orderly
liquidation of portfolio securities is prevented by the closing of, or
restricted trading on, the NYSE during periods of emergency, or such other
periods as ordered by the SEC. 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
22
<PAGE>
business of investing in such stocks, securities or currencies; (2) and the Fund
diversify its holdings so that, at the end of each quarter of the taxable year,
(i) at least 50% of the market value of the Fund's assets is represented by
cash, US Government securities and other securities limited in respect of any
one issuer to an amount not greater than 5% of the Fund's assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its assets is invested in the securities of any one issuer (other than
US Government securities).
Federal Income Taxes
If, at the end of each quarter of its taxable year, at least 50% of the Fund's
total assets is invested in obligations exempt from regular federal income tax,
the Fund will be eligible to pay dividends that are excludable by shareholders
from gross income for regular federal income tax purposes. The total amount of
such exempt interest dividends paid by the Fund cannot exceed the amount of
federally tax-exempt interest received by the Fund during the year less any
expenses allocable to the Fund.
Distributions of net capital gains (i.e., the excess of net long-term capital
gains over any net short-term losses) are taxable as long-term capital gain,
whether received in cash or invested in additional shares, regardless of how
long the shares have been held by a shareholder, except that the portion of net
capital gains representing accrued market discount on tax-exempt obligations
acquired after April 30, 1993 will be taxable as ordinary income. Individual
shareholders will be subject to federal tax on distributions of net capital
gains at a maximum rate of 20% if designated as derived from the Fund's capital
gains from property held for more than one year. Net Capital gain of a corporate
shareholder is taxed at the same rate as ordinary income. Distributions from the
Fund's other investment income (other than exempt interest dividends) or from
net realized short-term gain will taxable to shareholders as ordinary income,
whether received in cash or invested in additional shares. Distributions
generally will not be eligible for the dividends received deduction allowed to
corporate shareholders. Shareholders receiving distributions in the form of
additional shares issued by the Fund will be treated for federal income tax
purposes as having received a distribution in an amount equal to the fair market
value on the date of distribution of the shares received.
Interest on indebtedness incurred or continued to purchase or carry shares of
the Fund will not be deductible for federal income tax purposes to the extent
that the Fund's distributions are exempt from federal income tax.
Any gain or loss realized upon a sale or redemption of shares in the Fund by a
shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term capital gain or loss. Individual shareholders
will be subject to federal income tax on net capital gains at a maximum rate of
20% in respect of shares held for more than one year. Net capital gain of a
corporate shareholder is taxed at the same rate as ordinary income. However, if
shares on which a long-term capital gain distribution has been received are
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.
23
<PAGE>
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 interest
income or gain from 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
SEC, 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.
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 common stock, Seligman Advisors allows reallowances to all dealers
on sales of Class A shares and Class C shares, as set forth above under "Dealer
Reallowances." Seligman Advisors retains the balance of sales charges and any
CDSCs paid by investors.
Total initial sales charges paid by shareholders of Class A and Class C shares
of the Fund for the fiscal year ended September 30, 1999, and of Class A shares
of the Fund for the fiscal years ended September 30, 1998 and 1997, are shown
below. No Class C shares of the Funds were issued or outstanding during the
fiscal years ended September 30, 1998 and 1997. Also shown are the amounts of
the Class A and Class C sales charges that were retained by Seligman Advisors
for the same periods:
Total Sales Charges Paid Amount of Class A and Class C
by Shareholders on Class Sales Charges Retained by
Fiscal Year A and Class C Shares Seligman Advisors
----------- -------------------- -----------------
1999 $50,781 $5,986
1998 73,037 8,550
1997 96,284 11,430
24
<PAGE>
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 the fiscal year ended September 30, 1999:
Net Underwriting Compensation on
Discounts and Redemptions and
Commissions (Class A Repurchases (CDSC on
and Class C Sales Class A, Class C and Brokerage Other
Charges Retained) Class D Shares Retained) Commissions Compensation
----------------- ------------------------ ----------- ------------
$5,986 $434 $-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 director or trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a director or 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 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 the Manager during a specified period of time. Such bonus or
other incentive will be made in the form of cash or, if permitted, may take the
form of non-cash payments. The non-cash payments will include (i) business
seminars at Seligman's headquarters or other locations, (ii) travel expenses,
including meals, entertainment and lodging, incurred in connection with trips
taken by qualifying registered representatives and members of their families to
places within or outside the United States, or (iii) the receipt of certain
merchandise. The cash payments may include payment of various business expenses
of the dealer. 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, 1999 for the
Fund's Class A shares was 4.29%. 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
25
<PAGE>
4.75% of the net amount invested) on September 30, 1999, which was the last day
of this period. The average number of Class A shares of the Fund was 7,456,023,
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,
1999 for the Fund's Class A shares was 7.59%. 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, 1999 was (7.68)%. The average annual total return for
the Fund's Class A shares for the five-year period ended September 30, 1999 was
4.65%. The average annual total return for the Fund's Class A shares for the
ten-year period ended September 30, 1999 was 6.05%. These returns were computed
by assuming a hypothetical initial payment of $1,000 in Class A shares of the
Fund. From this $1,000, the maximum sales load of $47.50 (4.75% of the 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-, five-, and ten-year
periods 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 C
The annualized yield for the 30-day period ended September 30, 1999 for the
Fund's Class C shares was 3.72%. The annualized yield was computed as discussed
above 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 plus the maximum sales load of 1.00% of the net amount
invested) on September 30, 1999, which was the last day of this period. The
average number of Class C shares of the Fund was 17,117, 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,
1999 for the Fund's Class C shares was 6.58%. The tax equivalent annualized
yield was computed by first computing the annualized yield as discussed above
for Class A shares. 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 C shares' yield, if any, that was
attributable to securities the income of which was not tax-exempt.
The total return for the Fund's Class C shares from May 27, 1999 (inception) to
September 30, 1999 was (5.28)%. This return was computed by assuming a
hypothetical initial payment of $1,000 in Class C shares of the Fund. From this
$1,000, the maximum sales load of $10.00 (1.00% of the public offering price)
was deducted. It was then assumed that all of the dividends and distributions by
the Fund's Class C shares over the period were reinvested. It was then assumed
that at the end of the period, the entire amount was redeemed, subtracting the
1% CDSC, if applicable.
26
<PAGE>
Class D
The annualized yield for the 30-day period ended September 30, 1999 for the
Fund's Class D shares was 3.75%. The annualized yield was computed as discussed
above 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, 1999, which was the last day of this
period. The average number of Class D shares of the Fund was 225,801, 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,
1999 for the Fund's Class D shares was 6.63%. The tax equivalent annualized
yield was computed as discussed above for Class A shares.
The average annual total return for the Fund's Class D shares for the one-year
period ended September 30, 1999 was (4.49)%. The average annual total return for
the Fund's Class D shares for the five-year period ended September 30, 1999 was
4.87%. The average annual total return for the Fund's Class D shares for the
period from February 1, 1994 (inception) through September 30, 1999 was 3.26%.
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 periods were reinvested. It was
then assumed that at the end of the one- and five-year periods 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, Class C and Class D shares for the ten years ended September 30,
1999 or from the Class's inception through September 30, 1999, assuming
investment of all dividends and capital gain distributions.
Class A
<TABLE>
<CAPTION>
Value of Value of Value Total Value
Year Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/90 $ 931 $ 8 $ 61 $1,000
9/30/91 995 13 132 1,140
9/30/92 1,027 17 206 1,250
9/30/93 1,095 37 294 1,426
9/30/94 983 49 333 1,365
9/30/95 1,007 72 419 1,498
9/30/96 1,010 72 497 1,579
9/30/97 1,003 125 576 1,704
9/30/98 1,033 148 675 1,856
9/30/99 947 157 695 1,799 79.93%
</TABLE>
Class C
<TABLE>
<CAPTION>
Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/99 $933 $-0- $14 $947 (5.28)%
</TABLE>
27
<PAGE>
Class D
<TABLE>
<CAPTION>
Value of Value of Value Total Value
Period Initial Capital Gain Of Of Total
Ended(1) Investment(2) Distributions Dividends Investment(2) Return(1)(3)
-------- ------------- ------------- --------- ------------- ------------
<S> <C> <C> <C> <C> <C>
9/30/94 $919 $-0- $ 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
9/30/99 887 74 238 1,199 19.90%
</TABLE>
- ----------
(1) For the ten-year period ended September 30, 1999 for Class A shares, from
commencement of operations of Class C shares on May 27, 1999 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 charge 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 charge 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,
1999, contains a schedule of the investments of the Fund as of September 30,
1999, as well as certain other financial information. 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 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.
28
<PAGE>
Appendix A
Moody's Investors Service, Inc. (Moody's)
Municipal Bonds
Aaa: Municipal bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk. Interest payments are
protected by a large or by an exceptionally stable margin and principal is
secure. While the various protective elements are likely to change, such changes
as can be visualized are most unlikely to impair the fundamentally strong
position of such issues.
Aa: Municipal bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally known as
high grade bonds. They are rated lower than Aaa bonds because margins of
protection may not be as large or fluctuation of protective elements may be of
greater amplitude or there may be other elements present which make the
long-term risks appear somewhat larger than in Aaa securities.
A: Municipal bonds which are rated A possess many favorable investment
attributes and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but elements
may be present which suggest a susceptibility to impairment sometime in the
future.
Baa: Municipal bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present but
certain protective elements may be characteristically lacking or may be
unreliable over any great length of time. Such bonds lack outstanding investment
characteristics and in fact may have speculative characteristics as well.
Ba: Municipal bonds which are rated Ba are judged to have speculative elements;
their future cannot be considered as well-assured. Often the protection of
interest and principal payments may be very moderate, and thereby not well
safeguarded during other good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B: Municipal bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small.
Caa: Municipal bonds which are rated Caa are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
Ca: Municipal bonds which are rated Ca represent obligations which are
speculative in high degree. Such issues are often in default or have other
marked shortcomings.
C: Municipal bonds which are rated C are the lowest rated class of bonds, and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
Moody's applies numerical modifiers (1, 2 and 3) in each generic rating
classification from Aa through B in its corporate bond rating system. The
modifier 1 indicates that the security ranks in the higher end of its generic
rating category; modifier 2 indicates a mid-range ranking; and modifier 3
indicates that the issuer ranks in the lower end of its generic rating category.
Municipal Notes
Moody's ratings for municipal notes and other short-term loans are designated
Moody's Investment Grade (MIG). This distinction is in recognition of the
differences between short-term and long-term credit risk. Loans bearing the
designation MIG 1 are of the best quality, enjoying strong protection by
established cash flows of funds for their servicing or by established and
broad-based access to the market for refinancing. Loans bearing the designation
MIG 2 are of high quality, with margins of protection ample although not so
large as in the preceding group. Loans bearing the designation MIG 3 are of
favorable quality, with all security elements accounted for but lacking the
undeniable strength of the preceding grades. Market access for refinancing in
particular, is likely to be less well established. Notes bearing the designation
MIG 4 are judged to be of adequate quality, carrying
29
<PAGE>
specific risk but having protection commonly regarded as required of an
investment security and not distinctly or predominantly speculative.
Commercial Paper
Moody's Commercial Paper Ratings are opinions of the ability of issuers to repay
punctually promissory senior debt obligations not having an original maturity in
excess of one year. Issuers rated "Prime-1" or "P-1" indicates the highest
quality repayment capacity of the rated issue.
The designation "Prime-2" or "P-2" indicates that the issuer has a strong
capacity for repayment of senior short-term promissory obligations. Earnings
trends and coverage ratios, while sound, may be more subject to variation.
Capitalization characteristics, while still appropriate, may be more affected by
external conditions. Ample alternative liquidity is maintained.
The designation "Prime-3" or "P-3" indicates that the issuer has an acceptable
capacity for repayment of short-term promissory obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
Issues rated "Not Prime" do not fall within any of the Prime rating categories.
Standard & Poor's Corporation (S&P)
Municipal Bonds
AAA: Municipal bonds rated AAA are highest grade obligations. Capacity to pay
interest and repay principal is extremely strong.
AA: Municipal bonds rated AA have a very high degree of safety and very strong
capacity to pay interest and repay principal and differ from the highest rated
issues only in small degree.
A: Municipal bonds rated A are regarded as upper medium grade. They have a
strong degree of safety and capacity to pay interest and repay principal
although they are somewhat more susceptible in the long term to the adverse
effects of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB: Municipal bonds rated BBB are regarded as having a satisfactory degree of
safety and capacity to pay interest and re-pay principal. Whereas they normally
exhibit adequate protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay interest and
re-pay principal for bonds in this category than for bonds in higher rated
categories.
BB, B, CCC, CC: Municipal bonds rated BB, B, CCC and CC are regarded, on
balance, as predominantly speculative with respect to capacity to pay interest
and pre-pay principal in accordance with the terms of the bond. BB indicates the
lowest degree of speculation and CC the highest degree of speculation. While
such bonds will likely have some quality and protective characteristics, these
are outweighed by large uncertainties or major risk exposure to adverse
conditions.
C: The rating C is reserved for income bonds on which no interest is being paid.
D: Bonds rated D are in default, and payment of interest and/or repayment of
principal is in arrears.
NR: Indicates that no rating has been requested, that there is insufficient
information on which to base a rating or that S&P does not rate a particular
type of bond as a matter of policy.
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.
30
<PAGE>
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.
31
<PAGE>
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 provides
only a brief summary of the complex factors affecting the financial situation in
New Jersey, 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. It
should be noted that the creditworthiness of obligations issued by local New
Jersey Issuers may be unrelated to the creditworthiness of obligations issued by
the State of New Jersey, and there is no obligation on the part of New Jersey to
make payment on local governmental obligations in the event of default or
financial difficulty.
State Finance/Economic Information. New Jersey is the ninth largest state in
population and the fifth smallest in land area. With an average of 1,094 persons
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.
For the last decade, New Jersey's job growth has been concentrated in five
clusters of economic activity - high technology, health, financial,
entertainment and logistics. Personal income in New Jersey, spurred by strong
labor markets, increased by 5.4% in 1998, a rate comparable to the national rate
of increase. As a result, retail sales rose by an estimated 6.2%. Low inflation,
now less than 2%, continues to benefit New Jersey consumers and businesses and
low interest rates boost housing and consumer durable expenditures. Home
building had its best year of the decade.
The New Jersey outlook is based largely on expected national economic
performance and on recent New Jersey strategic policy actions aimed at
infrastructure improvements, effective education and training of our workforce,
and those maintaining a competitive business climate. Investments in each of
these policy areas are seen as vital to maintaining the long-term health of New
Jersey's economy.
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 Appropriations Act enacted by the New
Jersey Legislature and approved by the Governor provided the basic framework for
the operation of the General Fund. The undesignated General Fund balance at
year-end for fiscal year 1996 was $442.0 million, for fiscal year 1997 was
$280.5 million and for fiscal year 1998 was 228.2 million. For fiscal year 1999,
the balance in the undesignated General Fund is estimated to be $207.3 million,
subject to change upon completion of the year-end audit. The estimated balance
for fiscal year 2000 is $171.4 million, based on the amounts contained in the
fiscal year 2000 Appropriations Act. The fund balances are available for
appropriation in succeeding fiscal years.
During the course of the fiscal year, the Governor may take steps to reduce New
Jersey expenditures if it appears that revenues have fallen below those
originally anticipated. There are additional means by which the Governor may
ensure that New Jersey does not incur a deficit. Under the New Jersey
Constitution, 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.
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. Certain tax revenues and certain other fees are
pledged to meet the principal, interest payments and redemption premium
payments, if any, required to pay the debt fully.
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The aggregate outstanding general obligation bonded indebtedness of New Jersey
as of June 30, 1999 was $3.6499 billion. The appropriation for the debt service
obligation on outstanding indebtedness is $518.7 million for fiscal year 2000.
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 2000 the amount appropriated to this purpose is $860.2 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 obligation" bonds, which may be issued by
eligible New Jersey entities. As of June 30, 1999, outstanding "moral
obligation" bonded indebtedness issued by New Jersey entities totaled
$689,355,315 and maximum annual debt service subject to "moral obligation" is
$82,691,389.
New Jersey Housing and Mortgage Finance Agency. Neither the New Jersey Housing
and Mortgage Finance Agency nor its predecessors, the New Jersey Housing Finance
Agency and the New Jersey Mortgage Finance Agency, have had a deficiency in a
debt service reserve fund which required New Jersey to appropriate funds to meet
its "moral obligation." It is anticipated that this agency's revenues will
continue to be sufficient to cover debt service on its bonds.
South Jersey Port Corporation. New Jersey has periodically provided the South
Jersey Port Corporation (Corporation) with funds to cover debt service and
property tax requirements, when earned revenues are anticipated to be
insufficient to cover these obligations. For calendar years 1990 through 1999,
New Jersey has made appropriations totalling $53,036,261.14, which covered
deficiencies in revenues of the Corporation, for debt service and property tax
payments.
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 $99,510,000
were outstanding as of June 30, 1999. 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
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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.
New Jersey Educational Facilities Authority. The New Jersey Educational
Facilities Authority issues bonds pursuant to three separate legislative
programs 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; (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 and
(vi) capital projects at county colleges.
New Jersey Sports and Exposition Authority. Legislation enacted in 1992
authorizes the New Jersey Sports and Exposition Authority (NJSEA) to issue bonds
for various purposes payable from a contract between the NJSEA and the New
Jersey Treasurer (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 (TTFA), an instrumentality of New
Jersey pursuant to the New Jersey Transportation Trust Fund Authority Act of
1984, as amended (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, except that pursuant to
legislation adopted in June, 1999, the amount of such debt has been increased to
$900 million for Fiscal Year 2000. 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 (Standby Deficiency Agreement)
with the trustee for grant anticipation notes (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.
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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 obligation 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.
State Pension Funding Bonds. Legislation enacted in June 1997 authorizes the EDA
to issue bonds, notes or other obligations for the purpose of financing in full
or in part the unfunded accrued pension liability for New Jersey's seven
retirement plans. On June 20, 1997, the EDA issued bonds pursuant to this
legislation (the "Pension Bonds") and $2.75 billion from the proceeds of the
Pension Bonds were deposited into New Jersey's retirement systems. As a result
of the funding from the proceeds of the Pension Bonds and the change in the
asset valuation method authorized by Chapter 115, Laws of 1997, enacted by the
New Jersey Legislature, full funding of the unfunded accrued pension liability
under each of New Jersey's retirement systems was achieved.
Conduit Issues. Certain State agencies and authorities are authorized to issue
debt on behalf of various private entities on a conduit basis. Under such
circumstances, neither the State agency or authority acting as a conduit issuer
nor the State of New Jersey is responsible for the repayment of such debt. The
payment obligations with respect to such debt is solely that of the entity on
whose behalf the debt was issued.
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.)
(Local Budget Law) imposes specific budgetary procedures upon counties and
municipalities ("local units"). Every local unit must adopt an operating budget
which is balanced on a cash basis, and items of revenue and appropriation must
be examined by the Director of the Division (the Director). The accounts of each
local unit must be independently audited by a registered municipal accountant.
New Jersey law provides that budgets must be submitted in a form promulgated by
the Division and further provides for limitations on estimates of tax collection
and for reserves in the event of any shortfalls in collections by the local
unit. The Division reviews all municipal and county annual budgets prior to
adoption for compliance with the Local Budget Law. The Director is empowered to
require changes for compliance with law as a condition of approval; to
disapprove budgets not in accordance with law; and to prepare the budget of a
local unit, within the limits of the adopted budget of the previous year with
suitable adjustments for legal compliance, if the local unit fails to adopt a
budget in accordance with law. This process insures that every local unit
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.
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The Local Government Cap Law (N.J.S.A. 40A:4-45.1 et seq.) (Cap Law) generally
limits the year-to-year increase of the total appropriations of any local unit
to either 5% or an index rate determined annually by the Director, whichever is
less. However, where the index percentage rate exceeds 5%, the Cap Law permits
the governing body of any local unit to approve the use of a higher percentage
rate up to the index rate. Further, where the index percentage rate is less than
5%, the Cap Law also permits the governing body of any local unit to approve the
use of a higher percentage rate up to 5%. Regardless of the rate utilized,
certain exceptions exist to the Cap Law's limitation on increases in
appropriations. The principal exceptions to these limitations are municipal and
county appropriations to pay debt service requirements; to comply with certain
other New Jersey or federal mandates; appropriations of private and public
dedicated funds; amounts approved by referendum; and, in the case of
municipalities only, to fund the preceding year's cash deficit or to reserve for
shortfalls in tax collections, and amounts required pursuant to contractual
obligations for specified services. The Cap Law was re-enacted in 1990 with
amendments and made a permanent part of the municipal finance system.
New Jersey law also regulates the issuance of debt by local units. The Local
Budget Law limits the amount of tax anticipation notes that may be issued by
local units and requires the repayment of such notes within 120 days of the end
of the fiscal year (six months in the case of the counties) in which issued. The
Local Bond Law (N.J.S.A. 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. The Local Bond Law permits the issuance of certain
obligations, including obligations issued for certain emergency or self
liquidating purposes, notwithstanding the statutory debt limitation described
above, but, with certain exceptions, it is then necessary to obtain the approval
of the Local Finance Board. Authorized net capital debt (gross capital debt
minus statutory deductions) is limited to 3.5% of the equalized valuation basis
in the case of municipalities and 2% of the equalized valuation basis in the
case of counties.
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. (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 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
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education. If the local board of education disagrees, it must appeal to the New
Jersey Commissioner of Education (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. 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 is 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. (School Bond Law), which closely
parallels the Local Bond Law (for further information relating to the Local Bond
Law, see "Municipal Finance" and "Counties and Municipalities" herein). Although
school districts are exempted from the 5% down payment provision generally
applied to bonds issued by local units, they are subject to debt limits (which
vary depending on the type of school system) 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% 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% 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% 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 of a Type II school district will exceed the school district
borrowing capacity, a school district (other than a regional school district)
may use the balance of the municipal borrowing capacity. If the total amount of
debt exceeds the school district's borrowing capacity, the Commissioner and the
Local Finance Board must approve the proposed authorization before it is
submitted to the voters. All authorizations of debt in a Type II school district
without a board of school estimate require an approving referendum, except
where, after hearing, the Commissioner and the New Jersey Board of Education
determine that the issuance of such debt is necessary to meet the constitutional
obligation to provide a thorough and efficient system of public schools. When
such obligations are issued, they are issued by, and in the name of, the school
district.
In Type I and II school districts with a board of school estimate, that board
examines the capital proposal of the board of education and certifies the amount
of bonds to be authorized. When it is necessary to exceed the borrowing capacity
of the municipality, the approval of a majority of the legally qualified voters
of the municipality is required, together with the approval of the Commissioner
and the Local Finance Board. When such bonds are issued 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.
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All authorizations of debt must be reported to the Division 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) (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 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 withhold from
certain New Jersey revenues or other New Jersey aid payable to the
municipalities, or from New Jersey school aid payable to the school district, as
appropriate, an amount sufficient to pay 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 $290,848,900 by various school districts as
of June 30, 1999 and $864,078,164 by various municipalities as of June 30, 19989
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% of the aggregate
outstanding bonded indebtedness of counties, municipalities or school districts
for school purposes (exclusive of bonds whose debt service is provided by New
Jersey appropriations), but not in excess of monies available in such Fund. If a
municipality, county or school district is unable to meet payment of the
principal of or interest on any of its school bonds, the trustee of the school
bond reserve will purchase such bonds at the face amount thereof or pay the
holders thereof the interest due or to become due. 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 local units, 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. 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 local unit 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 reviews and approves annual budgets of authorities and
special districts.
Certain local authorities are authorized to issue debt on behalf of various
entities on a conduit basis. Under such circumstances, neither the local
authority acting as a conduit issuer, the local unit creating such local
authority nor the State of New Jersey is responsible for the repayment of such
debt. The payment obligations with respect to such debt is solely that of the
entity on whose behalf the debt was issued.
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Pollution Control Bonds. In the 1970's, the State Legislature initiated a
comprehensive statutory mechanism for the management of solid waste disposal
within the State that required each county to develop a plan for county-wide
controlled flow of solid waste to a franchised location. The controlled flow of
solid waste to a franchised location enabled the imposition of above-market-rate
disposal fees. Most counties created independent local authorities or utilized
existing local authorities in order to finance, with the proceeds of bonds, the
technically complex and expensive infrastructure required to implement this
statutory mechanism. Typically, the primary security for the amortization of the
bonds was the above-market-rate disposal fees, although some bonds were further
secured by a guaranty of the respective county. On May 1, 1997, in Atlantic
Coast Demolition & Recycling, Inc. v. Board of Chosen Freeholders of Atlantic
County, 112 F.3d 652 (3d Cir. 1997), the United States Court of Appeals for the
Third Circuit held that the State's system of controlled flow of solid waste to
franchised locations unconstitutionally discriminated against out-of-State
operators of waste disposal facilities and, therefore, violated the Commerce
Clause of the United States Constitution. Subsequently, the United States
Supreme Court denied a petition for writ of certiorari. This decision has
terminated controlled flow of solid waste to franchised locations within the
State. In the absence of controlled flow, franchisees facing competition from
other operators of waste disposal facilities are unable to charge
above-market-rate disposal fees. The reduction of such fees to competitive
levels has reduced correspondingly the primary source of security for the
outstanding bonds of the local authorities. The facts relevant to each local
authority within the State remain unique. Some local authorities have
successfully implemented refunding and work-out financings. Other local
authorities have eliminated revenue shortfalls through the imposition of special
waste disposal taxes. In other cases, revenue shortfalls continue.
Year 2000 Initiative. New Jersey has implemented a plan to address the Year 2000
data processing problem and to ensure the continuation of governmental
operations into the Year 2000 and beyond. New Jersey imposed a moratorium during
Fiscal Year 1998 on all non-year 2000 related data processing activities to
ensure availability of resources for Year 2000 compliance. This moratorium will
remain in effect until each agency can certify that it is Year 2000 compliant.
In addition, all new equipment, software, systems, or enhancements purchased by
New Jersey must be Year 2000 compliant. As of September 30, 1999, the testing,
validation and implementation of 92.8% of all centrally maintained New Jersey
systems was complete. Departmental systems are in varying states of
implementation.
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. In addition, at any
given time, there are various numbers of contract and other claims against New
Jersey and New Jersey agencies, including environmental claims asserted against
New Jersey, among other parties, arising from the alleged disposal of hazardous
waste. Claimants in such matters are 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. 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 $87,880,000 for tort and medical malpractice claims
pending as of July 1, 1998. 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 which 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 et al., a suit filed by a coalition
of churches and church leaders in Hudson County against the Governor, the
Commissioners of the New Jersey Department of Environmental Protection (the
"DEP") and the Department of Health, concerning chromium contamination in
Liberty State Park in Jersey City. On March 2, 1999 the federal district court
entered an order for a preliminary injunction requiring the
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DEP to fence in certain areas of Liberty State Park, requires no mitigation work
beyond that which the DEP has nearly completed as part of the Green Park
development in that area and denies the plaintiff's motion for preliminary
injunctive relief in other areas of Liberty State Park.
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 renewal 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. On October 2, 1997
oral argument was conducted on the parties' cross-motions for summary judgement
in the Tax Court. No decision on the Cross-motions has been rendered to date.
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. Similar complaints have been filed individually by the school
districts of Dover and Pennsville and are presently pending before the
Commissioner of Education.
Abbot District's Early Childhood Plan Appeals. Thirteen Abbot District's have
filed petitions of appeal with the Commissioner concerning the Department of
Education's letters regarding such District's early childhood programs developed
in response to the Court's decision in Abbot v. Burke. The matters were
transmitted to the Office of Administrative Law for further proceedings. To
date, eleven of the original districts that filed petitions remain active (three
withdrew their petitions). Additionally, the Education Law Center has filed
petitions on behalf of the students in the state-operated schools of Newark,
Jersey City and Paterson as well as the students of West New York. A petition of
appeal was filed by the Passaic school district seeking supplemental funding for
special education, facilities and other programs for the commencement of the
1999-2000 school year.
Verner 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. New Jersey is
vigorously defending this action which on August 7, 1998 was transferred to the
Appellate Division as an appeal from final agency action.
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. Plaintiffs motion
for a preliminary injunction was denied and is being appealed. Subsequently,
plaintiffs filed for class certification which was granted. On February 8, 1999,
the Third Circuit court of Appeals affirmed the District court's decision,
concluding the federal statute allowed States discretion to employ either
methodology. Plaintiffs filed a petition for certiorari.
United Hospitals v. State of New Jersey and William Waldman, 19 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.
United Healthcare System, Inc. v. Fishman and Guhl. This Chapter 11 case
commenced two years ago when United Hospital closed. United seeks to expunge
proofs of claim filed in the Chapter 11 case by the Department of Health and
Senior Services and the Department of Human Services. United moreover asserts
claims for turnover of the property of the debtor's estate and declaratory
relief. United wants the bankruptcy court to take jurisdiction of and decide
Medicaid reimbursement matters pending in New Jersey state administrative
proceedings or on appeal in the New Jersey appellate courts. New Jersey has
filed a motion to dismiss.
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Trump Hotels & Casino Resorts, Inc. v. Mirage Resorts Incorporated, the
plaintiff is suing Mirage Resorts, New Jersey and various New Jersey agencies
and authorities 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 and (iii) the defendants sought to avoid the requirement of 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 and the time for appealing that
decision has run. In a related action, State of New Jersey and CRDA v. Trump
Hotels & Casino Resorts, Inc., New Jersey filed a declaratory judgment action
seeking a declaration that the use of certain funds under the Casino
Reinvestment Development Authority legislation does not violate the New Jersey
State Constitution. Declaratory judgment was entered in favor of New Jersey on
May 14, 1997 and the Appellate Division has affirmed the decision on April 2,
1998. The New Jersey Supreme Court granted certification and the matter has been
fully briefed and argued. The Supreme court has reserved decision.
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. The
Superior Court of New Jersey, Appellate Division has affirmed the dismissal of
these matters by the trial courts. The Plaintiffs filed petitions for
certification with the New Jersey Supreme court and are awaiting oral argument.
Camden County Energy Recovery Associates v. New Jersey Department of
Environmental Protection, Board of Chosen Freeholders of the County of Camden et
al., 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 (the "PCFA") counterclaimed, seeking reformation of the contract
between it and the plaintiff and cross-claimed against New Jersey for
contribution and indemnification. New Jersey has filed motions to dismiss the
complaint and a cross-claim. On August 7, 1999 the Appellate Division ruled in
favor of New Jersey and ordered the trial court to dismiss all claims and
cross-claims against New Jersey. The Camden County Energy Recovery Associates,
the County of Camden and the PCFA have filed motions for leave to appeal to the
Supreme Court of 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. New Jersey's trial court motion to dismiss the
complaint was denied on October 1, 1998. New Jersey 's motion to dismiss the
complaint was denied and it filed an answer to the complaint.
Zurbrugg Hospital v. Fishman; Rancocas Hospital v. Fishman; St. Francis Medical
Center v. Fishman and Solaris Health System v. Fishman. These cases represent
challenges by various hospitals to the $10 per adjusted hospital admission
charges imposed by N.J.S.A. 26:2H-18.57. Most of the fees in controversy have
been paid by hospitals pending the outcome of the appeal pursuant to agreements
with the Department of Health and Senior Service. The Appellate Division upheld
the $10 per adjusted admission charges and affirmed the payment demand and
rejected the hospitals' claims that the assessment constituted a special law
relating to taxation or a violation of the hospitals' equal protection rights.
Charlie and Nadine H. v. Christine Todd Whitman, a class action suit filed by
Children's Rights Inc. against the Governor, the Commissioner of the Department
of Human Services and Charles Venti, Director of the Division of Youth and
Family Services alleging their systemic failures to protect the plaintiff class
and furnish legally required services to the children and their families and
that the alleged failures violate the United States Constitution, federal
statutes and federal common law. The state has filed a motion to dismiss.
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East Cape May Associates v. NJ Dept. of Environmental Protection, the plaintiff
claims that it is entitled to damages for a taking of its property without just
compensation. The property is approximately 80 acres of freshwater wetlands in
Cape May, New Jersey. The Appellate Division held that DEP could avoid liability
by approving development on the property under the Freshwater Wetlands
Protection Act and remanded the case for a determination of whether the property
included 100 acres already developed. On remand, the trial court ruled that the
"property" did not include those 100 acres and that DEP could not approve
development of the 80 remaining acres without adopting rules. Since DEP had not
adopted rules, the trial court held that DEP's development offer was ineffective
and DEP was liable for a taking of the property.
Ratings. As of December 2, 1999, Standard & Poor's Ratings Services (S&P),
Moody's Investors Service (Moody's) and Fitch IBCA, Inc. (Fitch) have assigned
long-term ratings of AA+, Aa1 and AA+, respectively, to New Jersey General
Obligation Bonds. There is no assurance that the ratings of New Jersey General
Obligations Bonds will continue for any given period of time or that they will
not be revised downward or withdrawn entirely. Any such downward revision or
withdrawal could have an adverse effect on the market prices of New Jersey's
General Obligation Bonds.
The various political subdivisions of New Jersey are rated independently from
New Jersey by S&P, Moody's and/or Fitch, if they are rated. These ratings are
based upon information supplied to the rating agency by the political
subdivision. There is no assurance that such ratings will continue for any given
period of time or that they will not be revised downward or withdrawn entirely.
Any such downward revision or withdrawal could have an adverse effect on the
market prices of bonds issued by the political subdivision.
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Appendix C
HISTORY OF J. & W. SELIGMAN & CO. INCORPORATED
Seligman's beginnings date back to 1837, when Joseph Seligman, the oldest of
eight brothers, arrived in the United States from Germany. He earned his living
as a pack peddler in Pennsylvania, and began sending for his brothers. The
Seligmans became successful merchants, establishing businesses in the South and
East.
Backed by nearly thirty years of business success - culminating in the sale of
government securities to help finance the Civil War - Joseph Seligman, with his
brothers, established the international banking and investment firm of J. & W.
Seligman & Co. In the years that followed, the Seligman Complex played a major
role in the geographical expansion and industrial development of the United
States.
The Seligman Complex:
...Prior to 1900
o Helps finance America's fledgling railroads through underwritings.
o Is admitted to the New York Stock Exchange in 1869. Seligman remained a
member of the NYSE until 1993, when the evolution of its business made it
unnecessary.
o Becomes a prominent underwriter of corporate securities, including New York
Mutual Gas Light Company, later part of Consolidated Edison.
o Provides financial assistance to Mary Todd Lincoln and urges the Senate to
award her a pension.
o Is appointed U.S. Navy fiscal agent by President Grant.
o Becomes a leader in raising capital for America's industrial and urban
development.
...1900-1910
o Helps Congress finance the building of the Panama Canal.
...1910s
o Participates in raising billions for Great Britain, France and Italy,
helping to finance World War I.
...1920s
o Participates in hundreds of successful underwritings including those for
some of the Country's largest companies: Briggs Manufacturing, Dodge
Brothers, General Motors, Minneapolis-Honeywell Regulatory Company, Maytag
Company, United Artists Theater Circuit and Victor Talking Machine Company.
o Forms Tri-Continental Corporation in 1929, today the nation's largest,
diversified closed-end equity investment company, with over $2 billion in
assets, and one of its oldest.
...1930s
o Assumes management of Broad Street Investing Co. Inc., its first mutual
fund, today known as Seligman Common Stock Fund, Inc.
o Establishes Investment Advisory Service.
...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.
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...1950-1989
o Develops new open-end investment companies. Today, manages more than 50
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 Global Fund Series, Inc., which today offers five
separate series: Seligman International Growth Fund, Seligman Global
Smaller Companies Fund, Seligman Global Technology Fund, Seligman Global
Growth Fund and Seligman Emerging Markets 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.
o Launches innovative Seligman New Technologies Fund, Inc., a closed-end
"interval" fund seeking long-term capital appreciation by investing in
technology companies, including venture capital investing.
...2000
o Introduces Seligman Time Horizon/Harvester Series, Inc., an asset
allocation type mutual fund containing four funds: Seligman Time Horizon 30
Fund, Seligman Time Horizon 20 Fund, Seligman Time Horizon 10 Fund and
Seligman Harvester Fund.
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To the Shareholders
The fiscal year ended September 30, 1999, was a period of steadily rising
interest rates, creating a difficult environment for fixed-income securities and
for Seligman New Jersey Municipal Fund.
At the end of the Fund's fiscal-year 1998, the Federal Reserve Board was easing
monetary policy in an effort to protect the US economy from the effects of the
global economic crisis. Central banks around the world also lowered key interest
rates in response to global turmoil. These easing actions were successful and
the world economy rebounded. However, the global recovery, combined with
continued growth in the US, soon caused the US Fed to voice concerns about
inflation. In May, the Fed announced its bias toward a tighter policy and has
since followed through with two federal funds rate hikes, for a total of 50
additional basis points.
Throughout this fiscal year, continued robust growth in the US, the recovering
world economy, growing concerns regarding inflation, and tighter monetary
policy, sent market interest rates steadily higher. On September 30, 1998, the
30-year US Treasury bond was yielding 4.98%. One year later, the yield had moved
to 6.06%. The New Jersey State general obligation 30-year municipal bond
fluctuated within a narrower range, but still rose significantly, from 4.75% on
September 30, 1998, to 5.68% on September 30, 1999. The additional stability in
the New Jersey municipal market was largely the result of an imbalance in
municipal supply and demand. For much of the past year, rising yields were
attracting investors, while municipal issuers were reluctant to offer new supply
at higher rates.
Looking ahead, we believe that the US economy will slow, as was intended by the
Fed's most recent actions, and that inflation fears will thus subside and reduce
bond market volatility. We anticipate that the municipal market will outperform
the Treasury market for the balance of calendar-year 1999, as a result of
improving municipal market fundamentals, the most significant of which is the
slowdown in municipal issuance, which is expected to continue into the new year.
As the millennium approaches, we have become concerned that the media's focus on
the Year 2000 (Y2K) computer issue, and the fears that this attention may spark,
will cause some investors to take actions that are not in their best long-term
interests. In our view, the primary danger to investors is losing sight of their
long-term financial goals and altering their portfolios and asset allocations in
an attempt to respond to the confusion surrounding this issue.
In the US, governments and businesses have committed substantial resources to
this issue and, while there may be scattered inconveniences, we believe that the
US will enter the year 2000 relatively seamlessly, and that much of the rest of
the developed world is also well positioned to deal with the new millennium.
For the past several years, J. & W. Seligman & Co. Incorporated (Seligman), your
Fund's manager, and Seligman Data Corp. (Seligman Data), your Fund's shareholder
service agent, have been working to ensure that shareholders do not experience
any Y2K-related inconveniences at Seligman. We are pleased to report that the
early start has paid off. During the spring of this year, Seligman and Seligman
Data participated in Y2K testing conducted by the Securities Industry
Association. These tests were completed without any Y2K-related problems on the
part of Seligman or Seligman Data. Tests with key service providers were also
conducted, all of which were successfully completed in a Y2K environment.
We appreciate your confidence in Seligman New Jersey Municipal Fund and look
forward to serving your investment needs for many years to come. A discussion
with your Portfolio Manager, as well as the Fund's portfolio of investments and
financial statements, follows 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
November 5, 1999
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Interview With Your Portfolio Manager,
Thomas G. Moles
Q: What economic and market factors influenced Seligman New Jersey Municipal
Fund in the last 12 months?
A: The past 12 months have been challenging for the financial markets, including
the fixed-income markets. At this time last year, global equity markets were
struggling to recover from the Asian financial crisis, as well as economic
turmoil in Russia. In September 1998, the Federal Reserve Board initiated a
series of federal funds rate easings in an effort to restore stability and
liquidity to anxious world markets. At that time, market participants
generally expected that US economic growth would contract as a result of
world events, thereby preventing an acceleration in the rate of inflation.
Additionally, many experts predicted that, with the approach of the new
millennium, computer glitches would at best slow economic growth and at worst
cause major disruptions leading to worldwide recession. One year later, the
Fed has tightened to slow economic growth, world equity markets have
recovered, and most market watchers expect the transition to the year 2000 to
be uneventful.
During the past year, the municipal market did not exhibit the degree of
volatility that characterized the US Treasury market. This was largely the
result of the powerful influences of supply and demand that served to
mitigate both upward and downward movements in municipal yields. Last year's
Treasury market rallies were caused by heavy demand for Treasury securities
during periods of equity market declines. Conversely, demand for municipal
bonds was not greatly affected, which lessened municipal market volatility.
Further, year-to-date municipal issuance is down 20% over the same period
last year. This lack of supply held municipal yields steady and was the
primary reason municipal bonds outperformed Treasury bonds for much of the
past 12 months.
While the municipal market was relatively stable overall, it was not immune
to the effects of shifting economic and inflation expectations. By June 1999,
municipal yields began moving higher in response to increasing concern
regarding the pace of economic activity and continued to move higher through
fiscal year end. Accordingly, net asset values of the Fund's shares
deteriorated during the last quarter of the fiscal year and performance was
disappointing.
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.
Seligman Municipals Team: (standing from left) Audrey Kuchtyak, Theresa Barion,
Debra McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)
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Interview With Your Portfolio Manager,
Thomas G. Moles
Q: What was your investment strategy?
A: Over the past year, long-term municipal yields rose to levels not seen in
several years. This presented an opportunity to enhance Fund yields by
purchasing higher-yielding, longer-term bonds and by reducing positions in
shorter-term bonds. In general, the longer the maturity of a bond, the more
sensitive it is to changes in interest rates. During periods of declining
interest rates, longer-term bonds outperform shorter-term bonds. However,
during periods of rising interest rates, such as we have been experiencing,
longer-term bonds decline more in price than shorter-term bonds.
New purchases were concentrated in higher-rated bonds due primarily to a
continuation of narrow yield spreads between higher- and lower-quality bonds.
Additionally, a number of holdings received credit-rating upgrades, further
contributing to the overall improvement in the Fund's credit quality.
The Fund is well diversified among all major sectors of the municipal
marketplace. Most sectors remain stable with the exception of health care,
which remains vulnerable to further credit-quality deterioration mainly as a
result of government cutbacks and the growth of managed care. Many health
care issuers that have been well managed and have maintained consistently
healthy finances are suddenly facing serious budget deficits. As a result of
this alarming trend, we have been particularly diligent in monitoring our
health care holdings. Despite the current situation, the health care sector
continues to offer selective opportunities. Through in-depth credit analysis,
we endeavor to identify strong health care credits for inclusion in the
Fund's portfolio. Currently, Seligman New Jersey Municipal Fund has 17% of
assets in health care issues, the majority of which are insured and rated
AAA. The balance are investment grade.
Q: What is your outlook?
A: The long-awaited economic slowdown has yet to materialize, increasing the
risk that the rate of inflation will accelerate. In response, bond yields
have been rising steadily year to date. For the remainder of calendar year
1999, the bond markets will likely experience continued volatility until
solid signs that the economy is moderating emerge. Many market participants
expect the Fed to raise rates once more before year-end. This, together with
higher market rates, may ease inflationary pressures and spark a bond-market
rally.
As we head toward the new millennium, we believe that there is much to be
optimistic about. In the year 2000, the US economy will likely enter its
tenth year of expansion, an extraordinary achievement. The financial well
being of the nation's states, cities, and municipalities continues to
improve, with many reporting record budget surpluses. The jobless rate
remains below 5% nationally and consumer confidence remains high. Finally, as
one of the few remaining possible ways to shelter income, municipal bond
funds currently offer attractive yields compared to the after-tax yields of
many taxable bond investments.
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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, and assumes that all distributions within the period are invested
in additional shares for the 10-year period ended September 30, 1999, to a
$10,000 hypothetical investment made in the Lehman Brothers Municipal Bond Index
(Lehman Index) for the same period. The performances of Seligman New Jersey
Municipal Fund Class C and Class D shares are not shown in this chart but are
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 Without
Charge Sales Charge Lehman Index
9/30/89 $9,522 $10,000 $10,000
12/31/89 $9,881 $10,377 $10,384
3/31/90 $9,859 $10,354 $10,431
6/30/90 $10,099 $10,606 $10,675
9/30/90 $10,002 $10,504 $10,681
12/31/90 $10,550 $11,080 $11,142
3/31/91 $10,768 $11,309 $11,393
6/30/91 $10,993 $11,545 $11,636
9/30/91 $11,400 $11,972 $12,089
12/31/91 $11,715 $12,303 $12,495
3/31/92 $11,698 $12,285 $12,532
6/30/92 $12,219 $12,833 $13,009
9/30/92 $12,505 $13,133 $13,353
12/31/92 $12,767 $13,408 $13,596
3/31/93 $13,260 $13,925 $14,101
6/30/93 $13,779 $14,471 $14,562
9/30/93 $14,258 $14,974 $15,054
12/31/93 $14,347 $15,067 $15,265
3/31/94 $13,539 $14,219 $14,427
6/30/94 $13,618 $14,302 $14,587
9/30/94 $13,653 $14,338 $14,686
12/31/94 $13,464 $14,140 $14,475
3/31/95 $14,377 $15,099 $15,498
6/30/95 $14,661 $15,397 $15,871
9/30/95 $14,987 $15,739 $16,329
12/31/95 $15,560 $16,341 $17,001
3/31/96 $15,290 $16,058 $16,796
6/30/96 $15,447 $16,223 $16,925
9/30/96 $15,791 $16,584 $17,314
12/31/96 $16,089 $16,897 $17,756
3/31/97 $16,002 $16,806 $17,715
6/30/97 $16,513 $17,342 $18,326
9/30/97 $17,047 $17,903 $18,879
12/31/97 $17,526 $18,406 $19,391
3/31/98 $17,702 $18,591 $19,614
6/30/98 $18,000 $18,904 $19,912
9/30/98 $18,559 $19,491 $20,524
12/31/98 $18,578 $19,511 $20,647
3/31/99 $18,702 $19,641 $20,830
6/30/99 $18,361 $19,283 $20,462
9/30/99 $17,993 $18,897 $20,380
The performances of Class C and Class D shares will be greater than or less
than the performance shown for Class A shares, based on the differences in sales
charges and fees paid by shareholders.
Performance data quoted represent changes in prices and assume that all
distributions within the period are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
4
<PAGE>
Performance Overview and Portfolio Summary
Investment Results Per Share
Total Returns
For Periods Ended September 30, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------------------
CLASS C CLASS D
SINCE SINCE
INCEPTION SIX ONE FIVE 10 INCEPTION
5/27/99* MONTHS* YEAR YEARS YEARS 2/1/94
----------- --------- --------- --------- -------- ------------
<S> <C> <C> <C> <C> <C> <C>
Class A**
With Sales Charge n/a (8.38)% (7.68)% 4.65% 6.05% n/a
Without Sales Charge n/a (3.79) (3.05) 5.68 6.57 n/a
Class C**
With Sales Charge and CDSC (5.28)% n/a n/a n/a n/a n/a
Without Sales Charge and CDSC (3.33) n/a n/a n/a n/a n/a
Class D**
With 1% CDSC n/a (5.03) (4.49) n/a n/a n/a
Without CDSC n/a (4.09) (3.57) 4.87 n/a 3.26%
Lehman Index*** (1.83)+ (2.16) (0.70) 6.77 7.38 5.02++
</TABLE>
<TABLE>
<CAPTION>
NET ASSET VALUE DIVIDEND, CAPITAL GAIN, AND YIELD INFORMATION
For Periods Ended September 30, 1999
9/30/99 3/31/99 9/30/98 DIVIDENDS0 CAPITAL GAIN0 SEC YIELD00
-------- -------- -------- ---------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Class A $7.13 $7.58 $7.78 Class A $0.327 $0.096 4.29%
Class C 7.22 n/a n/a Class C 0.095 -- 3.72
Class D 7.22 7.67 7.86 Class D 0.273 0.096 3.75
</TABLE>
Holdings by Market Sector++ MOODY'S/S&P RATINGS++
Revenue Bonds 73% Aaa/AAA 54%
General Obligation Bonds++ 27 Aa/AA 19
WEIGHTED AVERAGE MATURITY 22.7 years A/A 18
Baa/BBB 9
- ------------------
*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 C shares are calculated with and
without the effect of the initial 1% maximum sales charge and the 1%
contingent deferred sales charge ("CDSC") that is charged on redemptions
made within 18 months of the date of purchase. Returns for Class D shares
are calculated with and without the effect of the 1% 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. It is composed of approximately 60% revenue bonds and 40%
state government obligations. Investors cannot invest directly in an index.
+From 5/31/99.
++From 1/31/94.
0Represents per share amount paid or declared for the year ended September
30, 1999 (for Class C shares, for the period May 27, 1999 to September 30,
1999).
00Current yield, representing the annualized yield for the 30-day period ended
September 30, 1999, has been computed in accordance with SEC regulations and
will vary.
++Percentages based on market values of long-term holdings at September 30,
1999.
++Includes pre-refunded securities.
5
<PAGE>
Portfolio of Investments
September 30, 1999
<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 12/1/20120..... Aaa/AAA $ 2,708,100
3,000,000 Howell Township, NJ GOs, 6.80% due 1/1/2014 ..................................... Aaa/AAA 3,190,260
3,000,000 Middletown, NJ Board of Education School GOs, 5.80% due 8/1/2019 ................ Aaa/AAA 3,031,680
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 2,016,200
3,000,000 New Jersey Economic Development Authority Gas Facilities Rev.
(NUI Corporation Project), 5.70% due 6/1/2032* ............................... Aaa/AAA 2,982,120
2,900,000 New Jersey Economic Development Authority Sewage Facilities Rev.
(Anheuser-Busch Project), 5.85% due 12/1/2030* ............................... A1/A+ 2,909,048
1,000,000 New Jersey Economic Development Authority Water Facilities Rev.
(Middlesex Water Co. Project), 5.20% due 10/1/2022 ........................... Aaa/AAA 934,900
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 2,835,030
3,000,000 New Jersey Educational Facilities Financing Authority Rev.
(Institute for Advanced Study), 5% due 7/1/2021 .............................. Aaa/AA+ 2,729,370
2,000,000 New Jersey Educational Facilities Financing Authority Rev.
(Princeton University), 6% due 7/1/20240...................................... Aaa/AAA 2,129,560
1,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(The Medical Center at Princeton), 5% due 7/1/2028 ........................... Aaa/AAA 884,820
3,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Hackensack University Medical Center), 5.20% due 1/1/2028 ................... Aaa/AAA 2,750,310
3,000,000 New Jersey Health Care Facilities Financing Authority Rev.
(Holy Name Hospital), 6% due 7/1/2025 ........................................ NR/BBB+ 2,891,610
2,255,000 New Jersey Health Care Facilities Financing Authority Rev. (Meridian Health
System Obligated Group), 5 3/8% due 7/1/2024 ................................. Aaa/AAA 2,152,442
1,500,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
6% due 10/1/2021* ............................................................ Aaa/AAA 1,514,040
1,000,000 New Jersey Housing & Mortgage Finance Agency (Home Buyer Rev.),
5.90% due 10/1/2029* ......................................................... Aaa/AAA 988,900
3,000,000 New Jersey State GOs, 5 5/8% due 7/15/20150 ..................................... Aa1/AA+ 3,185,130
3,000,000 Port Authority of New York & New Jersey Consolidated Rev.,
5 3/4% due 6/15/2030 ......................................................... A1/AA- 2,991,120
<FN>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
0 Pre-refunded security.
See notes to financial statements.
</FN>
</TABLE>
6
<PAGE>
Portfolio of Investments (continued)
September 30, 1999
<TABLE>
<CAPTION>
FACE RATINGS+ MARKET
AMOUNT MUNICIPAL BONDS MOODY'S/S&P VALUE
- ---------- ------------------- -------------- -----------
<S> <C> <C> <C>
$2,000,000 Puerto Rico Highway & Transportation Authority Rev., 51 1/42% due 7/1/2036 ...... Baa1/A $ 1,909,000
2,500,000 Rutgers State University, NJ, 5.20% due 5/1/2027 ................................ A1/AA 2,314,050
2,500,000 Salem County, NJ Improvement Authority Rev. (Correctional Facility
& Courthouse Annex), 5.70% due 5/1/2017 ...................................... Aaa/AAA 2,512,900
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- 2,550,025
1,250,000 South Jersey Port Corporation, NJ Marine Terminal Rev., 5.60% due 1/1/2023....... NR/A+ 1,219,263
-----------
TOTAL MUNICIPAL BONDS (COST $53,183,447)--97.6% ............................................................ 53,329,878
VARIABLE RATE DEMAND NOTES (COST $600,000)--1.1% ........................................................... 600,000
OTHER ASSETS LESS LIABILITIES--1.3% ........................................................................ 739,123
-----------
NET ASSETS--100.0% ......................................................................................... $54,669,001
===========
<FN>
- ------------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal alternative minimum tax.
See notes to financial statements.
</FN>
</TABLE>
7
<PAGE>
Statement of Assets and Liabilities
September 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Long-term holdings (Cost $53,183,447).......... $53,329,878
Short-term holdings (Cost $600,000)............ 600,000 $53,929,878
-----------
Cash................................................................. 45,749
Interest receivable.................................................. 897,675
Receivable for Capital Stock sold.................................... 10,664
Expenses prepaid to shareholder service agent........................ 7,939
Other................................................................ 1,868
-----------
Total Assets......................................................... 54,893,773
-----------
LIABILITIES:
Dividends payable.................................................... 74,915
Payable for Capital Stock repurchased................................ 27,172
Accrued expenses and other........................................... 122,685
-----------
Total Liabilities.................................................... 224,772
-----------
Net Assets........................................................... $54,669,001
===========
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($.001 par value; 100,000,000 shares authorized;
7,660,160 shares outstanding):
Class A........................................................... $ 7,428
Class C........................................................... 18
Class D........................................................... 215
Additional paid-in capital........................................... 54,275,958
Undistributed net realized gain...................................... 238,951
Net unrealized appreciation of investments........................... 146,431
-----------
Net Assets........................................................... $54,669,001
===========
NET ASSET VALUE PER SHARE:
Class A ($52,991,734 / 7,427,735 shares)............................. $7.13
=====
Class C ($127,383 / 17,652 shares)................................... $7.22
=====
Class D ($1,549,884 / 214,773 shares)................................ $7.22
=====
</TABLE>
- ------------------
See notes to financial statements.
8
<PAGE>
Statement of Operations
For the Year Ended September 30, 1999
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
Interest.................................................................. $ 3,237,933
EXPENSES:
Management fee............................................. $ 298,783
Distribution and service fees.............................. 164,425
Shareholder account services............................... 90,723
Auditing and legal fees.................................... 40,436
Registration............................................... 19,524
Directors' fees and expenses............................... 12,318
Custody and related services............................... 11,539
Shareholder reports and communications..................... 10,149
Miscellaneous.............................................. 4,709
---------
Total Expenses............................................................ 652,606
-----------
Net Investment Income..................................................... 2,585,327
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments........................... 257,481
Net change in unrealized appreciation of investments....... (4,555,415)
---------
Net Loss on Investments................................................... (4,297,934)
-----------
Decrease in Net Assets from Operations.................................... $(1,712,607)
===========
</TABLE>
- ------------------
See notes to financial statements.
9
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Year Ended September 30,
-------------------------------
1999 1998
------------- -------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment income.......................................................... $ 2,585,327 $ 2,857,506
Net realized gain on investments............................................... 257,481 795,284
Net change in unrealized appreciation of investments........................... (4,555,415) 1,665,711
----------- -----------
Increase (Decrease) in Net Assets from Operations.............................. (1,712,607) 5,318,501
----------- -----------
Distributions to shareholders:
Net investment income:
Class A..................................................................... (2,521,489) (2,793,695)
Class C..................................................................... (947) --
Class D..................................................................... (62,891) (63,811)
Net realized gain on investments:
Class A..................................................................... (744,909) (662,511)
Class D..................................................................... (21,499) (13,845)
----------- -----------
Decrease in Net Assets from Distributions...................................... (3,351,735) (3,533,862)
----------- -----------
Shares
-----------------------------------
Year Ended September 30,
-----------------------------------
1999 1998
-------------- --------------
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sales of shares:
Class A.................................. 196,843 351,084 1,478,334 2,673,614
Class C.................................. 17,577 -- 130,877 --
Class D.................................. 36,898 35,932 282,964 277,146
Shares issued in payment of dividends:
Class A.................................. 188,091 211,791 1,411,854 1,609,925
Class C.................................. 75 -- 549 --
Class D.................................. 4,681 6,154 35,612 47,336
Exchanged from associated Funds:
Class A.................................. 993,398 376,982 7,441,980 2,858,633
Class C.................................. -- -- -- --
Class D.................................. 36,753 74,609 286,110 573,703
Shares issued in payment of gain distributions:
Class A.................................. 70,420 66,337 535,893 496,199
Class C.................................. -- -- -- --
Class D.................................. 2,248 1,655 17,285 12,516
---------- ---------- ----------- -----------
Total 1,546,984 1,124,544 11,621,458 8,549,072
---------- ---------- ----------- -----------
Cost of shares repurchased:
Class A.................................. (968,501) (1,024,527) (7,276,733) (7,783,891)
Class C.................................. -- -- -- --
Class D.................................. (67,008) (84,855) (505,987) (653,515)
Exchanged into associated Funds:
Class A.................................. (992,358) (322,964) (7,426,285) (2,454,147)
Class C.................................. -- -- -- --
Class D.................................. -- -- -- --
---------- ---------- ----------- -----------
Total....................................... (2,027,867) (1,432,346) (15,209,005) (10,891,553)
---------- ---------- ----------- -----------
Decrease in Net Assets from Capital
Share Transactions....................... (480,883) (307,802) (3,587,547) (2,342,481)
========== ========== ----------- -----------
Decrease in Net Assets.......................................................... (8,651,889) (557,842)
NET ASSETS:
Beginning of year............................................................... 63,320,890 63,878,732
----------- -----------
End of Year..................................................................... $54,669,001 $63,320,890
=========== ===========
</TABLE>
- ------------------
* The Fund began offering Class C shares on May 27, 1999.
See notes to financial statements.
10
<PAGE>
Notes to Financial Statements
1. Multiple Classes of Shares -- Seligman New Jersey Municipal Fund, Inc. (the
"Fund") offers three 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. The
Fund began offering Class C shares on May 27, 1999. Class C shares are sold with
an initial sales charge of up to 1% and 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, if
applicable, of 1% imposed on redemptions made 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, if applicable, of 1% imposed on redemptions made within one
year of purchase. The three 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, 1999,
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
reclassifica tions will have no effect on net assets,
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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,
1999, amounted to $3,231,999 and $7,481,291, respectively.
At September 30, 1999, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
investments amounted to $1,129,939 and $983,508, respectively.
4. Management Fee, Distribution Services, and Other Transactions -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all 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"), agent for the distribution of
the Fund's shares and an affiliate of the Manager, received concessions of
$5,986 for sales of Class A shares. Commissions of $43,465 and $1,330 were paid
to dealers for sales of Class A and Class C shares, respectively.
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,
1999, fees incurred aggregated $146,701, or 0.25% per annum of the average daily
net assets of Class A shares.
Under the Plan, with respect to Class C and 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 C and 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, 1999, fees incurred under the Plan amounted to $253 and $17,471,
for Class C and Class D shares, respectively, which is equivalent to 1% per
annum of the average daily net assets of each class.
The Distributor is entitled to retain any CDSC imposed on certain redemptions
of Class A and Class C shares occurring within 18 months of purchase and on
redemptions of Class D shares occurring within one year of purchase. For the
year ended September 30, 1999, such charges amounted to $434.
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, 1999,
Seligman Services, Inc. received commissions of $2,734 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $11,293, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $90,723 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
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS
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, 1999, of $41,356 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 -- The Fund is a participant in a joint $750 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 in June 2000, but is
renewable annually with the consent of the participating banks. For the year
ended September 30, 1999, the Fund had not borrowed from the credit facility.
13
<PAGE>
Financial Highlights
The tables below are intended to help you understand each Class's financial
performance for the past five years or from its inception if less than five
years. Certain information reflects financial results for a single share of a
Class that was held throughout the periods shown. Per share amounts are
calculated using average shares outstanding during the period. "Total return"
shows the rate that you would have earned (or lost) on an investment in each
Class, assuming you reinvested all your dividend and capital gain distributions.
Total returns do not reflect any sales charges and are not annualized for
periods of less than one year.
<TABLE>
<CAPTION>
CLASS A CLASS C
-------------------------------------------------------- -----------------
YEAR ENDED SEPTEMBER 30, 5/27/99*
-------------------------------------------------------- TO
1999 1998 1997 1996 1995 9/30/99
---------- --------- --------- --------- ------- -----------------
<S> <C> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Period............. $7.78 $7.56 $7.60 $7.59 $7.40 $7.58
----- ----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income............................ 0.33 0.35 0.36 0.39 0.39 0.09
Net realized and unrealized investment gain (loss)
on investments................................. (0.55) 0.30 0.21 0.01 0.29 (0.36)
----- ----- ----- ----- ----- -----
Total from Investment Operations................. (0.22) 0.65 0.57 0.40 0.68 (0.27)
----- ----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment income............. (0.33) (0.35) (0.36) (0.39) (0.39) (0.09)
Distributions from net realized capital gain..... (0.10) (0.08) (0.25) -- (0.10) --
----- ----- ----- ----- ----- -----
Total Distributions.............................. (0.43) (0.43) (0.61) (0.39) (0.49) (0.09)
----- ----- ----- ----- ----- -----
Net Asset Value, End of Period................... $7.13 $7.78 $7.56 $7.60 $7.59 $7.22
===== ===== ===== ===== ===== =====
Total return: (3.05)% 8.87% 7.96% 5.37% 9.77% (3.33)%
Ratios/Supplemental Data:
Net Assets, end of period (000s omitted)......... $52,992 $61,739 $62,597 $66,293 $73,561 $127
Ratio of expenses to average net assets.......... 1.07% 1.02% 1.06% 1.02% 1.01% 1.82%+
Ratio of net income to average net assets........ 4.35% 4.54% 4.90% 5.06% 5.29% 3.71%+
Portfolio turnover rate.......................... 5.55% 23.37% 20.22% 25.65% 4.66% 5.55%++
Without management fee waiver:**
Ratio of expenses to average net assets.......... 1.06%
Ratio of net income to average net assets........ 5.24%
</TABLE>
- ------------------
See footnotes on page 15.
14
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------------
1999 1998 1997 1996 1995
---------- --------- --------- ---------- -------------
<S> <C> <C> <C> <C> <C>
PER SHARE DATA:
Net Asset Value, Beginning of Year................. $7.86 $7.64 $7.68 $7.67 $7.48
----- ----- ----- ----- -----
Income from Investment Operations:
Net investment income.............................. 0.27 0.29 0.31 0.33 0.33
Net realized and unrealized investment gain (loss)
on investments................................... (0.54) 0.30 0.21 0.01 0.29
----- ----- ----- ----- -----
Total from Investment Operations................... (0.27) 0.59 0.52 0.34 0.62
----- ----- ----- ----- -----
Less Distributions:
Dividends from net investment income............... (0.27) (0.29) (0.31) (0.33) (0.33)
Distributions from net realized capital gain....... (0.10) (0.08) (0.25) -- (0.10)
----- ----- ----- ----- -----
Total Distributions................................ (0.37) (0.37) (0.56) (0.33) (0.43)
----- ----- ----- ----- -----
Net Asset Value, End of Year....................... $7.22 $7.86 $7.64 $7.68 $7.67
===== ===== ===== ===== =====
Total return: (3.57)% 7.97% 7.10% 4.56% 8.79%
Ratios/Supplemental Data:
Net Assets, end of year (000s omitted)............. $1,550 $1,582 $1,282 $1,152 $1,190
Ratio of expenses to average net assets............ 1.82% 1.80% 1.83% 1.79% 1.89%
Ratio of net income to average net assets.......... 3.60% 3.76% 4.13% 4.29% 4.45%
Portfolio turnover rate............................ 5.55% 23.37% 20.22% 25.65% 4.66%
Without management fee waiver:**
Ratio of expenses to average net assets............ 1.94%
Ratio of net income to average net assets.......... 4.40%
<FN>
- ------------------
* Commencement of offering of Class C shares.
** During the periods stated, the Manager, at its discretion, waived a portion of its fees.
+ Annualized.
++ For the year ended September 30, 1999.
See Notes to Financial Statements.
</FN>
</TABLE>
15
<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, 1999, 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, 1999 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 referred to
above present fairly, in all material respects, the financial position of
Seligman New Jersey Municipal Fund, Inc. as of September 30, 1999, the results
of its operations, the changes in its net assets, and the financial highlights
for the respective stated periods in conformity with generally accepted
accounting principles.
/s/ DELOITTE & TOUCHE LLP
- -------------------------
DELOITTE & TOUCHE LLP
New York, New York
November 5, 1999
16
<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
Director, Conoco, Inc.
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
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, P1/2zerInc.
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
Member of the Board of Governors,
Investment Company Institute
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
17
<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
18
<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 -- The price at which a mutual fund's share can be purchased. The
offering price is the current net asset value per share 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 the fund's investment objective and policies,
services, investment restrictions, how shares are bought and sold, fund fees and
other charges, and the fund's financial highlights.
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 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 fund 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 maximum offering price of the stock.
- -------------------
Adapted from the Investment Company Institute's 1999 Mutual Fund Fact Book.
19
<PAGE>
SELIGMAN
-------------------
NEW JERSEY
MUNICIPAL FUND, INC.
Annual Report
September 30, 1999
Providing Income
Exempt From Regular
Income Tax
SELIGMAN ADVISORS, INC.
an affiliate of
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.
TECNJ3 9/99
<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) Articles Supplementary dated May 24, 1999. (Incorporated by reference to
Registrant's Post-Effective Amendment No. 19 filed on May 28, 1999.)
(a)(1) Form of Amended and Restated Articles of Incorporation. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 14, filed on
January 29, 1997.)
(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) Addendum to Sales/Bank Agreement. (Incorporated by reference to
Post-Effective Amendment No. 57 to the Registration Statement of
Seligman Capital Fund, Inc. (File No. 811-1886) filed on May 28, 1999.)
(e)(1) Form of Bank Agreement between Seligman Advisors, Inc. and Banks.
(Incorporated by reference to Post-Effective Amendment No. 57 to the
Registration Statement of Seligman Capital Fund, Inc. (File No.
811-1886) filed on May 28, 1999.)
(e)(2) Distributing Agreement between the Registrant and Seligman Advisors,
Inc. (Incorporated by reference to Registrant's Post-Effective Amendment
No. 14, filed on January 29, 1997.)
(e)(3) Sales Agreement between Dealers and Seligman Advisors, 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. (Incorporated by reference to Registrant's
Post-Effective Amendment No. 18 filed on January 29, 1999.)
(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 in respect of Class C shares.
(Incorporated by reference to Post-Effective Amendment No. 19 filed on
May 28, 1999.)
C-1
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
(i)(1) 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) Form of Purchase Agreement for Initial Capital for Class C shares.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
19 filed on May 28, 1999.)
(l)(1) Form 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.
(Incorporated by reference to Registrant's Post-Effective Amendment No.
19 filed on May 28, 1999.)
(m)(1) Amended Administration, Shareholder Services and Distribution Agreement.
(Incorporated by reference to Post-Effective Amendment No. 57 to the
Registration Statement of the Seligman Capital Fund, Inc. (File No.
811-1886) filed on May 28, 1999.)
(n) Plan of Multiple Classes of Shares (three Classes) pursuant to Rule
18f-3 under the Investment Company Act of 1940. (Incorporated by
reference to Registrant's Post-Effective Amendment No. 19 filed on May
28, 1999.)
(p) *Code of Ethics.
(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, as amended, 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.
C-2
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
Item 26. Business and Other Connections of Investment Adviser. J. & W. Seligman
& Co. Incorporated, a Delaware corporation (Seligman), is the
Registrant's investment manager. Seligman also serves as investment
manager to nineteen 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 Global Fund Series, Inc., Seligman High Income Fund Series,
Seligman Income Fund, Inc., Seligman Municipal Fund Series, Inc.,
Seligman Municipal Series Trust, Seligman New Technologies Fund, Inc.,
Seligman Pennsylvania Municipal Fund Series, Seligman Portfolios, Inc.,
Seligman Quality Municipal Fund, Inc., Seligman Select Municipal, Inc.,
Seligman Time Horizon/Harvester Series, Inc., Seligman Value Fund
Series, Inc. and Tri-Continental Corporation.
Seligman has an investment advisory service division which provides
investment management or advice to private clients. The list required
by this Item 26 of officers and directors of Seligman, 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 of Form ADV, filed by Seligman pursuant to the
Investment Advisers Act of 1940, as amended, (SEC File No. 801-15798)
on March 31, 1999.
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 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 Time Horizon/Harvester Series, Inc.
Seligman Value Fund Series, Inc.
C-3
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
(b) Name of each director, officer or partner of Registrant's principal
underwriter named in response to Item 20:
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of December 31, 1999
-----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
William C. Morris* Director Chairman of the Board and Chief Executive
Officer
Brian T. Zino* Director President and Director
Ronald T. Schroeder* Director 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, Division 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
Matthew A. Digan* Senior Vice President, Domestic None
Funds
Jonathan G. Evans Senior Vice President, Sales None
222 Fairmont Way
Ft. Lauderdale, FL 33326
T. Wayne Knowles Senior Vice President, Division None
104 Morninghills Court 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
Michelle L. McCann-Rappa* Senior Vice President, Retirement None
Plans
Scott H. Novak* Senior Vice President, Insurance None
Jeff Rold Senior Vice President, Product None
181 East 73rd Street, Apt 20B Business Management
New York, New York 10021
</TABLE>
C-4
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of December 31, 1999
-----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
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 Drive
Rumson, NJ 07760
Charles L. von Breitenbach, II* Senior Vice President, Managed None
Money
J. Brereton Young* Senior Vice President, Director None
of Sales Development
Jeffrey S. Dean* Vice President, Business Analysis None
Mason S. Flinn Vice President, Regional Retirement None
2130 Fillmore Street Plans Manager
BMB 280
San Francisco, CA 94115-2224
Marsha E. Jacoby* Vice President, Offshore Business None
Manager
Jody Knapp Vice President, Regional Retirement None
17011 East Monterey Drive Plans Manager
Fountain Hills, AZ 85268
David W. Mountford Vice President, Regional Retirement None
7131 NW 46th Street Plans Manager
Lauderhill, FL 33319
Ronald W. Pond* Vice President, Portfolio Advisor None
Jeffery C. Pleet* Vice President, Regional Retirement None
Plans Manager
Tracy A. Salomon* Vice President, Retirement Marketing None
Helen Simon* Vice President, Sales Administration None
Gary A. Terpening* Vice President, Director of Business None
Development
Charles E. Wenzel Vice President, Regional Retirement None
117 Carpetners Row Plans Manager
Mount Chanin, DE 19710
Daniel Chambers Regional Vice President None
4618 Lorraine Avenue
Dallas, TX 75209
</TABLE>
C-5
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of December 31, 1999
-----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Richard B. Callaghan Regional Vice President None
7821 Dakota Lane
Orland Park, IL 60462
Kevin Casey Regional Vice President None
19 Bayview Avenue
Babylon, NY 11702
Bradford C. Davis Regional Vice President None
241 110th Avenue SE
Bellevue, WA 98004
Cathy Des Jardins Regional Vice President None
PMB 152
1705 14th Street
Boulder, CO 80302
Kenneth Dougherty Regional Vice President None
8640 Finlarig Drive
Dublin, OH 43017
Kelli A. Wirth Dumser Regional Vice President None
7121 Jardiniere Court
Charlotte, NC 28226
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
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
7105 Harbour Landing
Alpharetta, GA 30005
Leslie A. Mudd Regional Vice President None
5243 East Calle Redonda
Phoenix, AZ 85018
Tim O'Connell Regional Vice President None
11908 Acacia Glen Court
San Diego, CA 92128
George M. Palmer, Jr. Regional Vice President None
1805 Richardson Place
Tampa, FL 33606
Thomas Parnell Regional Vice President None
1575 Edgecomb Road
St. Paul, MN 55116
</TABLE>
C-6
<PAGE>
File No. 33-13401
811-5126
PART C. OTHER INFORMATION (continued)
<TABLE>
<CAPTION>
Seligman Advisors, Inc.
-----------------------
As of December 31, 1999
-----------------------
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address with Underwriter with Registrant
---------------- ---------------- ---------------
<S> <C> <C>
Craig Prichard Regional Vice President None
9207 Cross Oaks Court
Fairfax Station, VA 22039
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
James Taylor Regional Vice President None
290 Bellington Lane
Creve Coeur, MO 63141
Steve Wilson Regional Vice President None
83 Kaydeross Park Road
Saratoga Springs, NY 12866
Frank J. Nasta* Secretary Secretary
Aurelia Lacsamana* Treasurer None
Gail S. Cushing* Assistant Vice President, National None
Accounts Manager
Sandra G. Floris* Assistant Vice President, Order Desk None
Keith Landry* Assistant Vice President, Order Desk None
Albert A. Pisano* Assistant Vice President and None
Compliance Officer
Joyce Peress* Assistant Secretary Assistant Secretary
</TABLE>
* The principal business address of each of these directors and/or officers
is 100 Park Avenue, New York, NY 10017.
(c) Not Applicable.
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 10% 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, as amended; 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.
C-7
<PAGE>
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 No. 20 to its
Registration Statement pursuant to Rule 485(b) under the Securities Act of 1933
and has duly caused this Post-Effective Amendment No. 20 to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of New York, State of New York, on the 27th day of
January, 2000.
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. 20 to the Registration Statement has been signed below by the
following persons in the capacities indicated on January 27, 2000.
Signature Title
--------- -----
/s/ William C. Morris Chairman of the Board (Principal
- ------------------------------------ Executive Officer) and Director
William C. Morris
/s/ Brian T. Zino President and Director
- ------------------------------------
Brian T. Zino
/s/ Thomas G. Rose Treasurer (Principal Financial and
- ------------------------------------ Accounting Officer)
Thomas G. Rose
John R. Galvin, Director )
Alice S. Ilchman, Director )
Frank A. McPherson, Director )
John E. Merow, Director )
Betsy S. Michel, Director ) /s/ Brian T. Zino
James C. Pitney, Director ) ----------------------------------
James Q. Riordan, Director ) Brian T. Zino, Attorney-In-Fact
Richard R. Schmaltz, Director )
Robert L. Shafer, Director )
James N. Whitson, Director )
C-8
<PAGE>
33-13401
811-5126
SELIGMAN NEW JERSEY MUNICIPAL FUND, INC.
Post-Effective Amendment No. 20 to the
Registration Statement on Form N-1A
EXHIBIT INDEX
Form N-1A Item No. Description
- ------------------ -----------
Item 23(j) Consent of Independent Auditors
Item 23(j)(1) Consent of New Jersey Counsel
Item 23(p) Codes of Ethics
CONSENT OF INDEPENDENT AUDITORS
Seligman New Jersey Municipal Fund, Inc.:
We consent to the use in Post-Effective Amendment No. 20 to Registration
Statement No. 33-13401 of our report dated November 5, 1999, appearing in the
Annual Report to Shareholders for the year ended September 30, 1999,
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.
/s/ Deloitte & Touche LLP
New York, New York
January 24, 2000
McCARTER & ENGLISH, LLP
ATTORNEYS AT LAW
FOUR GATEWAY CENTER
100 MULBERRY STREET
P.O. BOX 652
NEWARK, NJ 07101-0652
December 10, 1999
Seligman New Jersey Municipal Fund, Inc.
100 Park Avenue
New York, NY 10017
Dear Ladies and Gentlemen:
With respect to Post-Effective Amendment No 20 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.
We consent to the filing of this consent as an exhibit to the Registration
Statement and to the reference to us under the heading "New Jersey Taxes." In
giving such consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.
Very truly yours,
/s/McCarter & English, LLP
McCarter & English, LLP
CODE OF ETHICS
J. & W. Seligman & Co. Incorporated
Seligman Advisors, Inc.
Seligman Services, Inc.
Seligman Data Corp.
Seligman International, Inc.
Seligman International UK Limited
The Seligman Group of Investment Companies
I. Introduction
A primary duty of all directors, officers and employees (collectively
"Employees") of J. & W. Seligman & Co. Incorporated, its subsidiaries and
affiliates (collectively, "Seligman") is to be faithful to the interest of the
various Seligman advisory clients, including the registered and unregistered
companies advised by Seligman (collectively, "Clients"). Directors of the
Seligman Registered Investment Companies also have a duty to the Seligman
Registered Investment Companies and their shareholders. Persons who are
Disinterested Directors are "Employees" for purposes of this Code of Ethics.
Through the years, Seligman and its predecessor organizations have had a
reputation of maintaining the highest business and ethical standards and have
been favored with the confidence of investors and the financial community. Such
a reputation and confidence are not easily gained and are among the most
precious assets of Seligman. In large measure, they depend on the devotion and
integrity with which each Employee discharges his or her responsibilities. Their
preservation and development must be a main concern of each Employee, and each
Employee has a primary obligation to avoid any action or activity that could
produce conflict between the interest of the Clients and that Employee's
self-interest.
The purpose of this Code of Ethics ("Code") is to set forth the policies of
Seligman in the matter of conflicts of interest and to provide a formal record
for each Employee's reference and guidance. This Code is also designed to
prevent any act, practice or course of business prohibited by the rules and
regulations governing our industry.
Each Employee owes a fiduciary duty to each Client. Therefore, all Employees
must avoid activities, interests and relationships that might appear to
interfere with making decisions in the best interest of the Clients.
As an Employee, you must at all times:
1. Avoid serving your own personal interests ahead of the interests of
Clients. You may not cause a Client to take action, or not to take action,
for your personal benefit rather than the Client's benefit.
2. Avoid taking inappropriate advantage of your position. The receipt of
investment opportunities, perquisites or gifts from persons seeking
business with Clients or with Seligman could call into question the
exercise of your better judgment. Therefore, you must not give or receive
benefits that would compromise your ability to act in the best interest of
the Clients.
3. Conduct all personal Securities Transactions in full compliance with the
Code, including the pre-authorization and reporting requirements, and
comply fully with the Seligman Insider Trading Policies and Procedures (See
Appendix A).
While Seligman encourages you and your families to develop personal investment
programs, you must not take any action that could cause even the appearance that
an unfair or improper action has been taken. Accordingly, you must follow the
policies set forth below with respect to trading in your Account(s). This Code
places reliance on the good sense and judgment of you as an Employee; however,
if you are unclear as to the Code's meaning, you should seek the advice of the
Law and Regulation Department and assume the Code will be interpreted in the
most restrictive manner. Questionable situations should be resolved in favor of
Clients.
<PAGE>
Technical compliance with the Code's procedures will not insulate from scrutiny
any trades that indicate a violation of your fiduciary duties.
Application of the Code to Disinterested Directors
Disinterested Directors are only subject to the reporting requirements in
Section III.5(b) of the Code. Disinterested Directors are not subject to other
provisions of the Code but are subject to the requirements of the federal
securities laws and other applicable laws, such as the prohibition on trading in
securities of an issuer while in possession of material non-public information.
II. Definitions
(a) "Accounts" means all Employee Accounts and Employee Related Accounts.
(b) "Beneficial Interest" is broadly interpreted. The SEC has said that
the final determination of Beneficial Interest is a question to be
determined in the light of the facts of each particular case. The
terms Employee Account and Employee Related Account, as defined below,
generally define Beneficial Interest. However, the meaning of
"Beneficial Interest" may be broader than that described below. If
there are any questions as to Beneficial Interest, please contact the
Director of Compliance, General Counsel or Associate General Counsel.
(i) "Employee Account" means the following securities Accounts: (i)
any of your personal account(s); (ii) any joint or
tenant-in-common account in which you have an interest or are a
participant; (iii) any account for which you act as trustee,
executor, or custodian; (iv) any account over which you have
investment discretion or otherwise can exercise control,
including the accounts of entities controlled directly or
indirectly by you; (v) any account in which you have a direct or
indirect interest through a contract, arrangement or otherwise
(e.g., economic, voting power, power to buy or sell, or
otherwise); (vi) any account held by pledges, or for a
partnership in which you are a member, or by a corporation which
you should regard as a personal holding company; (vii) any
account held in the name of another person in which you do not
have benefits of ownership, but which you can vest or revest
title in yourself at once or some future time; (viii) any account
of which you have benefit of ownership; and (ix) accounts
registered by custodians, brokers, executors or other fiduciaries
for your benefit.
(ii) "Employee Related Account" means any Account of (i) your spouse
and minor children and (ii) any account of relatives or any other
persons to whose support you materially contribute, directly or
indirectly.
(c) "Disinterested Director" means a director or trustee of a Seligman
Registered Investment Company who is not an "interested person" of
such investment company within the meaning of Section 2(a)(19) of the
Investment Company Act of 1940.
(d) "Equivalent Security" includes, among other things, an option to
purchase or sell a Security or an instrument convertible or
exchangeable into a Security.
(e) "Investment Team" means one or more Investment Teams formed by the
Manager in various investment disciplines to review and approve
Securities for purchase and sale by Client Accounts. This includes a
team's leader, portfolio managers, research analysts, traders and
their direct supervisors.
(f) "Security" includes, among other things, stocks, notes, bonds,
debentures, and other evidences of indebtedness (including loan
participation and assignments), limited partnership interests,
investment contracts, and all derivative instruments (e.g., options
and warrants).
<PAGE>
(g) "Securities Transaction" means a purchase or sale of a Security.
(h) "Seligman Registered Investment Company" means an investment company
registered under the Investment Company Act of 1940 for which Seligman
serves as investment manager or adviser.
III. Personal Securities Transactions
1. Prohibited Transactions
These apply to all of your Accounts.
(a) Seven-Day Blackout: If you are a member of an Investment Team,
Securities Transactions are prohibited within seven calendar days
either before or after the purchase or sale of the relevant security
(or an Equivalent Security) by a Client whose Account is managed by
your Investment Team.
(b) Intention to Buy or Sell for Clients: Securities Transactions are
prohibited at a time when you intend, or know of another's intention,
to purchase or sell that Security (or an Equivalent Security) on
behalf of a Client.
(c) Sixty-Day Holding Period: Profits on Securities Transactions made
within a sixty-day period are prohibited and must be disgorged. This
is a prohibition of short term trading. Specifically,
o Purchase of a Security within 60 days of your sale of the
Security (or an Equivalent Security), at a price that is less
than the price in the previous sale is prohibited.
o Sale of a Security within the 60 day period of your purchase of
the Security (or an Equivalent Security), at a price that is
greater than the price in the previous purchase is prohibited.
Examples are as follows:
1. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee sells 100 shares of XYZ ($15 a share) on February 15.
Employee must disgorge $500.
2. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee purchases 50 shares of XYZ ($12 a share) on January 30.
Employee sells 50 shares of XYZ ($15 a share) on March 15.
Employee must disgorge $150. (The March 15 sale may not be
matched to the January 1 purchase).
3. Employee purchases 100 shares of XYZ ($10 a share) on January 1.
Employee sells 100 shares of XYZ ($10 a share) on February 1.
Employee purchases 100 shares of XYZ ($9 a share) on March 1
Employee must disgorge $100. (The February 1 sale is permissible
because no profit was made. However, the March 1 purchase is
matched against the February 1 sale resulting in a $100 profit).
(d) Restricted Transactions: Transactions in a Security are prohibited (i)
on the day of a purchase or sale of the Security by a Client, or (ii)
anytime a Client's order in the Security is open on the trading desk.
Other Securities may be restricted from time to time as deemed
appropriate by the Law and Regulation Department.
<PAGE>
(e) Short Sales: If you are a member of an Investment Team, you may not
engage in any short sale of a Security if, at the time of the
transaction, any Client managed by your Team has a long position in
that same Security. However, this prohibition does not prevent you
from engaging short sales against the box and covered call writing, as
long as these personal trades are in accordance with the sixty-day
holding period described above.
(f) Public Offerings: Acquisitions of Securities in initial and secondary
public offerings are prohibited, unless granted an exemption by the
Director of Compliance. An exemption for an initial public offering
will only be granted in certain limited circumstances, for example,
the demutualization of a savings bank.
(g) Private Placements: Acquisition of Securities in a private placement
is prohibited absent prior written approval by the Director of
Compliance.
(h) Market Manipulation: Transactions intended to raise, lower, or
maintain the price of any Security or to create a false appearance of
active trading are prohibited.
(i) Inside Information: You may not trade, either personally or on behalf
of others, on material, non-public information or communicate
material, non-public information to another in violation of the law.
This policy extends to activities within and outside your duties at
Seligman. (See Appendix A).
2. Maintenance of Accounts
All Accounts that have the ability to engage in Securities Transactions
must be maintained at Ernst & Company (Investec) and/or the specific
Merrill Lynch branch office located at 712 Fifth Avenue, New York, NY. You
are required to notify the Director of Compliance of any change to your
account status. This includes opening a new Account, converting,
transferring or closing an existing account or acquiring Beneficial
Interest in an Account through marriage or otherwise. You must place all
orders for Securities Transactions in these Account(s) with the Equity
Trading Desk or the appropriate Fixed Income Team as set forth in Section
III.3 ("Trade Pre-authorization Requirements").
The Director of Compliance may grant exceptions to the foregoing
requirements on a case by case basis. All requests for exceptions must be
applied for in writing and submitted for approval to the Director of
Compliance and will be subject to certain conditions.
3. Trade Pre-authorization Requirements
All Securities Transactions in an Employee Account or Employee Related
Account must be pre-authorized, except for Securities Transactions set
forth in Section III.4 ("Exempt Transactions").
(a) Trade Authorization Request Form: Prior to entering an order for a
Securities Transaction in an Employee Account or Employee Related
Account, which is subject to pre-authorization, you must complete a
Trade Authorization Request Form (set forth in Appendix B) and submit
the completed Form (faxed or hand delivered) to the Director of
Compliance (or designee).
(b) Review of the Form and Trade Execution: After receiving the completed
Trade Authorization Request Form, the Director of Compliance (or
designee) will review the information and, as soon as practical,
determine whether to authorize the proposed Securities Transaction.
The authorization, date and time of the authorization must be
reflected on the Form. Once approved the order may then be executed by
Equity Trading Desk or the appropriate Fixed Income Team, except for
accounts for which an exemption was granted under Section III.2.
<PAGE>
(c) Length of Trade Authorization Approval: Any authorization, if granted,
is effective until the earliest of (i) its revocation, (ii) the close
of business on the day from which authorization was granted or (iii)
your discovery that the information in the Trade Authorization Request
Form is no longer accurate. If the Securities Transaction was not
placed or executed within that period, a new pre-authorization must be
obtained. A new pre-authorization need not be obtained for orders
which cannot be filled in one day due to an illiquid market, so long
as such order was placed for execution on the day the original
pre-authorization was given.
No order for a Securities Transaction may be placed prior to the
Director of Compliance (or designee) receiving the completed Trade
Pre-authorization Form and approving the transaction. In some cases,
trades may be rejected for a reason that is confidential.
4. Exempt Transactions
The prohibitions of this Code shall not apply to the following Securities
Transactions in your Account(s):
(a) Purchases or sales of Securities which are non-volitional (i.e., not
involving any investment decision or recommendation).
(b) Purchases of Securities through certain corporate actions (such as
stock dividends, dividend reinvestments, stock splits, mergers,
consolidations, spin-offs, or other similar corporate reorganizations
or distributions generally applicable to all holders of the same class
of Securities).
(c) Purchases of Securities effected upon the exercise of rights issued by
an issuer pro rata to all holders of a class of its Securities, to the
extent such rights were acquired from the issuer.
(d) Purchases or sales of open-end registered investment companies, U.S.
Government Securities and money market instruments (e.g., U.S.
Treasury Securities, bankers acceptances, bank certificates of
deposit, commercial paper and repurchase agreements).
(e) Purchases of Securities which are part of an automatic dividend
reinvestment plan or stock accumulation plan; however, quarterly
account statement of such plans must be sent to the Director of
Compliance.
(f) Securities Transactions that are granted a prior exemption by the
Director of Compliance, the General Counsel or the Associate General
Counsel.
5. Reporting
(a) You must arrange for the Director of Compliance to receive from the
executing broker, dealer or bank duplicate copies of each confirmation
and account statement for each Securities Transaction in an Employee
Account or Employee Related Account.
(b) If you are a Disinterested Director you are required to report the
information specified below with respect to any Securities Transaction
in any Securities Account in which you have Beneficial Interest, if
you knew, or in the ordinary course of fulfilling your official duties
as a Disinterested Director, should have known, that during 15 days
immediately before or after the date of your transaction, the Security
(or Equivalent Security) was purchased or sold by a Seligman
Registered Investment Company or considered for purchase or sale by a
Seligman Registered Investment Company. Such report shall be made not
later than 10 days after the end of the calendar quarter in which the
Transaction was effected and shall contain the following information:
<PAGE>
(i) The date of the transaction, the name of the company, the number
of shares, and the principal amount of each Security involved;
(ii) The nature of the transaction (i.e., purchase, sale or any other
type of acquisition or disposition);
(iii) The price at which the transaction was effected;
(iv) The name of the broker, dealer or bank with or through whom the
transaction was effected; and
(v) The date the report is submitted.
(c) You are required to disclose all Securities beneficially owned by you
within ten days of commencement of employment and at the end of each
calendar year within 10 days thereafter (See Appendix C).
(d) You are also required to disclose all Employee and Employee Related
Securities Accounts, Private Securities Transactions and Outside
Activities, Affiliations and Investments upon commencement of
employment and annually thereafter (See Appendix D).
(e) Any report may contain a statement that the report shall not be
construed as an admission by you, that you have any direct or indirect
beneficial ownership in the Security to which the report relates.
(f) The Director of Compliance or his designee will review all reports.
6. Dealings with the Clients
You should not have any direct or indirect investment interest in the
purchase or sale of any Security or property from or to Clients. This is a
prohibition against dealings between you and the Clients and is not
intended to preclude or limit investment transactions by you in Securities
or property, provided such transactions are not in conflict with the
provisions of this Code.
7. Preferential Treatment, Favors and Gifts
You are prohibited from giving and receiving gifts of significant value or
cost from any person or entity that does business with or on behalf of any
Client. You should also avoid preferential treatment, favors, gifts and
entertainment which might, or might appear to, influence adversely or
restrict the independent exercise of your best efforts and best judgments
on behalf of the Clients or which might tend in any way to impair
confidence in Seligman by Clients. Cash Gifts that do not exceed $100 in
value per person for a calendar year are permissible. Ordinary courtesies
of business life, or ordinary business entertainment, and gifts of
inconsequential value are also permissible. However, they should not be so
frequent nor so extensive as to raise any question of impropriety.
8. Outside Business Activities and Service as a Director, Trustee or in a
Fiduciary Capacity of any Organization
You may not engage in any outside business activities or serve as a
Director, Trustee or in a fiduciary capacity of any organization, without
the prior written consent of the Director of Compliance.
<PAGE>
9. Remedies of the Code
Upon discovering a violation of this Code, sanctions may be imposed against
the person concerned as may be deemed appropriate, including, among other
things, a letter of censure, fines, suspension or termination of personal
trading rights and/or employment.
As part of any sanction, you may be required to absorb any loss from the
trade. Any profits realized, as a result of your personal transaction that
violates the Code must be disgorged to a charitable organization, which you
may designate.
10. Compliance Certification
At least once a year, you will be required to certify on the Employee
Certification Form (set forth in Appendix E) that you have read and
understand this Code, that you have complied with the requirements of the
Code, and that you have disclosed or reported all personal Securities
Transactions pursuant to the provisions of the Code.
11. Inquiries Regarding the Code
If you have any questions regarding this Code or any other
compliance-related matter, please call the Director of Compliance, or in
his absence, the General Counsel or Associate General Counsel.
--------------------------------
William C. Morris
Chairman
December 22, 1966
Revised: March 8, 1968 December 7, 1990
January 14, 1970 November 18, 1991
March 21, 1975 April 1, 1993
May 1, 1981 November 1, 1994
May 1, 1982 February 28, 1995
April 1, 1985 November 19, 1999*
March 27, 1989
* Refers to the incorporation of the Code of Ethics of the Seligman
Investment Companies originally adopted June 12, 1962, as amended.
<PAGE>
Appendix A
Amended November 19, 1999
J. & W. Seligman & Co. Incorporated - Insider Trading Policies and Procedures
SECTION I. BACKGROUND
Introduction
United States law creates an affirmative duty on the part of broker-dealers
and investment advisers to establish, maintain and enforce written policies and
procedures that provide a reasonable and proper system of supervision,
surveillance and internal control to prevent the misuse of material, non-public
information by the broker-dealer, investment adviser or any person associated
with them. The purpose of these procedures is to meet those requirements. The
following procedures apply to J. & W. Seligman & Co. Incorporated, its
subsidiaries and affiliates (collectively, "Seligman") and all officers,
directors and employees (collectively, "Employees") thereof.
Statement of Policy
No Employee may trade, either personally or on behalf of others, on
material, non-public information or communicate material, non-public information
to another in violation of the law. This policy extends to activities within and
outside their duties at Seligman. Each Employee must read, acknowledge receipt
and retain a copy of these procedures.
Inside Information
The term "insider trading" is not defined in the federal securities laws,
but generally is used to refer to the use of material, non-public information to
trade in securities or to communicate material, non-public information to
others.
While the law concerning insider trading is not static, it is understood
that the law generally prohibits:
A. trading by an insider, while in possession of material, non-public
information, or
B. trading by a non-insider, while knowingly in possession of material,
non-public information, where the information either was disclosed to
the non-insider in violation of an insider's duty to keep it
confidential or was misappropriated, or
C. communicating material, non-public information to others.
The elements of insider trading and the penalties for such unlawful conduct
are discussed below. If you have any questions after reviewing these procedures,
you should consult the Director of Compliance, General Counsel or Associate
General Counsel.
1. Who Is An Insider?
The concept of "insider" is broad. It includes Employees of a company. In
addition, a person can be a "temporary insider" if he or she enters into a
special confidential relationship in the conduct of a company's affairs and
as a result is given access to information solely for the company's
purposes. A temporary insider can include, among others, a company's
attorneys, accountants, consultants, bank lending officers, and the
Employees of such organizations. In addition, Seligman may become a
temporary insider of a company it advises or for which it performs other
services. According to the Supreme Court, the company must expect the
outsider to keep the disclosed non-public information
<PAGE>
confidential and the relationship must at least imply such a duty before
the outsider will be considered an insider.
2. What Is Material Information?
Trading on inside information is not a basis for liability unless the
information is material. "Material information" generally is defined as
information for which there is a substantial likelihood that a reasonable
investor would consider it important in making his or her investment
decisions, or information that is reasonably certain to have a substantial
affect on the price of a company's securities. Information that Employees
should consider material includes, but is not limited to: dividend changes,
earnings estimates, changes in previously released earnings estimates,
significant merger or acquisition proposals or agreements, major
litigation, liquidation problems and extraordinary management developments.
In addition, information about major contracts or new customers could also
qualify as material, depending upon the importance of such developments to
the company's financial condition or anticipated performance.
Material information does not have to relate to a company's business. For
example, in Carpenter v. U.S., 408 U.S. 316 (1987), the Supreme Court
considered as material certain information about the contents of a
forthcoming newspaper column that was expected to affect the market price
of a Security. In that case, a Wall Street Journal reporter was found
criminally liable for disclosing to others the dates that reports on
various companies would appear in the Journal and whether those reports
would be favorable or not.
3. What Is Non-Public Information?
Information is non-public until it has been effectively communicated to the
market place. One must be able to point to some fact to show that the
information is generally public. For example, information found in a report
filed with the SEC, or appearing in Dow Jones, Reuters Economic Services,
The Wall Street Journal or other publications of general circulation would
be considered public. However, see Section II, Paragraph 2.
4. Penalties for Insider Trading
Penalties for trading on or communicating material, non-public information
are severe, both for individuals involved in such unlawful conduct and
their employers. A person can be subject to some or all of the penalties
below even if he or she does not personally benefit from the violation.
Penalties include:
- Civil injunctions
- Disgorgement of profits
- Jail sentences
- Fines for the person who committed the violation of up to three
times the profit gained or loss avoided, whether or not the
person actually benefited, and
- Fines for the employer or other controlling person of up to the
greater of $1,000,000 or three times the amount of the profit
gained or loss avoided.
In addition, any violation of policies and procedures set forth herein can
be expected to result in serious sanctions by Seligman, including dismissal of
the persons involved.
<PAGE>
SECTION II. PROCEDURES
Procedures to Implement Policy Against Insider Trading.
The following procedures have been established to assist the Employees of
Seligman in avoiding insider trading, and to aid Seligman in preventing,
detecting and imposing sanctions against insider trading. Every Employee of
Seligman must follow these procedures or risk serious sanctions, including
dismissal, substantial personal liability and criminal penalties. If you have
any questions about these procedures you should consult the Director of
Compliance, the General Counsel or Associate General Counsel.
1. Identifying Inside Information.
Before trading for yourself or others (including investment companies and
private Accounts managed by Seligman), in the securities of a company about
which you may have potential inside information, ask yourself the following
questions:
a. Is the information material? Is this information that an investor
would consider important in making his or her investment decisions? Is
this information that would substantially affect the market price of
the securities if generally disclosed?
b. Is the information non-public? To whom has this information been
provided? Has the information been effectively communicated to the
marketplace in a publication of general circulation or does it fall
within the circumstances set forth in paragraph 2 below.
If, after consideration of the above, you believe that the information is
material and non-public, or if you have questions as to whether the information
is material and non-public, you should take the following steps:
c. Report the matter immediately to the Director of Compliance, General
Counsel or Associate General Counsel.
d. Do not purchase or sell the securities on behalf of yourself or
others, including investment companies or private Accounts managed by
Seligman.
e. Do not communicate the information inside or outside Seligman other
than to the Director of Compliance, General Counsel or Associate
General Counsel.
f. After the Director of Compliance, General Counsel or Associate General
Counsel has reviewed the issue, you will be instructed to continue the
prohibitions against trading and communication, or you will be allowed
to trade and communicate the information.
2. Important Specific Examples
a. If you have a telephone or face-to-face conversation with a senior
executive of a publicly-traded company and are provided information
about the company that you have reason to believe has not yet been
disclosed in a widely-disseminated publication such as a press
release, quarterly report or other public filing, you have received
non-public information. This information is considered non-public even
if you believe that the company executive would provide the same
information to other analysts or portfolio managers who call the
company. Until information has been disclosed in a manner that makes
it available to (or capable of being accessed by) the investment
community as a whole, it is considered non-public. If the information
is material, as described above, you may not trade while in possession
of this information unless you first discuss the matter and obtain
approval from the Director of Compliance, General Counsel or Associate
General Counsel. Although it may be lawful for an analyst to act on
the basis of material information that the company's management has
chosen to disclose selectively to that analyst, where the information
is provided in a one-on-one context,
<PAGE>
regulators are likely to question such conduct. Approval from the Law
and Regulation Department will therefore depend on the specific
circumstances of the information and the disclosure. Under the Supreme
Court's important decision of Dirks v. SEC, 463 U.S. 646 (1983),
securities analysts may be free to act on selectively disclosed
material information if it is provided by company executives
exclusively to achieve proper corporate purposes.
b. If you obtain material information in the course of an analysts'
conference call or meeting conducted by a publicly-traded company in
the ordinary course of its business in which representatives of
several other firms or investors are also present (as distinguished
from the one-on-one situation described in the preceding paragraph),
you may act on the basis of that information without need to consult
with the Director of Compliance, General Counsel or Associate General
Counsel, even if the information has not yet been published by the
news media. You should be aware, however, that if there is something
highly unusual about the meeting or conference call that leads you to
question whether it has been authorized by the company or is otherwise
suspect, you should first consult with the Director of Compliance,
General Counsel or Associate General Counsel.
c. If you are provided material information by a company and are
requested to keep such information confidential, you may not trade
while in possession of that information before first obtaining the
approval of the Director of Compliance, General Counsel or the
Associate General Counsel.
As these examples illustrate, the legal requirements governing insider
trading are not always obvious. You should therefore always consult with the
Director of Compliance, General Counsel or Associate General Counsel if you have
any question at all about the appropriateness of your proposed conduct.
3. Restricting Access To Material, Non-Public Information
Information in your possession that you identify as material and non-public
may not be communicated to anyone, including persons within Seligman,
except as provided in paragraphs 1 and 2 above. In addition, care should be
taken so that such information is secure. For example, files containing
material, non-public information should be sealed; access to computer files
containing material, non-public information should be restricted.
4. Resolving Issues Concerning Insider Trading
If, after consideration of the items set forth in paragraphs 1 and 2, doubt
remains as to whether information is material or non-public, or if there is
any unresolved question as to the applicability or interpretation of the
foregoing procedures, or as to the propriety of any action, it must be
discussed with the Director of Compliance, General Counsel and or the
Associate General Counsel before trading or communicating the information
to anyone.
5. Personal Securities Trading
All Employees shall follow with respect to personal Securities trading the
procedures set forth in the Code of Ethics. In addition, no Employee shall
establish a brokerage Account with a Firm other than those previously
approved without the prior consent of the Director of Compliance and every
Employee shall be subject to reporting requirements under Section III.5 of
the Code of Ethics. The Director of Compliance, or his designee, shall
monitor the personal Securities trading of all Employees.
<PAGE>
Appendix B
Amended November 19, 1999
J. & W. SELIGMAN & CO. INCORPORATED
TRADE AUTHORIZATION REQUEST FORM
1. Name of Employee/Telephone Number: _________________________
2. If different than #1, name of the person in whose
account the trade will occur: _________________________
3. Relationship of (2) to (1): _________________________
4. Name the firm at which the account is held: _________________________
5. Name of Security: _________________________
6. Number of shares or units to be bought or
sold or amount of bond: _________________________
7. Approximate price per share, unit or bond: _________________________
8. Check those that are applicable: _____ Purchase _____ Sale
_____ Market Order ______ Limit Order (Price of Limit Order: _____)
9. Do you possess material non public information regarding
the Security or the issuer of the Security? _____ Yes _____ No
10. To your knowledge, are there any outstanding (purchase
or sell) orders for this Security or any Equivalent
Security by a Seligman Client? _____ Yes _____ No
11. To your knowledge, is this Security or Equivalent
Security being considered for purchase or sale for
one or more Seligman Clients? _____ Yes _____ No
12. Is this Security being acquired in an initial or
secondary public offering? _____ Yes _____ No
13. Is this Security being acquired in a private placement? _____ Yes _____ No
14. Have you or any Related Account covered by the pre-
authorization provisions of the Code purchased or sold
this Security within the past 60 days? _____ Yes ____ No
<PAGE>
- - - - - -
For Investment Team Members Only:
15. Has any Client Account managed by your team purchased or sold this Security
or Equivalent Security within the past seven calendar days or do you expect
any such account to purchase or sell this Security or Equivalent Security
within seven calendar days of your purchase or sale? ______ Yes ______ No
16. Why is this Security Transaction appropriate for you and not for one or
more of your team's Clients?
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- - - - - -
I have read the J. & W. Seligman & Co. Incorporated Code of Ethics, as revised
on November 19, 1999, within the prior 12 months and believe that the proposed
trade(s) fully complies with the requirements of the Code of Ethics and Insider
Trading policy.
----------------------------
Employee Signature
----------------------------
Date Submitted
Authorized by: ________________________
Date: ________________________
<PAGE>
Appendix C
Amended November 19, 1999
REPORT OF SECURITIES BENEFICIALLY OWNED
AS OF DECEMBER 31, 1999
The following is a list of all Securities positions (except open-end
investment companies, U.S. Government Securities and money market instruments)
in which I have direct or indirect beneficial ownership, as defined in the Code
of Ethics. This includes Securities held at home, in safe deposit boxes or by an
issuer.
Description of Security No. of Shares Principal Amount Location of Security
- ----------------------- ------------- ---------------- --------------------
- ----------------------- ------------- ---------------- --------------------
- ----------------------- ------------- ---------------- --------------------
- ----------------------- ------------- ---------------- --------------------
- ----------------------- ------------- ---------------- --------------------
- ----------------------- ------------- ---------------- --------------------
_______ The list above (and any additional sheets I have attached) represents
all my Securities positions in which I have direct or indirect
beneficial ownership as defined in the Code of Ethics.
_______ I only have a beneficial ownership interest in open-end investment
companies, U.S. Government Securities and money market instruments,
and/or I do not beneficially own any Securities.
Date: ________________________ -------------------------------
First Last, Company
<PAGE>
Appendix D
Amended November 19, 1999
EMPLOYEE REPORTING QUESTIONNAIRE
Employee Name: ____________________ Ext: ______ Department: _______________
Please Print
Company/Affiliate: ______________________ Supervisor: ___________________
1. Securities Accounts
Do you have any Accounts in which Securities can be purchased or sold over
which you have control or in which you have a Beneficial Interest, as
defined in Seligman's Code of Ethics?
Yes _______ No ________
If yes, please list all such Accounts:
Account Account Type of
Institution Number Title Account
----------- ------ ----- -------
-------------------- --------------- ----------------- --------------
-------------------- --------------- ----------------- --------------
-------------------- --------------- ----------------- --------------
2. Financial Interests
Do you have any private placements, restricted stock warrants, general or
limited partnerships, or other investment interests in any organization
(public, private or charitable) not held in the accounts listed above?
Please include Securities and certificates held in your custody.
Yes _______ No _______
If yes, please describe:
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---------------------------------------------------------------------------
3. Outside Activities/Affiliations
a) Do you have any activities outside Seligman or its affiliates for
which you receive additional compensation:
Yes _______ No _______
If yes, please describe:
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---------------------------------------------------------------------------
b) Do you serve in the capacity of officer, director, partner or employee
(or in any other fiduciary capacity) for any company or organization
(public, private or charitable) other than Seligman or its affiliates.
Yes ________ No _______
If yes, please describe:
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I hereby certify that I have read and understand the foregoing statements
and that each of my responses thereto are true and complete. I agree to
immediately inform the Director of Compliance if there is any change in any
of the above answers. I also understand that any misrepresentation or
omissions of facts in response to this questionnaire and failure to
immediately inform the Director of Compliance of any changes to responses
provided herein may result in termination of my employment.
------------------------------------ ----------------------------
Employee's Signature Date
------------------------------------
Title
<PAGE>
Appendix E
Amended November 19, 1999
Annual Certification of Compliance with the Code of Ethics
I acknowledge that I have received and read the Code of Ethics and Insider
Trading Policies and Procedures, as amended on November 19, 1999 and hereby
agree, in consideration of my continued employment by J. & W. Seligman & Co.
Incorporated, or one of its subsidiaries or affiliates, to comply with the Code
of Ethics and Insider Trading Policies and Procedures.
I hereby certify that during the past calendar year:
1. In accordance with the Code of Ethics, I have fully disclosed the
Securities holdings in my Employee Account(s) and Employee Related
Account(s) (as defined in the Code of Ethics).
2. In accordance with the Code of Ethics, I have maintained all Employee
Accounts and Employee Related Accounts at Ernst & Company (Investec) or
Merrill Lynch located at 712 Fifth Avenue, New York, NY except for Accounts
as to which the Director of Compliance has provided written permission to
maintain elsewhere.
3. In accordance with the Code of Ethics, except for transactions exempt from
reporting under the Code of Ethics, I have arranged for the Director of
Compliance to receive duplicate confirmations and statements for each
Securities Transaction of all Employee Accounts and Employee Related
Accounts, and I have reported all Securities Transactions in each of my
Employee Accounts and Employee Related Accounts.
4. I have complied with the Code of Ethics in all other respects.
--------------------------------
Employee Signature
--------------------------------
Date:____________ Print Name
