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. Eligible employee benefit plans which have at least $500,000 invested in the Seligman Group of mutual funds or 50 eligible employees may purchase Class A shares at net asset value, but, in the event of plan termination, will be subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination.
Class C shares are sold primarily with an initial sales charge of up to 1%, and a CDSC, if applicable, of 1% imposed on redemptions made within 18 months of purchase. Class C shares purchased through certain financial intermediaries may be bought without an initial sales charge and with a 1% CDSC on redemptions made within 12 months of purchase. All Class C shares are subject to a distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual basis.
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 for each Series represent interests in the same portfolio of investments, have the same rights and are generally identical in all respects except that each class bears its separate distribution and certain other class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required.
Notes to Financial Statements (unaudited)
b. Federal Taxes — There is no provision for federal income tax. Each Series has elected to be taxed as a regulated investment company and intends to distribute substantially all taxable net income and net realized gains.
c. Security Transactions and Related Investment Income — Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial reporting and federal income tax purposes. Interest income is recorded on the accrual basis. The Trust amortizes discounts and premiums paid on bonds and other debt securities for financial reporting purposes.
Short-term holdings include securities with stated or effective maturity dates of less than one year.
Variable rate demand notes purchased by the Trust may be put back to the designated remarketing agent for the issue at par on any day, for settlement within seven days, and, accordingly, are treated as short-term holdings. These notes bear interest at a rate that resets daily or weekly. At March 31, 2006, the interest rates paid on these notes ranged from 3.05% to 3.13%.
d. Multiple Class Allocations — Each Series’ income, expenses (other than class-specific expenses), and realized and unrealized gains or losses are allocated daily to each class of shares of that Series 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 six months ended March 31, 2006, 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 Trust are recorded on the ex-dividend date.
f. Restricted Cash — Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Trust’s insurance policies.
3. Management Fee, Distribution Services, and Other Transactions — The Manager manages the affairs of the Trust and provides the necessary personnel and facilities. Compensation of all officers of the Trust, all trustees of the Trust who are employees of the Manager, and all personnel of the Trust and the Manager is paid by the Manager. The Manager’s fee is calculated daily and payable monthly, equal to 0.50% per annum of each Series’ average daily net assets. The Manager, at its discretion, agreed to waive a portion of its fees for the year ended September 30, 2006 to limit the per annum fee of California High-Yield Series and Florida Series to 0.40% and 0.35%, respectively. For the six months ended March 31, 2006, the amounts of fees waived by the Manager for California High-Yield Series and Florida Series were $18,061 and $24,985, respectively.
For the six months ended March 31, 2006, Seligman Advisors, Inc. (the “Distributor”), agent for the distribution of the Trust’s shares and an affiliate of the Manager, received the following concessions from sales of Class A shares, after commissions were paid to dealers for sales of Class A and Class C shares:
Series
|
| Distributor
Concessions
|
| Dealer
Commissions
|
|---|
| California High-Yield | | $ | 563 | | | $ | 4,699 | |
| California Quality | | | 1,593 | | | | 11,101 | |
| Florida | | | 1,853 | | | | 14,324 | |
| North Carolina | | | 595 | | | | 4,063 | |
22
Notes to Financial Statements (unaudited)
The Trust 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 continuing fees of up to 0.25% on an annual basis 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 Trust monthly pursuant to the Plan. For the six months ended March 31, 2006, for California High-Yield Series, California Quality Series, Florida Series, and North Carolina Series, fees incurred under the Plan aggregated to $15,038, $22,268, $34,755, and $19,935, respectively, or 0.10%, 0.10%, 0.24%, and 0.24%, respectively, per annum of average daily net assets of Class A shares.
Under the Plan, with respect to Class C shares and Class D shares, service organizations can enter into agreements with the Distributor and receive continuing fees 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 Trust to the Distributor pursuant to the Plan. For the six months ended March 31, 2006, fees incurred under the Plan equivalent to 1% per annum of the average daily net assets of Class C and Class D shares were as follows:
Series
|
| Class C
|
| Class D
|
|---|
| California High-Yield | | $ | 11,714 | | | $ | 15,376 | |
| California Quality | | | 14,796 | | | | 5,340 | |
| Florida | | | 18,581 | | | | 6,157 | |
| North Carolina | | | 6,465 | | | | 2,628 | |
The Distributor is entitled to retain any CDSC imposed on certain redemptions of Class A, Class C and Class D shares. For the six months ended March 31, 2006, such charges amounted to $924 for California High-Yield Series, $5 for California Quality Series, $675 for Florida Series, and $1 for North Carolina Series.
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive commissions from certain sales of Trust shares, as well as distribution and service fees pursuant to the Plan. For the six months ended March 31, 2006, Seligman Services, Inc. received commissions from the sales of shares of each Series and distribution and service fees, pursuant to the Plan, as follows:
Series
|
| Commissions
|
| Distribution and
Service Fees
|
|---|
| California High-Yield | | | — | | | $ | 2,030 | |
| California Quality | | $ | 429 | | | | 1,420 | |
| Florida | | | 638 | | | | 1,799 | |
| North Carolina | | | — | | | | 1,328 | |
For the six months ended March 31, 2006, Seligman Data Corp., which is owned by certain associated investment companies, charged each Series at cost for shareholder account services in accordance with a methodology approved by the Trust’s trustees as follows:
Series
|
|
|
|---|
| California High-Yield | | $ | 38,219 | |
| California Quality | | | 43,417 | |
| Florida | | | 30,081 | |
| North Carolina | | | 17,484 | |
23
Notes to Financial Statements (unaudited)
Costs of Seligman Data Corp. directly attributable to a Series were charged to that Series. The remaining charges were allocated to each Series by Seligman Data Corp. pursuant to a formula based on each Series’ net assets, shareholder transaction volume and number of shareholder accounts.
The Trust and certain other associated investment companies (together, the “Guarantors”) have severally but not jointly guaranteed the performance and observance of all the terms and conditions of two leases entered into by Seligman Data Corp., including the payment of rent by Seligman Data Corp. (the “Guaranties”). The leases and the Guaranties expire in September 2008 and January 2009, respectively. The obligation of the Trust to pay any amount due under either Guaranty is limited to a specified percentage of the full amount, which generally is based on the Trust’s percentage of the expenses billed by Seligman Data Corp. to all Guarantors in the most recent calendar quarter. As of March 31, 2006, the Trust’s potential obligation under the Guaranties is $24,100. As of March 31, 2006, no event has occurred which would result in the Trust becoming liable to make any payment under a Guaranty. Each Series would bear a portion of any payments made by the Trust under the Guaranties. A portion of rent paid by Seligman Data Corp. is charged to the Trust as part of Seligman Data Corp.’s shareholder account services cost.
Certain officers and trustees of the Trust are officers or directors of the Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
The Trust has a compensation agreement under which trustees who receive fees may elect to defer receiving such fees. Trustees may elect to have their deferred fees accrue interest or earn a return based on the performance of selected Series of the Trust or other funds in the Seligman Group of Investment Companies. The cost of such fees and earnings accrued thereon is included in trustees’ fees and expenses. Deferred fees and related accrued earnings are not deductible by the Series for federal income tax purposes until such amounts are paid. The accumulated balances at December 31, 2005, which were paid to the participating trustee in January 2006, were as follows:
Series
|
|
|
|---|
| California High-Yield | | $ | 8,873 | |
| California Quality | | | 9,086 | |
| Florida | | | 5,867 | |
| North Carolina | | | 5,000 | |
As of March 31, 2006, no trustees were participating in the deferred compensation arrangement.
4. Committed Line of Credit — The Trust is a participant in a joint $400 million committed line of credit that is shared by substantially all open-end funds in the Seligman Group of Investment Companies. Each Series’ borrowings are limited to 10% of its net assets. Borrowings pursuant to the credit facility are subject to interest at a per annum rate equal to the overnight federal funds rate plus 0.50%. Each Series incurs a commitment fee of 0.10% 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 2006, but is renewable annually with the consent of the participating banks. For the six months ended March 31, 2006, the Trust did not borrow from the credit facility.
24
Notes to Financial Statements (unaudited)
5. Purchases and Sales of Securities — Purchases and sales of portfolio securities, excluding short-term investments, for the six months ended March 31, 2006, were as follows:
Series
|
|
|
| Purchases
|
| Sales
|
|
|
|---|
| California High-Yield | | | | | — | | | $ | 160,000 | | | | | |
| California Quality | | | | | — | | | | 2,030,000 | | | | | |
| Florida | | | | $ | 1,567,245 | | | | 2,601,290 | | | | | |
| North Carolina | | | | | 3,166,425 | | | | 4,765,000 | | | | | |
6. Federal Tax Information — Certain components of income, expense and realized capital gain and loss are recognized at different times or have a different character for federal income tax purposes and for financial reporting purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Series. As a result of the differences described above, the treatment for financial reporting purposes of distributions made during the year from net investment income or net realized gains may differ from their ultimate treatment for federal income tax purposes. Further, the cost of investments also can differ for federal income tax purposes.
The tax basis information presented below is based on operating results for the six months ended March 31, 2006, and will vary from the final tax information as of the Trust’s year-end.
At March 31, 2006, each Series’ tax basis cost of investments for federal income tax purposes was less than the cost for financial reporting purposes due to the amortization of market discount for financial reporting purposes, offset, in part, for the California Quality Series by the tax deferral of losses on wash sales of $149,160. The tax basis cost of investments was as follows:
Series
|
|
|
| Tax
Basis Cost
|
|
|
|
|
|---|
| California High-Yield | | | | $ | 34,044,923 | | | | | | | |
| California Quality | | | | | 44,765,104 | | | | | | | |
| Florida | | | | | 29,971,301 | | | | | | | |
| North Carolina | | | | | 16,242,010 | | | | | | | |
At March 31, 2006, the tax basis components of accumulated earnings were as follows:
Series
|
|
|
| California
High-Yield
|
| California
Quality
|
| Florida
|
| North
Carolina
|
|---|
| Gross unrealized appreciation of portfolio securities | | | | $ | 1,518,562 | | | $ | 2,482,485 | | | $ | 1,577,127 | | | $ | 938,406 | |
| Gross unrealized depreciation of portfolio securities | | | | | (11,930 | ) | | | — | | | | — | | | | (27,295 | ) |
| Net unrealized appreciation of portfolio securities | | | | | 1,506,632 | | | | 2,482,485 | | | | 1,577,127 | | | | 911,111 | |
| Undistributed tax-exempt income | | | | | 2,924 | | | | 73,333 | | | | 49,214 | | | | 16,563 | |
| Accumulated net realized gain | | | | | — | | | | 47,762 | | | | 58,324 | | | | 108,117 | |
| Total accumulated earnings | | | | $ | 1,509,556 | | | $ | 2,603,580 | | | $ | 1,684,665 | | | $ | 1,035,791 | |
25
Notes to Financial Statements (unaudited)
The tax characterization of distributions paid was as follows:
|
|
|
| Six Months
Ended
3/31/2006
|
| Year
Ended
9/30/2005
|
|
|
|---|
| Tax-exempt income: |
| California High-Yield | | | | $ | 723,567 | | | $ | 1,513,097 | | | | | |
| California Quality | | | | | 982,651 | | | | 2,128,131 | | | | | |
| Florida | | | | | 654,538 | | | | 1,448,202 | | | | | |
| North Carolina | | | | | 307,269 | | | | 745,364 | | | | | |
| Long-term capital gains: |
| California High-Yield | | | | | — | | | | 355,782 | | | | | |
| California Quality | | | | | 238,526 | | | | 723,504 | | | | | |
| Florida | | | | | 199,755 | | | | 23,714 | | | | | |
| North Carolina | | | | | 130,484 | | | | 60,846 | | | | | |
7. Transactions in Shares of Beneficial Interest — Transactions in Shares of Beneficial Interest were as follows:
California High-Yield Series
|
|---|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|---|
Class A
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | 22,415 | �� | | $ | 147,573 | | | | 59,615 | | | $ | 395,391 | |
| Investment of dividends | | | 56,951 | | | | 375,231 | | | | 113,844 | | | | 754,713 | |
| Exchanged from associated funds | | | — | | | | — | | | | 30,967 | | | | 204,413 | |
| Investment of gain distributions | | | — | | | | — | | | | 37,131 | | | | 244,320 | |
| Total | | | 79,366 | | | | 522,804 | | | | 241,557 | | | | 1,598,837 | |
| Cost of shares repurchased | | | (164,079 | ) | | | (1,080,213 | ) | | | (622,899 | ) | | | (4,130,453 | ) |
| Exchanged into associated funds | | | — | | | | — | | | | (32,609 | ) | | | (217,152 | ) |
| Total | | | (164,079 | ) | | | (1,080,213 | ) | | | (655,508 | ) | | | (4,347,605 | ) |
| Decrease | | | (84,713 | ) | | $ | (557,409 | ) | | | (413,951 | ) | | $ | (2,748,768 | ) |
| |
Class C
| | Shares | | Amount | | Shares | | Amount |
| Net proceeds from sales of shares | | | 27,283 | | | $ | 179,582 | | | | 12,984 | | | $ | 86,027 | |
| Investment of dividends | | | 3,587 | | | | 23,667 | | | | 7,953 | | | | 52,760 | |
| Exchanged from associated funds | | | — | | | | — | | | | 4,728 | | | | 31,382 | |
| Investment of gain distributions | | | — | | | | — | | | | 3,786 | | | | 24,951 | |
| Total | | | 30,870 | | | | 203,249 | | | | 29,451 | | | | 195,120 | |
| Cost of shares repurchased | | | (62,431 | ) | | | (410,248 | ) | | | (101,439 | ) | | | (675,224 | ) |
| Decrease | | | (31,561 | ) | | $ | (206,999 | ) | | | (71,988 | ) | | $ | (480,104 | ) |
26
Notes to Financial Statements (unaudited)
California High-Yield Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class D
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 604 | | | $ | 3,995 | | | | 3,299 | | | $ | 21,989 | |
| Investment of dividends | | | | | 4,466 | | | | 29,473 | | | | 8,473 | | | | 56,211 | |
| Exchanged from associated funds | | | | | 51,584 | | | | 340,288 | | | | 83,528 | | | | 557,021 | |
| Investment of gain distributions | | | | | — | | | | — | | | | 3,628 | | | | 23,905 | |
| Total | | | | | 56,654 | | | | 373,756 | | | | 98,928 | | | | 659,126 | |
| Cost of shares repurchased | | | | | (17,951 | ) | | | (118,309 | ) | | | (25,714 | ) | | | (171,359 | ) |
| Exchanged into associated funds | | | | | (2,259 | ) | | | (14,870 | ) | | | (820 | ) | | | (5,438 | ) |
| Total | | | | | (20,210 | ) | | | (133,179 | ) | | | (26,534 | ) | | | (176,797 | ) |
| Increase | | | | | 36,444 | | | $ | 240,577 | | | | 72,394 | | | $ | 482,329 | |
California Quality Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class A
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 56,996 | | | $ | 384,408 | | | | 147,127 | | | $ | 1,003,777 | |
| Investment of dividends | | | | | 74,768 | | | | 502,991 | | | | 158,217 | | | | 1,079,785 | |
| Exchanged from associated funds | | | | | 37,214 | | | | 249,792 | | | | 27,959 | | | | 190,982 | |
| Investment of gain distributions | | | | | 22,352 | | | | 150,199 | | | | 65,323 | | | | 443,520 | |
| Total | | | | | 191,330 | | | | 1,287,390 | | | | 398,626 | | | | 2,718,064 | |
| Cost of shares repurchased | | | | | (504,881 | ) | | | (3,399,458 | ) | | | (850,072 | ) | | | (5,793,374 | ) |
| Exchanged into associated funds | | | | | (9,765 | ) | | | (65,527 | ) | | | (55,162 | ) | | | (375,462 | ) |
| Total | | | | | (514,646 | ) | | | (3,464,985 | ) | | | (905,234 | ) | | | (6,168,836 | ) |
| Decrease | | | | | (323,316 | ) | | $ | (2,177,595 | ) | | | (506,608 | ) | | $ | (3,450,772 | ) |
| |
Class C
| | | | Shares | | Amount | | Shares | | Amount |
| Net proceeds from sales of shares | | | | | — | | | $ | — | | | | 5,654 | | | $ | 38,337 | |
| Investment of dividends | | | | | 3,713 | | | | 24,895 | | | | 8,248 | | | | 56,102 | |
| Exchanged from associated funds | | | | | — | | | | — | | | | 54,246 | | | | 369,172 | |
| Investment of gain distributions | | | | | 1,564 | | | | 10,479 | | | | 6,094 | | | | 41,254 | |
| Total | | | | | 5,277 | | | | 35,374 | | | | 74,242 | | | | 504,865 | |
| Cost of shares repurchased | | | | | (119,248 | ) | | | (798,612 | ) | | | (286,099 | ) | | | (1,947,902 | ) |
| Exchanged into associated funds | | | | | (1,091 | ) | | | (7,297 | ) | | | (2,802 | ) | | | (18,961 | ) |
| Total | | | | | (120,339 | ) | | | (805,909 | ) | | | (288,901 | ) | | | (1,966,863 | ) |
| Decrease | | | | | (115,062 | ) | | $ | (770,535 | ) | | | (214,659 | ) | | $ | (1,461,998 | ) |
27
Notes to Financial Statements (unaudited)
California Quality Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class D
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 7,750 | | | $ | 52,089 | | | | 322 | | | $ | 2,189 | |
| Investment of dividends | | | | | 1,310 | | | | 8,778 | | | | 2,672 | | | | 18,176 | |
| Exchanged from associated funds | | | | | 8,566 | | | | 57,219 | | | | 4,242 | | | | 28,804 | |
| Investment of gain distributions | | | | | 382 | | | | 2,558 | | | | 1,276 | | | | 8,635 | |
| Total | | | | | 18,008 | | | | 120,644 | | | | 8,512 | | | | 57,804 | |
| Cost of shares repurchased | | | | | (5,294 | ) | | | (35,452 | ) | | | (47,258 | ) | | | (320,268 | ) |
| Exchanged into associated funds | | | | | (2,220 | ) | | | (14,939 | ) | | | (389 | ) | | | (2,645 | ) |
| Total | | | | | (7,514 | ) | | | (50,391 | ) | | | (47,647 | ) | | | (322,913 | ) |
| Increase (decrease) | | | | | 10,494 | | | $ | 70,253 | | | | (39,135 | ) | | $ | (265,109 | ) |
Florida Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class A
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 66,312 | | | $ | 518,757 | | | | 94,812 | | | $ | 756,005 | |
| Investment of dividends | | | | | 38,646 | | | | 302,611 | | | | 80,048 | | | | 637,959 | |
| Exchanged from associated funds | | | | | 29,014 | | | | 226,355 | | | | 73,081 | | | | 583,068 | |
| Investment of gain distributions | | | | | 13,324 | | | | 104,182 | | | | 1,665 | | | | 13,282 | |
| Total | | | | | 147,296 | | | | 1,151,905 | | | | 249,606 | | | | 1,990,314 | |
| Cost of shares repurchased | | | | | (181,238 | ) | | | (1,417,059 | ) | | | (600,570 | ) | | | (4,786,378 | ) |
| Exchanged into associated funds | | | | | (146,903 | ) | | | (1,150,312 | ) | | | (6,052 | ) | | | (48,575 | ) |
| Total | | | | | (328,141 | ) | | | (2,567,371 | ) | | | (606,622 | ) | | | (4,834,953 | ) |
| Decrease | | | | | (180,845 | ) | | $ | (1,415,466 | ) | | | (357,016 | ) | | $ | (2,844,639 | ) |
| |
Class C
| | | | Shares | | Amount | | Shares | | Amount |
| Net proceeds from sales of shares | | | | | 9,876 | | | $ | 77,622 | | | | 36,316 | | | $ | 289,703 | |
| Investment of dividends | | | | | 5,397 | | | | 42,339 | | | | 12,388 | | | | 98,932 | |
| Exchanged from associated funds | | | | | — | | | | — | | | | 767 | | | | 6,163 | |
| Investment of gain distributions | | | | | 2,277 | | | | 17,832 | | | | 289 | | | | 2,312 | |
| Total | | | | | 17,550 | | | | 137,793 | | | | 49,760 | | | | 397,110 | |
| Cost of shares repurchased | | | | | (61,949 | ) | | | (485,173 | ) | | | (118,994 | ) | | | (947,816 | ) |
| Exchanged into associated funds | | | | | — | | | | — | | | | (22,374 | ) | | | (178,456 | ) |
| Total | | | | | (61,949 | ) | | | (485,173 | ) | | | (141,368 | ) | | | (1,126,272 | ) |
| Decrease | | | | | (44,399 | ) | | $ | (347,380 | ) | | | (91,608 | ) | | $ | (729,162 | ) |
28
Notes to Financial Statements (unaudited)
Florida Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class D
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 15,865 | | | $ | 125,079 | | | | 24 | | | $ | 189 | |
| Investment of dividends | | | | | 1,489 | | | | 11,679 | | | | 2,757 | | | | 22,009 | |
| Exchanged from associated funds | | | | | 4,287 | | | | 33,567 | | | | 3,539 | | | | 28,403 | |
| Investment of gain distributions | | | | | 569 | | | | 4,450 | | | | 56 | | | | 453 | |
| Total | | | | | 22,210 | | | | 174,775 | | | | 6,376 | | | | 51,054 | |
| Cost of shares repurchased | | | | | (13,286 | ) | | | (104,212 | ) | | | (26,608 | ) | | | (211,683 | ) |
| Increase (decrease) | | | | | 8,924 | | | $ | 70,563 | | | | (20,232 | ) | | $ | (160,629 | ) |
North Carolina Series
|
|
|---|
|
|
|
| Six Months Ended
March 31, 2006
|
| Year Ended
September 30, 2005
|
|
|---|
Class A
|
|
|
| Shares
|
| Amount
|
| Shares
|
| Amount
|
|---|
| Net proceeds from sales of shares | | | | | 33,661 | | | $ | 265,587 | | | | 31,132 | | | $ | 250,714 | |
| Investment of dividends | | | | | 23,543 | | | | 184,850 | | | | 53,761 | | | | 430,309 | |
| Exchanged from associated funds | | | | | 3,938 | | | | 30,797 | | | | 16,614 | | | | 133,328 | |
| Investment of gain distributions | | | | | 11,434 | | | | 89,521 | | | | 5,121 | | | | 41,021 | |
| Total | | | | | 72,576 | | | | 570,755 | | | | 106,628 | | | | 855,372 | |
| Cost of shares repurchased | | | | | (144,294 | ) | | | (1,130,176 | ) | | | (448,712 | ) | | | (3,586,486 | ) |
| Exchanged into associated funds | | | | | (375 | ) | | | (2,939 | ) | | | (11,785 | ) | | | (94,215 | ) |
| Total | | | | | (144,669 | ) | | | (1,133,115 | ) | | | (460,497 | ) | | | (3,680,701 | ) |
| Decrease | | | | | (72,093 | ) | | $ | (562,360 | ) | | | (353,869 | ) | | $ | (2,825,329 | ) |
| |
Class C
| | | | Shares | | Amount | | Shares | | Amount |
| Net proceeds from sales of shares | | | | | — | | | $ | — | | | | 1,058 | | | $ | 8,487 | |
| Investment of dividends | | | | | 1,060 | | | | 8,312 | | | | 4,610 | | | | 36,863 | |
| Investment of gain distributions | | | | �� | 979 | | | | 7,659 | | | | 864 | | | | 6,911 | |
| Total | | | | | 2,039 | | | | 15,971 | | | | 6,532 | | | | 52,261 | |
| Cost of shares repurchased | | | | | (11,289 | ) | | | (88,535 | ) | | | (202,888 | ) | | | (1,611,054 | ) |
| Exchanged into associated funds | | | | | (22,937 | ) | | | (179,821 | ) | | | — | | | | — | |
| Total | | | | | (34,226 | ) | | | (268,356 | ) | | | (202,888 | ) | | | (1,611,054 | ) |
| Decrease | | | | | (32,187 | ) | | $ | (252,385 | ) | | | (196,356 | ) | | $ | (1,558,793 | ) |
| |
Class D
| | | | Shares | | Amount | | Shares | | Amount |
| Net proceeds from sales of shares | | | | | 12 | | | $ | 95 | | | | 1,627 | | | $ | 13,179 | |
| Investment of dividends | | | | | 519 | | | | 4,072 | | | | 1,578 | | | | 12,612 | |
| Exchanged from associated funds | | | | | 942 | | | | 7,364 | | | | — | | | | — | |
| Investment of gain distributions | | | | | 274 | | | | 2,141 | | | | 154 | | | | 1,228 | |
| Total | | | | | 1,747 | | | | 13,672 | | | | 3,359 | | | | 27,019 | |
| Cost of shares repurchased | | | | | (3,388 | ) | | | (26,546 | ) | | | (24,018 | ) | | | (191,428 | ) |
| Exchanged into associated funds | | | | | — | | | | — | | | | (140 | ) | | | (1,116 | ) |
| Total | | | | | (3,388 | ) | | | (26,546 | ) | | | (24,158 | ) | | | (192,544 | ) |
| Decrease | | | | | (1,641 | ) | | $ | (12,874 | ) | | | (20,799 | ) | | $ | (165,525 | ) |
29
Notes to Financial Statements (unaudited)
8. Other Matters — In late 2003, the Manager conducted an extensive internal review in response to public announcements concerning frequent trading in shares of open-end mutual funds. As of September 2003, the Manager had one arrangement that permitted frequent trading in the Seligman mutual funds. This arrangement was in the process of being closed down by the Manager before the first proceedings relating to trading practices within the mutual fund industry were publicly announced. Based on a review of the Manager’s records for 2001 through 2003, the Manager identified three other arrangements that had permitted frequent trading in the Seligman mutual funds. All three had already been terminated prior to the end of September 2002.
The results of the Manager’s internal review were presented to the Independent Directors of all the Seligman registered investment companies (the “Seligman Funds”). In order to resolve matters with the Independent Directors relating to the four arrangements that permitted frequent trading, the Manager, in May 2004, made payments to three mutual funds and agreed to waive a portion of its management fee with respect to another mutual fund (none of which was a Series of Seligman Municipal Series Trust).
Since February 2004, the Manager has been in discussions with the New York staff of the Securities and Exchange Commission (“SEC”) and the Office of the New York Attorney General (“Attorney General”) in connection with their review of frequent trading in certain of the Seligman Funds. No late trading is involved. This review was apparently stimulated by the Manager’s voluntary public disclosure of the foregoing arrangements in January 2004. In March 2005, negotiations to settle the matter were initiated by the New York staff of the SEC. After several months of negotiations, tentative agreement was reached, both with the New York staff of the SEC and the Attorney General, on the financial terms of a settlement. However, settlement discussions with the Attorney General ended when the Attorney General sought to impose operating conditions on the Manager that were unacceptable to the Manager, would have applied in perpetuity and were not requested or required by the SEC. Subsequently, the New York staff of the SEC indicated that, in lieu of moving forward under the terms of the tentative financial settlement, the staff was considering recommending to the Commissioners of the SEC the instituting of a formal action against the Manager and the Distributor (together, “Seligman”).
Seligman believes that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds.
Immediately after settlement discussions with the Attorney General ended, the Attorney General issued subpoenas to certain of the Seligman Funds and their directors. The subpoenas seek various Board materials and information relating to the deliberations of the Independent Directors as to the advisory fees paid by the Seligman Funds to the Manager. The Manager has objected to the Attorney General’s seeking of such information and, on September 6, 2005, filed suit in federal district court seeking to enjoin the Attorney General from pursuing a fee inquiry. Seligman believes that the Attorney General’s inquiry is improper because Congress has vested exclusive regulatory oversight of investment company advisory fees in the SEC.
At the end of September 2005, the Attorney General indicated that it intends to file an action at some time in the future alleging, in substance, that the Manager permitted other persons to engage in frequent trading other than the arrangements described above and, as a result, the prospectus disclosure of the Seligman Funds is and has been misleading. Seligman believes any such action would be without merit.
Any resolution of these matters with regulatory authorities may include, but not be limited to, sanctions, penalties, injunctions regarding Seligman, restitution to mutual fund shareholders or changes in procedures. Any penalties or restitution will be paid by Seligman and not by the Seligman Funds.
30
Notes to Financial Statements (unaudited)
Seligman does not believe that the foregoing possible actions or any threatened legal actions should have a material adverse impact on the Manager, the Distributor or the Seligman Funds; however, there can be no assurance of this, or that these matters and any related publicity will not result in reduced demand for shares of the Seligman Funds or other adverse consequences.
31
Financial Highlights (unaudited)
The tables below are intended to help you understand the financial performance of each Class of each Series for the periods presented. 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 or taxes investors may incur on distributions or on the redemption of shares, and are not annualized for periods of less than one year.
California High-Yield Series
|
|---|
Class A
|
|
|---|
| | Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: |
Net Asset Value, Beginning of Period | | $ | 6.62 | | | $ | 6.65 | | | $ | 6.59 | | | $ | 6.74 | | | $ | 6.63 | | | $ | 6.33 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.14 | | | | 0.26 | | | | 0.28 | | | | 0.28 | | | | 0.29 | | | | 0.30 | |
| Net realized and unrealized gain (loss) on investments | | | (0.06 | ) | | | 0.04 | | | | 0.06 | | | | (0.12 | ) | | | 0.13 | | | | 0.30 | |
Total from Investment Operations | | | 0.08 | | | | 0.30 | | | | 0.34 | | | | 0.16 | | | | 0.42 | | | | 0.60 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.14 | ) | | | (0.26 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.29 | ) | | | (0.30 | ) |
| Distributions from net realized capital gain | | | — | | | | (0.07 | ) | | | (0.01 | ) | | | (0.03 | ) | | | (0.02 | ) | | | — | |
Total Distributions | | | (0.14 | ) | | | (0.33 | ) | | | (0.28 | ) | | | (0.31 | ) | | | (0.31 | ) | | | (0.30 | ) |
Net Asset Value, End of Period | | $ | 6.56 | | | $ | 6.62 | | | $ | 6.65 | | | $ | 6.59 | | | $ | 6.74 | | | $ | 6.63 | |
| |
Total Return | | | 1.18 | % | | | 4.63 | % | | | 5.30 | % | | | 2.48 | % | | | 6.50 | % | | | 9.74 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $30,586 | | $31,432 | | $34,315 | | $38,798 | | $51,011 | | | $50,239 |
| Ratio of expenses to average net assets | | | 0.94 | %† | | | 0.92 | % | | | 0.90 | % | | | 0.88 | % | | | 0.84 | % | | | 0.70 | % |
| Ratio of net investment income to average net assets | | | 4.20 | %† | | | 3.97 | % | | | 4.20 | % | | | 4.24 | % | | | 4.41 | % | | | 4.69 | % |
| Portfolio turnover rate | | | — | | | | 1.47 | % | | | — | | | | 4.43 | % | | | 11.72 | % | | | 2.95 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.04 | %† | | | 1.02 | % | | | 1.00 | % | | | 0.98 | % | | | 0.94 | % | | | 0.95 | % |
Ratio of net investment income
to average net assets | | | 4.10 | %† | | | 3.87 | % | | | 4.10 | % | | | 4.14 | % | | | 4.31 | % | | | 4.44 | % |
See footnotes on page 43.
32
Financial Highlights (unaudited)
California High-Yield Series
|
|---|
Class C
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: |
Net Asset Value, Beginning of Period | | $ | 6.63 | | | $ | 6.66 | | | $ | 6.60 | | | $ | 6.75 | | | $ | 6.64 | | | $ | 6.34 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.20 | | | | 0.22 | | | | 0.22 | | | | 0.23 | | | | 0.25 | |
| Net realized and unrealized gain (loss) on investments | | | (0.06 | ) | | | 0.04 | | | | 0.06 | | | | (0.12 | ) | | | 0.13 | | | | 0.30 | |
Total from Investment Operations | | | 0.05 | | | | 0.24 | | | | 0.28 | | | | 0.10 | | | | 0.36 | | | | 0.55 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.20 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.25 | ) |
| Distributions from net realized capital gain | | | — | | | | (0.07 | ) | | | (0.01 | ) | | | (0.03 | ) | | | (0.02 | ) | | | — | |
Total Distributions | | | (0.11 | ) | | | (0.27 | ) | | | (0.22 | ) | | | (0.25 | ) | | | (0.25 | ) | | | (0.25 | ) |
Net Asset Value, End of Period | | $ | 6.57 | | | $ | 6.63 | | | $ | 6.66 | | | $ | 6.60 | | | $ | 6.75 | | | $ | 6.64 | |
| |
Total Return | | | 0.72 | % | | | 3.69 | % | | | 4.35 | % | | | 1.56 | % | | | 5.57 | % | | | 8.74 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $2,245 | | $2,475 | | $2,964 | | $3,482 | | $3,457 | | | $3,293 |
| Ratio of expenses to average net assets | | | 1.84 | %† | | | 1.82 | % | | | 1.80 | % | | | 1.78 | % | | | 1.74 | % | | | 1.60 | % |
Ratio of net investment income
to average net assets | | | 3.30 | %† | | | 3.07 | % | | | 3.30 | % | | | 3.34 | % | | | 3.51 | % | | | 3.79 | % |
| Portfolio turnover rate | | | — | | | | 1.47 | % | | | — | | | | 4.43 | % | | | 11.72 | % | | | 2.95 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.94 | %† | | | 1.92 | % | | | 1.90 | % | | | 1.88 | % | | | 1.84 | % | | | 1.85 | % |
Ratio of net investment income
to average net assets | | | 3.20 | %† | | | 2.97 | % | | | 3.20 | % | | | 3.24 | % | | | 3.41 | % | | | 3.54 | % |
See footnotes on page 43.
33
Financial Highlights (unaudited)
California High-Yield Series
|
|---|
Class D
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: |
Net Asset Value, Beginning of Period | | $ | 6.63 | | | $ | 6.66 | | | $ | 6.60 | | | $ | 6.75 | | | $ | 6.64 | | | $ | 6.34 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.20 | | | | 0.22 | | | | 0.22 | | | | 0.23 | | | | 0.25 | |
| Net realized and unrealized gain (loss) on investments | | | (0.06 | ) | | | 0.04 | | | | 0.06 | | | | (0.12 | ) | | | 0.13 | | | | 0.30 | |
Total from Investment Operations | | | 0.05 | | | | 0.24 | | | | 0.28 | | | | 0.10 | | | | 0.36 | | | | 0.55 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.20 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.25 | ) |
| Distributions from net realized capital gain | | | — | | | | (0.07 | ) | | | (0.01 | ) | | | (0.03 | ) | | | (0.02 | ) | | | — | |
Total Distributions | | | (0.11 | ) | | | (0.27 | ) | | | (0.22 | ) | | | (0.25 | ) | | | (0.25 | ) | | | (0.25 | ) |
Net Asset Value, End of Period | | $ | 6.57 | | | $ | 6.63 | | | $ | 6.66 | | | $ | 6.60 | | | $ | 6.75 | | | $ | 6.64 | |
| |
Total Return | | | 0.72 | % | | | 3.69 | % | | | 4.35 | % | | | 1.56 | % | | | 5.57 | % | | | 8.74 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $3,200 | | $2,988 | | $2,519 | | $4,832 | | $5,419 | | | $5,938 |
| Ratio of expenses to average net assets | | | 1.84 | %† | | | 1.82 | % | | | 1.80 | % | | | 1.78 | % | | | 1.74 | % | | | 1.60 | % |
Ratio of net investment income
to average net assets | | | 3.30 | %† | | | 3.07 | % | | | 3.30 | % | | | 3.34 | % | | | 3.51 | % | | | 3.79 | % |
| Portfolio turnover rate | | | — | | | | 1.47 | % | | | — | | | | 4.43 | % | | | 11.72 | % | | | 2.95 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.94 | %† | | | 1.92 | % | | | 1.90 | % | | | 1.88 | % | | | 1.84 | % | | | 1.85 | % |
Ratio of net investment income
to average net assets | | | 3.20 | %† | | | 2.97 | % | | | 3.20 | % | | | 3.24 | % | | | 3.41 | % | | | 3.54 | % |
See footnotes on page 43.
34
Financial Highlights (unaudited)
California Quality Series
|
|---|
Class A
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 6.79 | | | $ | 6.89 | | | $ | 6.88 | | | $ | 7.04 | | | $ | 6.90 | | | $ | 6.53 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.14 | | | | 0.28 | | | | 0.28 | | | | 0.27 | | | | 0.29 | | | | 0.30 | |
| Net realized and unrealized gain (loss) on investments | | | (0.08 | ) | | | (0.02 | ) | | | — | | | | (0.16 | ) | | | 0.20 | | | | 0.39 | |
Total from Investment Operations | | | 0.06 | | | | 0.26 | | | | 0.28 | | | | 0.11 | | | | 0.49 | | | | 0.69 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.14 | ) | | | (0.27 | ) | | | (0.27 | ) | | | (0.27 | ) | | | (0.29 | ) | | | (0.30 | ) |
| Distributions from net realized capital gain | | | (0.03 | ) | | | (0.09 | ) | | | — | | | | — | | | | (0.06 | ) | | | (0.02 | ) |
Total Distributions | | | (0.17 | ) | | | (0.36 | ) | | | (0.27 | ) | | | (0.27 | ) | | | (0.35 | ) | | | (0.32 | ) |
Net Asset Value, End of Period | | $ | 6.68 | | | $ | 6.79 | | | $ | 6.89 | | | $ | 6.88 | | | $ | 7.04 | | | $ | 6.90 | |
| |
Total Return | | | 0.88 | % | | | 3.90 | % | | | 4.23 | % | | | 1.63 | % | | | 7.29 | % | | | 10.72 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $44,261 | | $47,186 | | $51,395 | | $61,566 | | $74,713 | | $74,585 |
| Ratio of expenses to average net assets | | | 0.98 | %† | | | 0.94 | % | | | 0.93 | % | | | 0.93 | % | | | 0.87 | % | | | 0.87 | % |
Ratio of net investment income
to average net assets | | | 4.18 | %† | | | 4.04 | % | | | 4.06 | % | | | 3.96 | % | | | 4.23 | % | | | 4.42 | % |
| Portfolio turnover rate | | | — | | | | — | | | | 0.86 | % | | | 1.43 | % | | | 6.40 | % | | | 19.83 | % |
See footnotes on page 43.
35
Financial Highlights (unaudited)
California Quality Series
|
|---|
Class C
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 6.76 | | | $ | 6.87 | | | $ | 6.85 | | | $ | 7.01 | | | $ | 6.88 | | | $ | 6.51 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.21 | | | | 0.22 | | | | 0.21 | | | | 0.23 | | | | 0.24 | |
| Net realized and unrealized gain (loss) on investments | | | (0.08 | ) | | | (0.02 | ) | | | 0.01 | | | | (0.16 | ) | | | 0.18 | | | | 0.39 | |
Total from Investment Operations | | | 0.03 | | | | 0.19 | | | | 0.23 | | | | 0.05 | | | | 0.41 | | | | 0.63 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.24 | ) |
| Distributions from net realized capital gain | | | (0.03 | ) | | | (0.09 | ) | | | — | | | | — | | | | (0.06 | ) | | | (0.02 | ) |
Total Distributions | | | (0.14 | ) | | | (0.30 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.28 | ) | | | (0.26 | ) |
Net Asset Value, End of Period | | $ | 6.65 | | | $ | 6.76 | | | $ | 6.87 | | | $ | 6.85 | | | $ | 7.01 | | | $ | 6.88 | |
| |
Total Return | | | 0.42 | % | | | 2.84 | % | | | 3.46 | % | | | 0.72 | % | | | 6.20 | % | | | 9.81 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $2,441 | | $3,259 | | $4,783 | | $5,772 | | $5,067 | | $1,952 |
| Ratio of expenses to average net assets | | | 1.88 | %† | | | 1.84 | % | | | 1.83 | % | | | 1.83 | % | | | 1.77 | % | | | 1.77 | % |
Ratio of net investment income
to average net assets | | | 3.28 | %† | | | 3.13 | % | | | 3.16 | % | | | 3.06 | % | | | 3.33 | % | | | 3.52 | % |
| Portfolio turnover rate | | | — | | | | — | | | | 0.86 | % | | | 1.43 | % | | | 6.40 | % | | | 19.83 | % |
See footnotes on page 43.
36
Financial Highlights (unaudited)
California Quality Series
|
|---|
Class D
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 6.76 | | | $ | 6.87 | | | $ | 6.85 | | | $ | 7.01 | | | $ | 6.88 | | | $ | 6.51 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.21 | | | | 0.22 | | | | 0.21 | | | | 0.23 | | | | 0.24 | |
Net realized and unrealized gain (loss)
on investments | | | (0.08 | ) | | | (0.02 | ) | | | 0.01 | | | | (0.16 | ) | | | 0.18 | | | | 0.39 | |
Total from Investment Operations | | | 0.03 | | | | 0.19 | | | | 0.23 | | | | 0.05 | | | | 0.41 | | | | 0.63 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.22 | ) | | | (0.24 | ) |
| Distributions from net realized capital gain | | | (0.03 | ) | | | (0.09 | ) | | | — | | | | — | | | | (0.06 | ) | | | (0.02 | ) |
Total Distributions | | | (0.14 | ) | | | (0.30 | ) | | | (0.21 | ) | | | (0.21 | ) | | | (0.28 | ) | | | (0.26 | ) |
Net Asset Value, End of Period | | $ | 6.65 | | | $ | 6.76 | | | $ | 6.87 | | | $ | 6.85 | | | $ | 7.01 | | | $ | 6.88 | |
| |
Total Return | | | 0.42 | % | | | 2.84 | % | | | 3.46 | % | | | 0.72 | % | | | 6.20 | % | | | 9.81 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $1,075 | | $1,022 | | $1,306 | | $1,512 | | $1,956 | | $3,344 |
| Ratio of expenses to average net assets | | | 1.88 | %† | | | 1.84 | % | | | 1.83 | % | | | 1.83 | % | | | 1.77 | % | | | 1.77 | % |
Ratio of net investment income
to average net assets | | | 3.28 | %† | | | 3.13 | % | | | 3.16 | % | | | 3.06 | % | | | 3.33 | % | | | 3.52 | % |
| Portfolio turnover rate | | | — | | | | — | | | | 0.86 | % | | | 1.43 | % | | | 6.40 | % | | | 19.83 | % |
See footnotes on page 43.
37
Financial Highlights (unaudited)
Florida Series
|
|---|
Class A
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.92 | | | $ | 8.00 | | | $ | 8.08 | | | $ | 8.08 | | | $ | 7.88 | | | $ | 7.48 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.16 | | | | 0.33 | | | | 0.32 | | | | 0.32 | | | | 0.34 | | | | 0.36 | |
Net realized and unrealized gain (loss)
on investments | | | (0.10 | ) | | | (0.08 | ) | | | (0.06 | ) | | | 0.01 | | | | 0.20 | | | | 0.43 | |
Total from Investment Operations | | | 0.06 | | | | 0.25 | | | | 0.26 | | | | 0.33 | | | | 0.54 | | | | 0.79 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.16 | ) | | | (0.32 | ) | | | (0.32 | ) | | | (0.32 | ) | | | (0.34 | ) | | | (0.36 | ) |
| Distributions from net realized capital gain | | | (0.05 | ) | | | (0.01 | ) | | | (0.02 | ) | | | (0.01 | ) | | | — | | | | (0.03 | ) |
Total Distributions | | | (0.21 | ) | | | (0.33 | ) | | | (0.34 | ) | | | (0.33 | ) | | | (0.34 | ) | | | (0.39 | ) |
Net Asset Value, End of Period | | $ | 7.77 | | | $ | 7.92 | | | $ | 8.00 | | | $ | 8.08 | | | $ | 8.08 | | | $ | 7.88 | |
| |
Total Return | | | 0.71 | % | | | 3.17 | % | | | 3.26 | % | | | 4.16 | % | | | 7.08 | % | | | 10.78 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $27,347 | | $29,298 | | $32,470 | | $34,131 | | $37,513 | | $36,695 |
| Ratio of expenses to average net assets | | | 1.01 | %† | | | 0.98 | % | | | 0.99 | % | | | 1.00 | % | | | 0.94 | % | | | 0.70 | % |
Ratio of net investment income
to average net assets | | | 4.13 | %† | | | 4.11 | % | | | 4.05 | % | | | 3.98 | % | | | 4.37 | % | | | 4.70 | % |
| Portfolio turnover rate | | | 5.00 | % | | | — | | | | — | | | | 12.51 | % | | | 10.19 | % | | | 9.57 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.16 | %† | | | 1.13 | % | | | 1.14 | % | | | 1.15 | % | | | 1.09 | % | | | 1.08 | % |
Ratio of net investment income
to average net assets | | | 3.98 | %† | | | 3.96 | % | | | 3.90 | % | | | 3.83 | % | | | 4.22 | % | | | 4.32 | % |
See footnotes on page 43.
38
Financial Highlights (unaudited)
Florida Series
|
|---|
Class C
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.93 | | | $ | 8.02 | | | $ | 8.09 | | | $ | 8.10 | | | $ | 7.90 | | | $ | 7.50 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.13 | | | | 0.27 | | | | 0.26 | | | | 0.26 | | | | 0.29 | | | | 0.31 | |
Net realized and unrealized gain (loss)
on investments | | | (0.09 | ) | | | (0.09 | ) | | | (0.05 | ) | | | — | | | | 0.19 | | | | 0.43 | |
Total from Investment Operations | | | 0.04 | | | | 0.18 | | | | 0.21 | | | | 0.26 | | | | 0.48 | | | | 0.74 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.13 | ) | | | (0.26 | ) | | | (0.26 | ) | | | (0.26 | ) | | | (0.28 | ) | | | (0.31 | ) |
| Distributions from net realized capital gain | | | (0.05 | ) | | | (0.01 | ) | | | (0.02 | ) | | | (0.01 | ) | | | — | | | | (0.03 | ) |
Total Distributions | | | (0.18 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.34 | ) |
Net Asset Value, End of Period | | $ | 7.79 | | | $ | 7.93 | | | $ | 8.02 | | | $ | 8.09 | | | $ | 8.10 | | | $ | 7.90 | |
| |
Total Return | | | 0.46 | % | | | 2.27 | % | | | 2.61 | % | | | 3.24 | % | | | 6.26 | % | | | 9.97 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $3,489 | | $3,907 | | $4,683 | | $4,686 | | $3,839 | | $2,274 |
| Ratio of expenses to average net assets | | | 1.77 | %† | | | 1.73 | % | | | 1.74 | % | | | 1.75 | % | | | 1.69 | % | | | 1.45 | % |
Ratio of net investment income
to average net assets | | | 3.37 | %† | | | 3.36 | % | | | 3.30 | % | | | 3.23 | % | | | 3.62 | % | | | 3.95 | % |
| Portfolio turnover rate | | | 5.00 | % | | | — | | | | — | | | | 12.51 | % | | | 10.19 | % | | | 9.57 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.92 | %† | | | 1.88 | % | | | 1.89 | % | | | 1.90 | % | | | 1.84 | % | | | 1.83 | % |
Ratio of net investment income
to average net assets | | | 3.22 | %† | | | 3.21 | % | | | 3.15 | % | | | 3.08 | % | | | 3.47 | % | | | 3.57 | % |
See footnotes on page 43.
39
Financial Highlights (unaudited)
Florida Series
|
|---|
Class D
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.93 | | | $ | 8.02 | | | $ | 8.10 | | | $ | 8.10 | | | $ | 7.90 | | | $ | 7.50 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.13 | | | | 0.27 | | | | 0.26 | | | | 0.26 | | | | 0.29 | | | | 0.31 | |
Net realized and unrealized gain (loss)
on investments | | | (0.09 | ) | | | (0.09 | ) | | | (0.06 | ) | | | 0.01 | | | | 0.19 | | | | 0.43 | |
Total from Investment Operations | | | 0.04 | | | | 0.18 | | | | 0.20 | | | | 0.27 | | | | 0.48 | | | | 0.74 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.13 | ) | | | (0.26 | ) | | | (0.26 | ) | | | (0.26 | ) | | | (0.28 | ) | | | (0.31 | ) |
| Distributions from net realized capital gain | | | (0.05 | ) | | | (0.01 | ) | | | (0.02 | ) | | | (0.01 | ) | | | — | | | | (0.03 | ) |
Total Distributions | | | (0.18 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.27 | ) | | | (0.28 | ) | | | (0.34 | ) |
Net Asset Value, End of Period | | $ | 7.79 | | | $ | 7.93 | | | $ | 8.02 | | | $ | 8.10 | | | $ | 8.10 | | | $ | 7.90 | |
| |
Total Return | | | 0.46 | % | | | 2.27 | % | | | 2.48 | % | | | 3.37 | % | | | 6.26 | % | | | 9.97 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $1,224 | | $1,176 | | $1,351 | | $1,567 | | $1,904 | | $1,811 |
| Ratio of expenses to average net assets | | | 1.77 | %† | | | 1.73 | % | | | 1.74 | % | | | 1.75 | % | | | 1.69 | % | | | 1.45 | % |
Ratio of net investment income
to average net assets | | | 3.37 | %† | | | 3.36 | % | | | 3.30 | % | | | 3.23 | % | | | 3.62 | % | | | 3.95 | % |
| Portfolio turnover rate | | | 5.00 | % | | | — | | | | — | | | | 12.51 | % | | | 10.19 | % | | | 9.57 | % |
| Without management fee waiver:* | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of expenses to average net assets | | | 1.92 | %† | | | 1.88 | % | | | 1.89 | % | | | 1.90 | % | | | 1.84 | % | | | 1.83 | % |
Ratio of net investment income
to average net assets | | | 3.22 | %† | | | 3.21 | % | | | 3.15 | % | | | 3.08 | % | | | 3.47 | % | | | 3.57 | % |
See footnotes on page 43.
40
Financial Highlights (unaudited)
North Carolina Series
|
|---|
Class A
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.94 | | | $ | 8.05 | | | $ | 8.14 | | | $ | 8.19 | | | $ | 7.89 | | | $ | 7.54 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.14 | | | | 0.29 | | | | 0.29 | | | | 0.29 | | | | 0.32 | | | | 0.33 | |
Net realized and unrealized gain (loss)
on investments | | | (0.11 | ) | | | (0.10 | ) | | | (0.07 | ) | | | (0.01 | ) | | | 0.31 | | | | 0.37 | |
Total from Investment Operations | | | 0.03 | | | | 0.19 | | | | 0.22 | | | | 0.28 | | | | 0.63 | | | | 0.70 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.14 | ) | | | (0.28 | ) | | | (0.28 | ) | | | (0.29 | ) | | | (0.32 | ) | | | (0.33 | ) |
| Distributions from net realized capital gain | | | (0.06 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.01 | ) | | | (0.02 | ) |
Total Distributions | | | (0.20 | ) | | | (0.30 | ) | | | (0.31 | ) | | | (0.33 | ) | | | (0.33 | ) | | | (0.35 | ) |
Net Asset Value, End of Period | | $ | 7.77 | | | $ | 7.94 | | | $ | 8.05 | | | $ | 8.14 | | | $ | 8.19 | | | $ | 7.89 | |
| |
Total Return | | | 0.26 | % | | | 2.45 | % | | | 2.82 | % | | | 3.51 | % | | | 8.21 | % | | | 9.52 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $15,864 | | $16,781 | | $19,856 | | $22,778 | | $25,386 | | $25,737 |
| Ratio of expenses to average net assets | | | 1.31 | %† | | | 1.24 | % | | | 1.19 | % | | | 1.19 | % | | | 1.11 | % | | | 1.13 | % |
Ratio of net investment income
to average net assets | | | 3.50 | %† | | | 3.60 | % | | | 3.55 | % | | | 3.65 | % | | | 4.11 | % | | | 4.29 | % |
| Portfolio turnover rate | | | 19.11 | % | | | — | | | | 7.93 | % | | | 10.00 | % | | | 7.96 | % | | | 5.61 | % |
See footnotes on page 43.
41
Financial Highlights (unaudited)
North Carolina Series
|
|---|
Class C
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.94 | | | $ | 8.04 | | | $ | 8.13 | | | $ | 8.18 | | | $ | 7.88 | | | $ | 7.54 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.23 | | | | 0.22 | | | | 0.23 | | | | 0.27 | | | | 0.27 | |
Net realized and unrealized gain (loss)
on investments | | | (0.11 | ) | | | (0.09 | ) | | | (0.06 | ) | | | (0.01 | ) | | | 0.30 | | | | 0.36 | |
Total from Investment Operations | | | — | | | | 0.14 | | | | 0.16 | | | | 0.22 | | | | 0.57 | | | | 0.63 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.22 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.26 | ) | | | (0.27 | ) |
| Distributions from net realized capital gain | | | (0.06 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.01 | ) | | | (0.02 | ) |
Total Distributions | | | (0.17 | ) | | | (0.24 | ) | | | (0.25 | ) | | | (0.27 | ) | | | (0.27 | ) | | | (0.29 | ) |
Net Asset Value, End of Period | | $ | 7.77 | | | $ | 7.94 | | | $ | 8.04 | | | $ | 8.13 | | | $ | 8.18 | | | $ | 7.88 | |
| |
Total Return | | | (0.11 | )% | | | 1.82 | % | | | 2.06 | % | | | 2.74 | % | | | 7.41 | % | | | 8.59 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $1,134 | | $1,414 | | $3,012 | | $2,778 | | $2,962 | | $2,049 |
| Ratio of expenses to average net assets | | | 2.07 | %† | | | 1.99 | % | | | 1.94 | % | | | 1.94 | % | | | 1.86 | % | | | 1.88 | % |
Ratio of net investment income
to average net assets | | | 2.75 | %† | | | 2.85 | % | | | 2.80 | % | | | 2.90 | % | | | 3.36 | % | | | 3.54 | % |
| Portfolio turnover rate | | | 19.11 | % | | | — | | | | 7.93 | % | | | 10.00 | % | | | 7.96 | % | | | 5.61 | % |
See footnotes on page 43.
42
Financial Highlights (unaudited)
North Carolina Series
|
|---|
Class D
|
|---|
| |
Six Months
Ended
3/31/06
| | Year Ended September 30,
|
|---|
|
|
| 2005
|
| 2004
|
| 2003
|
| 2002ø
|
| 2001
|
|---|
Per Share Data: | | | | | | | | | | | | | | | | | | | | | | | | |
Net Asset Value, Beginning of Period | | $ | 7.93 | | | $ | 8.04 | | | $ | 8.13 | | | $ | 8.18 | | | $ | 7.88 | | | $ | 7.54 | |
Income from Investment Operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment income | | | 0.11 | | | | 0.23 | | | | 0.22 | | | | 0.23 | | | | 0.27 | | | | 0.27 | |
Net realized and unrealized gain (loss)
on investments | | | (0.11 | ) | | | (0.10 | ) | | | (0.06 | ) | | | (0.01 | ) | | | 0.30 | | | | 0.36 | |
Total from Investment Operations | | | — | | | | 0.13 | | | | 0.16 | | | | 0.22 | | | | 0.57 | | | | 0.63 | |
Less Distributions: | | | | | | | | | | | | | | | | | | | | | | | | |
| Dividends from net investment income | | | (0.11 | ) | | | (0.22 | ) | | | (0.22 | ) | | | (0.23 | ) | | | (0.26 | ) | | | (0.27 | ) |
| Distributions from net realized capital gain | | | (0.06 | ) | | | (0.02 | ) | | | (0.03 | ) | | | (0.04 | ) | | | (0.01 | ) | | | (0.02 | ) |
Total Distributions | | | (0.17 | ) | | | (0.24 | ) | | | (0.25 | ) | | | (0.27 | ) | | | (0.27 | ) | | | (0.29 | ) |
Net Asset Value, End of Period | | $ | 7.76 | | | $ | 7.93 | | | $ | 8.04 | | | $ | 8.13 | | | $ | 8.18 | | | $ | 7.88 | |
| |
Total Return | | | (0.12 | )% | | | 1.69 | % | | | 2.06 | % | | | 2.74 | % | | | 7.41 | % | | | 8.59 | % |
Ratios/Supplemental Data: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net assets, end of period (000s omitted) | | $508 | | $532 | | $706 | | $824 | | $941 | | $1,514 |
| Ratio of expenses to average net assets | | | 2.07 | %† | | | 1.99 | % | | | 1.94 | % | | | 1.94 | % | | | 1.86 | % | | | 1.88 | % |
Ratio of net investment income
to average net assets | | | 2.75 | %† | | | 2.85 | % | | | 2.80 | % | | | 2.90 | % | | | 3.36 | % | | | 3.54 | % |
| Portfolio turnover rate | | | 19.11 | % | | | — | | | | 7.93 | % | | | 10.00 | % | | | 7.96 | % | | | 5.61 | % |
| † | | Annualized. |
| * | | During the periods stated, the Manager, at its discretion, waived portions of its management fees for California High-Yield Series and Florida Series (Note 3). |
ø
| | As required, effective October 1, 2001, the Trust adopted the provisions of the AICPA Audit and Accounting Guide for Investment Companies and began amortizing market discount on portfolio securities for financial reporting purposes. The effects of this change, for the year ended September 30, 2002, was to increase net investment income and decrease net realized and unrealized gain on investments per share by less than $0.01 for each share class of each Series and to increase the ratio of net investment income to average net assets of each share class of the California High-Yield and Florida Series by 0.04% and each share class of the California Quality and North Carolina Series by 0.05%. The per share data and ratios for periods prior to October 1, 2001 have not been restated. |
See Notes to Financial Statements.
43
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
The term “Trust” refers to Seligman Municipal Series Trust, and the term “Series” refers to the California High-Yield Series, the California Quality Series, the Florida Series, and the North Carolina Series. There are separate management agreements between the Manager and the Trust in respect of each Series.
The trustees unanimously approved the continuance of the Management Agreements with the Manager in respect of each Series at a meeting held on November 17, 2005.
In preparation for the meeting, experienced counsel who are independent of the Manager had discussed with the Manager the continuances and nature of materials to be provided to the trustees, the trustees had requested and evaluated extensive materials from the Manager, including performance and expense information for other investment companies with similar investment objectives derived from data compiled by Lipper Inc. (“Lipper”). Prior to voting, the trustees reviewed the proposed continuance of the Management Agreements with the Manager and with experienced counsel who are independent of the Manager and received a memorandum from such counsel discussing the legal standards for their consideration of the proposed continuance. The independent trustees also discussed the proposed continuance in a private session with counsel at which no representatives of the Manager were present.
In reaching their determination with respect to the continuance of the Management Agreements in respect of each Series, the trustees considered their knowledge of the nature and quality of the services provided by the Manager to the Trust gained from their experience as directors and/or trustees of the Seligman Group of Funds, their overall confidence in the Manager’s integrity and competence they have gained from that experience, the Manager’s initiative in identifying and raising potential issues with the trustees and its responsiveness, frankness and attention to concerns raised by the trustees in the past, including the Manager’s willingness to consider and implement organizational and operational changes designed to improve investment results and the services provided to the Seligman Group of Funds. The trustees noted that the Board has six regular meetings each year, at each of which they receive presentations from the Manager on the investment results of the Series and review extensive materials and information presented by the Manager.
The trustees also considered all other factors they believed relevant, including the following:
| 1. | | information comparing the performance of each of the Series to other investment companies with similar investment objectives; |
| 2. | | the nature, extent and quality of investment and administrative services rendered by the Manager; |
| 3. | | payments received by the Manager from all sources in respect of each Series and all investment companies in the Seligman Group of Funds; |
| 4. | | the costs borne by, and profitability of, the Manager and its affiliates in providing services to each Series and to all investment companies in the Seligman Group of Funds; |
| 5. | | comparative fee and expense data for each Series and other investment companies with similar investment objectives; |
44
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
| 6. | | the extent to which economies of scale would be realized as the Series grow and whether fee levels reflect any economies of scale for the benefit of investors; |
| 7. | | the Manager’s practices regarding allocation of portfolio transactions of the Series; |
| 8. | | information about “revenue sharing” arrangements that the Manager enters into in respect of each Series; |
| 9. | | portfolio turnover rates of each Series compared to other investment companies with similar investment objectives; |
| 10. | | fall-out benefits which the Manager and its affiliates receive from their relationships to the Series; |
| 11. | | the professional experience and qualifications of each Series’ portfolio management team and other senior personnel of the Manager; and |
| 12. | | the terms of the Management Agreement. |
In their deliberations, the trustees did not identify any particular information that was all-important or controlling, and trustees attributed different weights to the various factors. The trustees evaluated all information available to them on a Series-by-Series basis, and their determinations were made separately in respect of each Series.
The trustees determined that the overall arrangements between each Series and the Manager, as provided in the Management Agreement in respect of that Series, were fair and reasonable in light of the services performed, expenses incurred and such other matters as the trustees considered relevant in the exercise of their reasonable judgment.
The material factors and conclusions that formed the basis for the trustees’ reaching their determination to approve the continuance of the Management Agreements (including their determinations that the Manager should continue to be the investment adviser for each Series and that the fees payable to the Manager pursuant to the Management Agreements are appropriate) were separately discussed by the trustees.
Nature, Extent and Quality of Services Provided by the Manager
The trustees noted that, under the Management Agreements, the Manager, subject to the control of the trustees, administers each Series’ business and other affairs. The Manager manages the investment of the assets of each Series, including making purchases and sales of portfolio securities consistent with such Series’ investment objective and policies. The Manager also provides each Series with such office space, administrative and other services (exclusive of, and in addition to, any such services provided by any others retained by each Series) and executive and other personnel as are necessary for Series operations. The Manager pays all of the compensation of trustees of the Trust who are employees or consultants of the Manager and of the officers and employees of the Trust, including the Trust’s chief compliance officer. The Manager also provides senior management for Seligman Data Corp. (“SDC”), a company owned by certain of the investment companies in the
45
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
Seligman Group of Funds that provides shareholder services to the Trust and other investment companies in the Seligman Group of Funds at cost.
The trustees considered the scope and quality of services provided by the Manager under the Management Agreement and noted that the scope of services provided had expanded over time as a result of regulatory and other developments. The trustees noted that, for example, the Manager is responsible for maintaining and monitoring its own and the Trust’s compliance programs, and these compliance programs have recently been refined and enhanced in light of recently adopted regulatory requirements. The trustees considered the quality of the investment research capabilities of the Manager and the other resources they have dedicated to performing services for the Trust. At prior meetings the trustees had also considered the Manager’s practices with respect to the selection of brokers and dealers to effect portfolio transactions, including their duty to seek best execution. The quality of administrative and other services, including the Manager’s role in coordinating the activities of the Trust’s other service providers, also were considered. The trustees concluded that, overall, they were satisfied with the nature, extent and quality of services provided (and expected to be provided) to each of the Series under the Management Agreements.
On an ongoing basis, the Manager reports to the trustees on the status of various matters relating to market timing activity affecting certain funds in the Seligman Group of Funds. In connection with the continuance review, the Manager and its counsel and the trustees’ special counsel also addressed, among other matters: the action brought by the Manager and its president against the Attorney General of the State of New York seeking an order enjoining the Attorney General from, among other things, investigating the fees paid by the funds in the Seligman Group of Funds to the Manager; the ex parte application filed by the Attorney General to seek further discovery and appoint a special referee to supervise the Attorney General’s investigation relating to market timing; and the indication by the Staff of the New York Office of the Securities and Exchange Commission (“SEC”) that it was considering recommending that the SEC institute a formal action against the Manager and Seligman Advisors, Inc. relating to market timing. After a detailed presentation by the Manager and further discussion with the Manager, the Manager’s counsel, the trustees’ special counsel and other experienced counsel independent of the Manager, the independent trustees concluded that they retained confidence in the integrity of the Manager and its ability to provide management services to the Trust.
Costs of Services Provided and Profitability to the Manager
At the request of the trustees, the Manager provided information concerning profitability of the Manager’s investment advisory and investment company activities and its financial condition based on historical information for 2004 and 2005 (through September 30) and estimates for full-year 2005. The information considered by the trustees included operating profit margin information for the Manager’s investment company business alone (i.e., excluding results of its other businesses) and on a consolidated basis. The trustees also reviewed the Manager’s profitability data and estimated profitability data for each Series. The trustees reviewed with the Manager’s chief financial officer the assumptions and methods of allocation used by the Manager in preparing the profitability data. The Manager stated its belief that the methods of allocation used were reasonable, but it
46
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
noted that there are limitations inherent in allocating costs to multiple individual advisory products served by an organization such as the Manager where each of the advisory products draws on, and benefits from, the research and other resources of the organization.
The trustees recognized that it is difficult to make comparisons of profitability from fund management contracts because comparative information is not generally publicly available and is affected by numerous factors, including the structure of the particular adviser, the types of funds it manages, its business mix, numerous assumptions regarding allocations and the adviser’s capital structure and cost of capital. In considering profitability information, the trustees considered the effect of fall-out benefits on the Manager’s expenses, as well as the “revenue sharing” arrangements the Manager has entered into with certain entities that distribute shares of the Seligman Group of Funds. The trustees focused on profitability of the Manager’s relationships with the Series before taxes and distribution expenses. The trustees recognized that the Manager should, in the abstract, be entitled to earn a reasonable level of profits for the services it provides to each Series and, based on their review, concluded that they were satisfied that the Manager’s level of profitability from its relationship with each Series was not excessive.
Fall-Out Benefits
The trustees also considered that a broker-dealer affiliate of the Manager receives 12b-1 fees from the Series in respect of shares held in accounts for which there is no other broker of record, and that the Trust’s distributor (another affiliate of the Manager) retains a portion of the 12b-1 fees from the Series and receives a portion of the sales charges on sales or redemptions of certain classes of shares.
The trustees recognized that the Manager’s profitability would be somewhat lower if it did not receive the benefits described above. The trustees noted that the Manager derives reputational and other benefits from its association with the Series.
Investment Results
In addition to the information received by the trustees for the meeting, the trustees receive detailed performance information for each Series at each regular Board meeting during the year. The trustees reviewed information showing performance of each Series compared to other funds in the appropriate Lipper average over the one-, three-, five- and ten-year periods ended September 30, 2005, and compared to a group of competitor funds selected by the Manager over annualized rolling three- and five-year periods ended September 30, 2005, for each calendar year in the 2000-to-2004 period, and for the first nine months of 2005, as applicable. The Manager explained that there was no appropriate benchmark index against which to compare each Series.
California High-Yield Series. The trustees compared the California High-Yield Series’ performance to the Lipper California Municipal Debt Funds Average and to ten competitor funds selected by the Manager. They noted that the California High-Yield Series ranked above the median for its Lipper category in all periods and that its results were close to or above the Lipper average and the competitor average for 2003 and 2004 as well as for the rolling three- and five-year periods ended
47
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
September 30, 2005. Although the Series’ results for the first nine months of 2005 were somewhat below the competitor average, they were above the Lipper average. Based upon their review, the trustees concluded that the California High-Yield Series’ relative investment performance over time had been highly satisfactory.
California Quality Series. The trustees compared the California Quality Series’ performance to the Lipper California Municipal Debt Funds Average and to ten competitor funds selected by the Manager. They noted that the California Quality Series ranked above the median for its Lipper category in the five- and ten-year periods, and somewhat below the median in the one- and three-year periods ended September 30, 2005. They also noted that the Series’ results were above or modestly below the Lipper average and the competitor average for most periods reviewed, although the Series lagged the competitor average by a larger amount in more recent periods. The Manager explained that the California Quality Series’ medium-term performance had been adversely affected by defensive positioning of the portfolio in anticipation of rising interest rates, which did not rise as the Manager had anticipated. Based upon their review, the trustees concluded that the California Quality Series’ relative investment performance over time had been satisfactory.
Florida Series. The trustees compared the Florida Series’ performance to the Lipper Florida Municipal Debt Funds Average and to ten competitor funds selected by the Manager. They noted that the Florida Series ranked above the median for its Lipper category in the three-, five- and ten- year periods ended September 30, 2005 and that its results were above the Lipper average and only slightly below the competitor average for the rolling three-year and five-year periods ended September 30, 2005. Based upon their review, the trustees concluded that the Florida Series’ relative investment performance over time had been satisfactory.
North Carolina Series. The trustees compared the North Carolina Series’ performance to the Lipper North Carolina Municipal Debt Funds Average and to six competitor funds selected by the Manager. The comparative information showed that the North Carolina Series’ investment results were close to the Lipper average for the rolling three- and five-year periods, although they lagged the competitor average in both periods and were also somewhat below both the Lipper average and the competitor average for the first nine months of 2005. The trustees also noted that the North Carolina Series’ Lipper ranking showed a declining trend and was below the median for the one-, three- and five-year periods ended September 30, 2005. The Manager noted that the North Carolina Series’ results were lowered somewhat by the Series’ relatively high expense ratio, which resulted principally from its small size (approximately $19 million). The Manager also explained that the Series’ performance in recent periods had been adversely affected by defensive positioning of the portfolio in anticipation of rising interest rates, which did not rise as the Manager had anticipated. Based upon their review, the trustees concluded that the North Carolina Series’ relative investment performance over time had been acceptable.
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Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
Management Fees and Other Expenses
The trustees considered the management fee rate paid by each Series to the Manager, which is 0.50%. The trustees recognized that it is difficult to make comparisons of management fees because there are variations in the services that are included in the fees paid by other funds. The trustees noted that in the case of the Florida Series and North Carolina Series, the management fee rate was less than both the average and the median for their respective peer group, and that, in the case of the California High-Yield Series and California Quality Series, the management fee rate was equal to the peer group median. The peer group for each Series consisted of all funds with front-end sales charges in its Lipper Category.
The trustees also considered the total expense ratio of each Series for the most recent fiscal year, as compared to the expense ratios for other funds in its peer group. The trustees recognized that the expense ratio information for the Series potentially reflected on the Manager’s provision of services, as the Manager is responsible for coordinating services provided to the Series by others.
In considering the expense ratios of the Series, the trustees noted that the Series have elected to have shareholder services provided at cost by SDC and that the Manager provides senior management of SDC as part of the services covered by its management fees. SDC provides services exclusively to the investment companies in the Seligman Group of Funds, and the trustees noted that the arrangement with SDC has provided the Series and their shareholders with a consistently high level of service. The Manager explained that the expense ratios of some peer group funds were lowered by waivers or reimbursements by those funds’ investment advisers, which in some cases were voluntary and perhaps temporary.
The trustees noted that the expense ratio of the California High-Yield Series was only moderately higher than its peer group median and average, and that for two of the other Series with relatively low net assets, the California Quality Series (approximately $52 million) and the Florida Series (approximately $34 million), each had expense ratios somewhat higher than their peer group medians and averages. The trustees concluded that the expense ratios of these three Series were satisfactory.
The comparative information showed that the North Carolina Series’ expense ratio was significantly higher than the peer group median and average and the highest in its peer group. The Manager explained that the North Carolina Series’ small size (approximately $19 million) contributed to its relatively high expense ratio. The trustees noted that the peer group was small, consisting of only five funds in addition to the North Carolina Series, that four of the five peer group funds were significantly larger than the North Carolina Series, and that three peer group funds benefited from reimbursements by their advisers. If expense ratios were considered without those reimbursements, the North Carolina Series’ expense ratio would have been closer to the median. On the basis of this review, the trustees concluded that the North Carolina Series’ expense ratio was acceptable.
49
Matters Relating to the Trustees’
Consideration of the Continuance of the
Management Agreements
Economies of Scale
The trustees noted that the management fee schedules for the Series do not contain breakpoints that reduce the fee rate on assets above specified levels. The trustees recognized that there is no direct relationship between the economies of scale realized by funds and those realized by the Manager as assets increase, largely because economies of scale are realized (if at all) by the Manager across a variety of products and services, and not only in respect of a single fund. The trustees do not believe there is a uniform methodology for establishing breakpoints that give effect to fund-specific services provided by the Manager and to the economies of scale that the Manager may realize in its overall mutual fund business or those components of it which directly or indirectly affect a funds’ operations. The trustees observed that in the mutual fund industry as a whole, as well as among funds similar to the Series, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply. Depending on the age and size of a particular fund and its manager’s cost structure, different conclusions can be drawn as to whether there are economies of scale to be realized at any particular level of assets, notwithstanding the intuitive conclusion that such economies exist, or will be realized at some level of total assets. Moreover, because different managers have different cost structures and service models, it is difficult to draw meaningful conclusions from the comparison of a fund’s management fee breakpoints with those of comparable funds. The trustees also noted that the advisory agreements for many funds do not have breakpoints at all and that, in any event, none of the Series have benefited from significant net sales in recent times. Having taken these factors into account, the trustees concluded that the absence of breakpoints in each Series’ fee rate schedule was acceptable under each Series’ circumstances.
50
51
Additional Trust Information
Quarterly Schedule of Investments
A complete schedule of portfolio holdings owned by the Trust will be filed with the SEC for the first and third quarters of each fiscal year on Form N-Q, and will be available to shareholders (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US or (ii) on the SEC’s website at www.sec.gov.1 In addition, the Form N-Q may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Certain of the information contained on the Fund’s Form N-Q is also made available to shareholders on Seligman’s website at www.seligman.com.1
Proxy Voting
A description of the policies and procedures used by the Trust to determine how to vote proxies relating to portfolio securities as well as information regarding how the Trust voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be available (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC’s website at www.sec.gov.1 Information for each new 12-month period ending June 30 will be available no later than August 31 of that year.
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1 | | These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Trust’s prospectus or statement of additional information. |
52
| ITEM 2. | CODE OF ETHICS.
Not applicable. |
| | |
| ITEM 3. | AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable. |
| | |
| ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable. |
| | |
| ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable. |
| | |
| ITEM 6. | SCHEDULE OF INVESTMENTS.
Included in Item 1 above. |
| | |
| ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. |
| | |
| ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable. |
| | |
| ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable. |
| | |
| ITEM 10. | SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable. |
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| ITEM 11. | CONTROLS AND PROCEDURES.
(a) The registrant's principal executive officer and principal financial officer have concluded, based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this report, that these disclosure controls and procedures provide reasonable assurance that material information required to be disclosed by the registrant in the report it files or submits on Form N-CSR is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms and that such material information is accumulated and communicated to the registrant's management, including its principal executive officer and principal financial officer, as appropriate, in order to allow timely decisions regarding required disclosure. |
| | (b) The registrant’s principal executive officer and principal financial officer are aware of no changes in the registrant’s internal control over financial reporting that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
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| ITEM 12. | EXHIBITS. |
| | (a)(1) | Not applicable. |
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| | (a)(2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. |
| | | |
| | (a)(3) | Not applicable. |
| | | |
| | (b) | Certifications of chief executive officer and chief financial officer as required by Rule 30a-2(b) under the Investment Company Act of 1940. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
SELIGMAN MUNICIPAL SERIES TRUST
| By: | /S/ BRIAN T. ZINO |
| | Brian T. Zino
President and Chief Executive Officer |
| | |
| Date: | June 2, 2006 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /S/ BRIAN T. ZINO |
| | Brian T. Zino
President and Chief Executive Officer |
| | |
| Date: | June 2, 2006 |
| | |
| By: | /S/ LAWRENCE P.VOGEL |
| | Lawrence P. Vogel
Vice President, Treasurer and Chief Financial Officer |
| | |
| Date: | June 2, 2006 |
| | |
SELIGMAN MUNICIPAL SERIES TRUST
EXHIBIT INDEX
| (a)(1) | Not applicable. |
| | |
| (a)(2) | Certifications of principal executive officer and principal financial officer as required by Rule 30a-2(a) under the Investment Company Act of 1940. |
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| (b) | Certification of chief executive officer and chief financial officer as required by Rule 30a-2(b) of the Investment Company Act of 1940. |
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