SELIGMAN
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SELECT
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MUNICIPAL
FUND, INC.
[Photo]
[JWS Logo]
Annual Report
December 31, 1994
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To the Stockholders
We are pleased to report on Seligman Select Municipal Fund's investment results,
portfolio holdings, and audited financial statements for the year ended December
31, 1994.
During the past three months, your Fund paid Common Stockholders federally
tax-free monthly dividends of $0.07 per share on October 26, November 23, and
December 21; this brings total dividends for the year to $0.84. The annualized
distribution rate based on current net asset value was 7.28% at December 31,
which is equivalent to a taxable yield of 12.05% based on the maximum federal
tax rate of 39.6%. Preferred Stockholders were paid dividends at annual rates
ranging from 3.25% to 3.85%. Earnings on your Fund's assets in excess of the
Preferred dividend requirement constituted dividend income available for Common
Stockholders.
Your Fund's net asset value was $11.54 per share at December 31, compared to
$12.01 on September 30, and $13.14 a year ago. Your Fund's market price was
$10.50 per share at December 31, compared to $11.50 on September 30, and $13.00
a year ago. Total return based on net asset value was -1.77% for the three
months and -5.46% for the 12 months ended December 31. Total return based on
market price was -6.67% and -13.05%, respectively, for the same periods. (Total
return reflects change in price, net asset or market as applicable, and assumes
any distributions paid within the period are reinvested in additional shares.)
While 1994 was a difficult year for fixed-income markets, municipal issues
did outperform U.S. Treasuries for most of the year. The steep decline in the
issuance of municipal bonds, due to higher interest rates, helped to stabilize
the municipal market. Total volume was down 44% from 1993, with refunding
issuance down 75%. By late October, however, the municipal market began to lose
ground against the Treasury market. Mutual fund liquidations, which had been
light, began to increase, due partly to year-end tax-related selling.
Additionally, broker/dealers, already stung by the sharp rise in interest
rates, were reluctant to take on too much inventory particularly at year-end.
The Orange County, California, situation further complicated matters in early
December, sending shock waves through the municipal market. Understandably,
investors expressed concern regarding the creditworthiness of their holdings and
required reassurance that their bonds were secure. However, as the year came to
a close, the municipal market began to improve. The dearth of new issues during
December helped to ease the supply problem caused by too many bonds for sale in
the secondary market.
Looking forward, we see a continuation of the current trends--tighter supply
and higher demand--which bodes well for the municipal market in 1995. New issue
supply should remain near 1994 levels. Demand, on the other hand, should
continue to increase as investors become comfortable with the current level of
interest rates and their expectations for higher rates and concerns about
inflation gradually diminish.
For additional information about your Fund, or your investment in its shares,
please write, or call using the toll-free telephone numbers listed on page 15.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Thomas G. Moles
Thomas G. Moles
President
February 3, 1995
1
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Your Portfolio Manager
Thomas G. Moles is a Managing Director of J. & W.
Seligman & Co. Incorporated, as well as President and
Senior Portfolio Manager of Seligman Select Municipal
Fund and Seligman Quality Municipal Fund, and Vice
[Photo] President and Senior Portfolio Manager of the Seligman
tax-exempt mutual funds, which include 19 separate
portfolios. He is responsible for more than $1.8
billion in tax-exempt securities. Mr. Moles, with more
than 22 years of experience, has spearheaded Seligman's
tax-exempt efforts since joining the firm in 1983.
Economic Factors Affecting Seligman Select Municipal Fund
"The increase in interest rates in 1994 caused the value of fixed-income
securities to decline, including those in Seligman Select. However, as mentioned
in the September 30 Third Quarter Report, the municipal bond market experienced
less volatility and, in general, outperformed the taxable bond markets,
including U.S. Treasuries."
Investment Strategy
"Currently, 86% of your Fund's portfolio is invested in 'triple A' rated
municipal bonds, even though it is required to maintain a minimum of only 80%.
Your portfolio continues to consist mostly of long-term securities that offer
higher yields than those of short- or intermediate-term securities: The average
weighted maturity of your Fund's bonds is 23 years.
"Furthermore, your portfolio is concentrated primarily in higher-coupon, premium
bonds in order to lessen the impact of rising interest rates on the portfolio.
The average coupon rate of your Fund's bonds is 7.35%. Premium municipal bonds
are generally less sensitive to changes in interest rates than current and
discount coupon municipal bonds. In addition, a portion of your portfolio
remains invested in prerefunded bonds because they offer higher current yields,
react with less volatility to changes in interest rates, and provide increased
liquidity."
Looking Ahead
"Because the Federal Reserve Board is expected to continue to raise short-term
interest rates until it believes they are high enough to slow the economy to a
non-inflationary pace, the short term may remain difficult for bond markets.
However, the higher interest rates should slow the economy's growth in 1995,
resulting in a stabilized bond market in which valuations can begin to recover."
2
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Portfolio of Investments December 31, 1994
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Face Ratings
State Amount Municipal Bonds Moody's/S&P+ Market Value
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska -- 4.6% $10,000,000 Alaska Housing Finance Corp. (Collateralized
Home Mortgage Rev.), 7.65% due 6/1/2024 ... Aaa/AAA $ 10,291,600
Arizona -- 0.9% 2,000,000 Phoenix Street and Highway User Rev.,
6 1/2% due 7/1/2009........................ NR/AA 2,003,720
California -- 2.2% 6,000,000 San Joaquin Hills Transportation Corridor
Agency Senior Lien Toll Road Rev.
(Orange County), 6 3/4% due 1/1/2032....... NR/NR 4,963,260
Delaware -- 3.0% 6,500,000 Delaware Economic Development
Authority Exempt Facilities Rev.
(Delmarva Power and Light Co. Project),
7.60% due 3/1/2020*........................ Aaa/AAA 6,831,500
District of 9,000,000 Metropolitan Washington, D.C. Airports
Columbia -- 7.7% Authority Airport System Rev., 7.60%
due 10/1/2014*............................. A1/AA- 9,249,660
7,500,000 District of Columbia G.O.'s, 7 1/2%
due 6/1/2009 .............................. Aaa/AAA 8,173,950
Florida -- 8.5% 5,700,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .............................. Aaa/AAA 6,103,845
1,260,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .............................. Aaa/AAA 1,309,241
3,215,000 Florida Housing Finance Agency (Home Ownership
Rev.), 7.90% due 3/1/2022*................. Aaa/NR 3,399,863
3,000,000 Florida Municipal Power Agency Rev.
(St. Lucie Project), 5 1/2% due 10/1/2012.. Aaa/AAA 2,677,710
5,430,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022*...... Aaa/NR 5,721,917
Illinois -- 2.3% 5,000,000 Chicago O'Hare International Airport
International Terminal Special
Rev., 7 5/8% due 1/1/2010*................. Aaa/AAA 5,260,700
Indiana -- 2.3% 5,000,000 Indiana Employment Development Commission
Environmental Rev. (Public Service Company of
Indiana Inc.), 7 1/2% due 3/15/2015*....... Aaa/AAA 5,181,600
Louisiana -- 5.0% 10,000,000 Louisiana Public Facilities Authority Hospital
Rev. (Southern Baptist Hospitals, Inc.
Project), 8% due 5/15/2012................. NR/AAA 11,167,300
Massachusetts -- 7.0% 5,370,000 Massachusetts Housing Finance Agency (Multi-
Family Residential Development Rev.), 7.65%
due 2/1/2028*.............................. Aaa/AAA 5,536,792
5,285,000 Massachusetts Port Authority
Rev., 7 3/4% due 7/1/2018*................. Aaa/AAA 5,458,400
4,500,000 Massachusetts State G.O.'s
Consolidated Loan, 7 3/8% due 12/1/2008.... Aaa/AAA 4,859,460
Nebraska -- 2.0% 4,425,000 Nebraska Investment Finance Authority (Single
Family Mortgage Rev.), 8 1/8% due 8/15/2038* Aaa/AAA 4,604,699
Nevada -- 5.5% 7,000,000 Clark County Industrial Development Rev.
(Nevada Power Company Project), 7.80%
due 6/1/2020* ............................. Aaa/AAA 7,410,200
5,000,000 Washoe County Water Facility Rev.
(Sierra Pacific Power Company Project),
6.65% due 6/1/2017* ....................... Aaa/AAA 4,913,950
New Hampshire -- 6.1% 6,365,000 New Hampshire Housing Finance Authority (Single
Family Residential Mortgage Rev.), 7.90% due
7/1/2022*.................................. Aa/A+ 6,559,833
6,950,000 New Hampshire State Industrial Development
Authority Pollution Control Rev. (The
Connecticut Light and Power Company
Project), 7 3/8% due 12/1/2019*............ Aaa/AAA 7,143,836
</TABLE>
3
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Portfolio of Investments (continued) December 31, 1994
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Face Ratings
State Amount Municipal Bonds Moody's/S&P+ Market Value
- - ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey -- 1.9% 4,110,000 New Jersey Housing & Mortgage Finance Agency
(Home Buyer Rev.), 7.70% due 10/1/2029*.... Aaa/AAA $ 4,217,641
New York -- 7.7% 7,500,000 New York State Dormitory Authority Rev. (Leake
and Watts Service Inc.), 6% due 7/1/2023... Aaa/AAA 6,836,175
10,000,000 New York State Energy Research & Development
Authority Electric Facilities Rev.
(Consolidated Edison Co. NY Inc. Project),
7 1/2% due 1/1/2026* ...................... Aaa/AAA 10,394,200
New York and 6,000,000 Port Authority of New York and New Jersey, 8%
New Jersey -- 2.8% due 12/1/2023*............................. Aaa/AAA 6,230,340
Ohio -- 3.1% 6,850,000 Ohio Housing Finance Agency (Single Family
Mortgage Rev.), 7.65% due 3/1/2029*........ NR/AAA 7,090,229
Pennsylvania -- 2.4% 2,500,000 Allegheny County Airport Rev. (Greater
Pittsburgh International Airport),
6.80% due 1/1/2010* ....................... Aaa/AAA 2,516,675
3,000,000 Lehigh County Industrial Development Authority
Pollution Control Rev. (Pennsylvania Power &
Light Company Project), 6.40% due 11/1/2021 Aaa/AAA 2,891,790
South Dakota -- 4.8% 10,000,000 South Dakota Student Loan Corporation Student
Loan Rev., 7 5/8% due 8/1/2006*............ Aaa/AAA 10,707,200
Tennessee -- 2.6% 6,000,000 Humphreys County Industrial Development Board
Solid Waste Disposal Rev. (E.I. du Pont de
Nemours & Co. Project), 6.70% due 5/1/2024* Aa2/AA 5,849,100
Texas -- 8.7% 10,000,000 Lower Colorado River Authority
Rev., 6% due 1/1/2017...................... Aaa/AAA 9,168,000
5,000,000 Matagorda County Navigation District No. 1
Pollution Control Rev. (Houston Lighting and
Power Company Project), 7 7/8% due 11/1/2016* Aaa/AAA 5,187,650
5,000,000 Matagorda County Navigation District No. 1
Pollution Control Rev. (Central Power and
Light Co. Project), 7 7/8% due 12/1/2016*.. Aaa/AAA 5,194,450
Washington -- 3.8% 2,000,000 Grant County Public Utility District No. 002
(Priest Rapids Hydroelectric Development
Rev.), 7.70% due 1/1/2018*................. A1/A+ 2,120,440
6,000,000 Snohomish County Public Utility
District Rev., 6% due 1/1/2018............. Aaa/AAA 5,407,140
1,000,000 Spokane Regional Solid Waste Management System
Rev., 7 3/4% due 1/1/2011*................. Aaa/AAA 1,058,170
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Total Municipal Bonds (Cost $209,442,852) -- 94.9%............................................ 213,692,236
Short-Term Holdings (Cost $6,800,000) -- 3.0%................................................. 6,800,000
Other Assets Less Liabilities -- 2.1%......................................................... 4,607,425
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NET INVESTMENT ASSETS -- 100.0%............................................................... $225,099,661
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</TABLE>
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* Interest income earned from this security is subject to the federal
alternative minimum tax.
+ Ratings have not been audited by Deloitte & Touche LLP.
See notes to financial statements.
4
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Statement of Assets and Liabilities December 31, 1994
<S> <C> <C>
Assets:
Investments at value:
Long-term holdings (cost $209,442,852)..................................... $213,692,236
Short-term holdings (cost $6,800,000)...................................... 6,800,000 $220,492,236
------------
Cash............................................................................................ 261,975
Interest receivable............................................................................. 4,598,456
Expenses prepaid to stockholder service agent................................................... 60,193
Deferred organizational expenses................................................................ 2,168
Other........................................................................................... 16,111
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Total Assets.................................................................................... 225,431,139
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Liabilities:
Accrued expenses, taxes, and other.............................................................. 331,478
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Net Investment Assets........................................................................... 225,099,661
Preferred Stock................................................................................. 75,000,000
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Net Assets for Common Stock..................................................................... $150,099,661
============
Net Assets per share of Common Stock (market value $10.50)...................................... $11.54
======
Composition of Net Assets:
Preferred Stock Series A, $.01 par value, liquidation preference and asset coverage
per share--$100,000 and $300,133, respectively; shares authorized, issued and
outstanding--375............................................................................. $ 37,500,000
Preferred Stock Series B, $.01 par value, liquidation preference and asset coverage
per share--$100,000 and $300,133, respectively; shares authorized, issued and
outstanding--375............................................................................. 37,500,000
Common Stock, $.01 par value: shares authorized--49,999,250; issued and
outstanding--13,006,614...................................................................... 130,066
Additional paid-in capital................................................................... 143,139,266
Undistributed net investment income............................................................. 2,580,945
Net unrealized appreciation of investments...................................................... 4,249,384
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Net Investment Assets........................................................................... $225,099,661
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</TABLE>
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See notes to financial statements.
5
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Statement of Operations For the year ended December 31, 1994
<S> <C> <C>
Investment income:
Interest........................................................................................ $ 15,756,911
Expenses:
Management fee................................................................ $ 1,286,149
Stockholder account, transfer, and registrar services......................... 274,529
Preferred stock remarketing fee............................................... 187,500
Custody and related services.................................................. 71,732
Auditing and legal fees....................................................... 66,569
Stockholder reports and communications........................................ 55,903
Directors' fees and expenses.................................................. 34,991
Stockholders' meeting......................................................... 29,814
Amortization of organizational expenses....................................... 26,013
Miscellaneous................................................................. 63,329
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Total expenses.................................................................................. 2,096,529
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Net investment income........................................................................... 13,660,382*
Net realized and unrealized gain (loss) on investments:
Net realized gain on investments.............................................. 345,488
Net change in unrealized appreciation......................................... (21,357,953)
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Net loss on investments......................................................................... (21,012,465)
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Decrease in net investment assets from operations............................................... $ (7,352,083)
=============
</TABLE>
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* Net investment income available for Common Stock is $11,481,209, which is net
of Preferred Stock dividends.
See notes to financial statements.
6
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Statement of Changes in Net Investment Assets
Year ended December 31,
--------------------------------
1994 1993
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<S> <C> <C>
Operations:
Net investment income......................................................... $ 13,660,382 $ 13,614,595
Net realized gain on investments.............................................. 345,488 2,849,335
Net change in unrealized appreciation......................................... (21,357,953) 8,167,797
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Increase (decrease) in net investment assets from operations.................. (7,352,083) 24,631,727
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Distributions to stockholders:
Net investment income:
Preferred Stock, Series A (per share: $2,903.58 and $2,540.07)............. (1,088,842) (952,526)
Preferred Stock, Series B (per share: $2,907.55 and $2,536.25)............. (1,090,331) (951,094)
Common Stock (per share: $.84 and $.84).................................... (10,919,152) (10,876,325)
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Total................................................................... (13,098,325) (12,779,945)
Net realized gain on investments:
Common Stock (per share: $.027 and $.220).................................. (350,970) (2,852,266)
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Decrease in net investment assets from distributions.......................... (13,449,295) (15,632,211)
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Capital share transactions:
Value of shares of Common Stock issued for investment plan
(94,425 and 86,596 shares)................................................. 1,110,989 1,126,701
Value of shares of Common Stock issued in payment of gain
distribution (5,318 and 36,439 shares)..................................... 57,488 479,646
Cost of shares purchased for investment plan (78,800 and 61,500 shares)....... (912,503) (804,669)
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Increase in net investment assets from capital share transactions............. 255,974 801,678
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Increase (decrease) in net investment assets.................................. (20,545,404) 9,801,194
Net investment assets:
Beginning of year............................................................. 245,645,065 235,843,871
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End of year (including undistributed net investment
income of $2,580,945 and $2,018,888)....................................... $225,099,661 $245,645,065
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</TABLE>
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See notes to financial statements.
7
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Notes to Financial Statements
1. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. All tax-exempt 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. 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. 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. Deferred organizational expenses incurred by the Fund in connection with its
initial offering are being amortized on a straight-line basis over a
five-year period beginning with the commencement of operations of the Fund.
e. Dividends and distributions paid by the Fund are recorded on the ex-dividend
date.
f. The treatment for financial statement 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. These differences
primarily are caused by differences in the timing of the recognition of
certain components of income, expense, or capital gain. 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 reclassification will have no effect on net assets,
results of operations, or net asset value per share of the Fund.
2. Purchases and sales of portfolio securities, excluding short-term
investments, for the year ended December 31, 1994, amounted to $24,224,105, and
$29,093,625, respectively.
At December 31, 1994, 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
portfolio securities amounted to $7,648,002 and $3,398,618, respectively.
3. Under the Fund's Charter, dividends or other distributions on the Common
Stock cannot be declared unless the Fund can satisfy the requirements of two
separate asset maintenance tests after giving effect to such distributions.
The Fund, in connection with its Dividend Investment Plan (the "Plan"),
acquires and issues shares of its own Common Stock, as needed, to satisfy Plan
requirements. For the year ended December 31, 1994, 78,800 shares were purchased
in the open market at a cost of $912,503, which represented a weighted average
discount of 3.53% from the net asset value of those acquired shares. Of those
shares, 77,878 were issued to Plan participants during the year for proceeds of
$888,661, a discount of 4.12% from the net asset value of those shares.
4. The Fund is authorized to issue 50,000,000 shares of Capital Stock, par value
$.01 per share, all of which were initially classified as Common Stock. The
Board of Directors is authorized to classify and reclassify any unissued shares
of Capital Stock, and has reclassified 750 shares of unissued Common Stock as
Preferred Stock.
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $100,000 per share plus any accumulated
but unpaid dividends. The Preferred Stock is also subject to mandatory
redemption at $100,000 per share plus any accumulated but unpaid dividends in
April 2020 (Series A) and April 2022 (Series B) or if certain requirements
relating to the composition of the assets and liabilities of the Fund as set
forth in its Charter are not satisfied. Liquidation preference of the Preferred
Stock is $100,000 per share plus accumulated and unpaid dividends.
8
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Dividends on each series of Preferred Stock are cumulative at a rate
established at the initial public offering and typically are reset every 28 days
based on the lowest rate which would permit the shares to be remarketed at
$100,000 per share.
The holders of Preferred Stock have voting rights equal to the holders of
Common Stock (one vote per share) and generally will vote together with holders
of shares of Common Stock as a single class. Voting as a separate class, holders
of Preferred Stock are entitled to elect two of the Fund's directors.
5. 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 0.55% per annum of the Fund's daily net assets.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $222,017 for stockholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager and/or Seligman Data Corp.
Fees of $14,000 were incurred by the Fund for the legal services of Sullivan
& Cromwell, a member of which firm is a director of the Fund.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at December 31, 1994 of
$30,662 is included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
6. Following is a summary of unaudited quarterly results of operations, in
thousands of dollars except for per share amounts:
<TABLE>
<CAPTION>
For quarters ended in the year 1994
------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total investment income ............................. $4,045 $3,806 $4,050 $3,856
Net Investment income for Common Stock .............. $3,017 $2,825 $2,915 $2,724
Per Common Share ................................. $.23 $.22 $.22 $.21
Net realized and unrealized investment loss ......... $(12,374) $(1,150) $(1,747) $(5,741)
Per Common Share ................................. $(.95) $(.09) $(.13) $(.44)
For quarters ended in the year 1993
------------------------------------------------------
March 31 June 30 September 30 December 31
-------- ------- ------------ -----------
Total investment income ............................. $3,985 $3,849 $4,015 $4,009
Net Investment income for Common Stock .............. $2,927 $2,884 $2,972 $2,928
Per Common Share ................................. $.22 $.22 $.23 $.23
Net realized and unrealized investment gain (loss) .. $3,968 $5,194 $2,487 $(632)
Per Common Share ................................ $.31 $.40 $.19 $(.05)
</TABLE>
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Financial Highlights
The Fund's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per Common share basis, from the Fund's beginning net asset
value to the ending net asset value so that they can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item, as disclosed in the financial statements,
to their equivalent per Common share amount.
The total investment return based on market value measures the Fund's
performance assuming investors purchased Fund shares at market value as of the
beginning of the period, reinvested dividends and capital gains paid as provided
for in the Fund's dividend investment plan, and then sold their shares at the
closing market value per share on the last day of the period. The computations
do not reflect any sales commissions investors may incur in purchasing or
selling Fund shares. The total investment return based on net asset value is
similarly computed except that the Fund's net asset value is substituted for the
corresponding market value. The total returns for periods of less than one year
are not annualized.
The ratios of expenses to average net assets and net investment income to
average net assets for all periods presented do not reflect the effect of
dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
Year ended December 31, 2/15/90*
----------------------------------------- to
Per share operating performance: 1994 1993 1992 1991 12/31/90
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period........... $13.14 $12.45 $11.95 $11.15 $11.16
------- ------- ------- ------- -------
Net investment income**........................ 1.05 1.05 1.09 1.10 0.92
Net realized and unrealized investment gain (loss) (1.61) 0.85 0.45 0.81 0.11
------- ------- ------- ------- -------
Increase (decrease) from investment operations. (0.56) 1.90 1.54 1.91 1.03
Dividends paid on Preferred Stock.............. (0.17) (0.15) (0.18) (0.27) (0.25)
Dividends paid on Common Stock................. (0.84) (0.84) (0.84) (0.84) (0.63)
Net realized gain paid on Common Stock......... (0.03) (0.22) (0.02) -- --
Offering cost of Common Stock.................. -- -- -- -- (0.04)
Offering cost of Preferred Stock............... -- -- -- -- (0.02)
Preferred Stock underwriting discount.......... -- -- -- -- (0.10)
------- ------- ------- ------- -------
Net increase (decrease) in net asset value..... (1.60) 0.69 0.50 0.80 (0.01)
------- ------- ------- ------- -------
Net asset value, end of period................. $11.54 $13.14 $12.45 $11.95 $11.15
======= ======= ======= ======= =======
Market value, end of period.................... $10.50 $13.00 $12.75 $12.25 $11.25
======= ======= ======= ======= =======
Total investment return for period:
Based upon market value..................... (13.05)% 10.55% 11.67% 17.10% (0.70)%
Based upon net asset value.................. (5.46)% 14.44% 11.78% 15.25% 5.82%
</TABLE>
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See page 11 for footnotes.
10
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Financial Highlights (continued)
<TABLE>
<CAPTION>
Year ended December 31, 2/15/90*
----------------------------------------- to
Ratios/Supplemental Data:** 1994 1993 1992 1991 12/31/90
------- ------- ------- ------- ----------
<S> <C> <C> <C> <C> <C>
Expenses to average net assets................. 0.90% 0.92% 0.90% 0.90% 0.78%+
Net investment income to average net assets.... 5.84% 5.58% 6.06% 6.33% 6.58%+
Portfolio turnover............................. 10.74% 15.83% 3.90% 7.36% 10.75%
Net investment assets, end of period (000's omitted):
For Common Stock............................ $150,100 $170,645 $160,844 $153,501 $142,385
For Preferred Stock......................... 75,000 75,000 75,000 75,000 75,000
-------- -------- -------- -------- --------
Total net investment assets.................... $225,100 $245,645 $235,844 $228,501 $217,385
======== ======== ======== ======== ========
</TABLE>
- - ----------
* Commencement of operations.
** During the period February 15, 1990, to December 31, 1990, had the Manager,
at its discretion, not waived a portion of its fee, the per share net
investment income would have been $0.91. The annualized ratios of expenses
to average net assets and net investment income to average net assets would
have been 0.83% and 6.52%, respectively.
+ Annualized.
See notes to financial statements.
================================================================================
Report of Independent Auditors
The Board of Directors and Stockholders,
Seligman Select Municipal Fund, Inc.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Select Municipal Fund, Inc. as of
December 31, 1994, the related statements of operations for the year then ended
and of changes in net investment assets for each of the years in the two-year
period then ended, and the financial highlights for 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 the 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 the 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 at December
31, 1994, by correspondence with the Fund's custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Select
Municipal Fund, Inc. as of December 31, 1994, the results of its operations, the
changes in its net investment 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
February 3, 1995
11
<PAGE>
================================================================================
Dividend Investment Plan
The Dividend Investment Plan (the "Plan") is available for any holder of Common
Stock with shares registered in his/her own name who wishes to purchase
additional shares of Common Stock with dividends or distributions received on
Fund shares owned. The Plan is not automatic; a Stockholder may elect to
participate in the Plan by notifying his/her broker when the account is set up
or, if the account is maintained by the Fund, by sending a written request to
Seligman Data Corp. ("Seligman Data"), 100 Park Avenue, New York, New York
10017. Under the Plan, Stockholders appoint the Fund as Plan Agent to invest
dividends in shares of the Fund. Such shares will be acquired by the Fund for
Stockholders either through open market purchases if the Fund is trading at a
discount or through the issuance of authorized but unissued shares of Common
Stock if the Fund is trading at a premium. If the market price of a share on the
payable date of a dividend is at or above the Fund's net asset value per share
on such date, the number of shares to be issued by the Fund to each Stockholder
receiving shares in lieu of cash dividends will be determined by dividing the
amount of the cash distribution to which such Stockholder would be entitled by
the greater of the net asset value per share on such date or 95% of the market
price of a share on such date. If the market price of a share on such a
distribution date is below the net asset value per share, the number of shares
to be issued to such Stockholder will be determined by dividing such amount by
the per share market price.
Purchases will be made by the Fund from time to time on the New York Stock
Exchange (the "Exchange") or elsewhere to satisfy dividend and distribution
investment requirements under the Plan. Purchases will be suspended on any day
when the closing price (or closing bid price if there were no sales) of the
shares on the Exchange on the preceding trading day was higher than the net
asset value per share. If on the dividend payable date, purchases by the Fund
are insufficient to satisfy dividend investments and on the last trading day
immediately preceding the dividend payable date the closing sale or bid price of
the shares is lower than or the same as the net asset value per share, the Fund
will continue to purchase shares until all investments by Stockholders have been
completed or the closing sale or bid price of the shares becomes higher than the
net asset value, in which case the Fund will issue the necessary additional
shares from authorized but unissued shares. If on the last trading day
immediately preceding the dividend payable date, the closing sale or bid price
of the shares of Common Stock is higher than the net asset value per share, and
if the number of shares previously purchased on the Exchange or elsewhere is
insufficient to satisfy dividend investments, the Fund will issue the necessary
additional shares from authorized but unissued shares of Common Stock. There
will be no brokerage charges with respect to shares of Common Stock issued
directly by the Fund to satisfy the dividend investment requirements. However,
each participant will pay a pro rata share of brokerage commissions incurred
with respect to the Fund's open market purchases of shares. In each case, the
cost per share of shares purchased for each Common Stockholder's account will be
the average cost, including brokerage commissions, of any shares of Common Stock
purchased in the open market plus the cost of any shares issued by the Fund. For
the year ended December 31, 1994, the Fund purchased 78,800 shares in the open
market for dividend and gain investment purposes.
Common Stockholders who elect to hold their shares in the name of a broker or
other nominee should contact such broker or other nominee to determine whether
they may participate in the Plan. To the extent such participation is permitted,
the Plan Agent will administer the Plan on the basis of the number of shares
certified from time to time by the broker or other nominee as representing the
total amount registered in the nominee's name and held for the account of
12
<PAGE>
================================================================================
beneficial owners who are participating in such Plan by delivering shares on
behalf of such holder to such nominee's account at Depository Trust Company
("DTC"). Stockholders holding shares that participate in the Plan in a brokerage
account may not be able to transfer the shares to another broker and continue to
participate in the Plan.
A Common Stockholder who has elected to participate in the Plan may withdraw
from the Plan at any time. There will be no penalty for withdrawal from the
Plan, and Common Stockholders who have previously withdrawn from the Plan may
rejoin it at any time. Changes in elections must be in writing and should
include the Common Stockholder's name and address as they appear on the account
registration or in respect of an account held at DTC, the account registration.
An election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a Common Stockholder to take all subsequent
distributions in cash. An election will be effective only for a dividend or gain
distribution if it is received by Seligman Data on or before such record date.
Seligman Data will maintain all Common Stockholders' accounts in the Plan not
held by DTC, and furnish written confirmation of all transactions in the
account, including information needed by Common Stockholders for tax records.
Shares in the account of each Plan participant may be held by the Plan Agent in
non-certificated form in the name of the participant, and each Common
Stockholder's proxy will include those shares purchased or received pursuant to
the Plan.
The Fund seeks to pay dividends that are exempt from regular federal income
taxes; however, to the extent that any dividends or distributions do not qualify
as exempt from regular federal income taxes or are subject to state income
taxes, the automatic investment of dividends will not relieve participants of
any income taxes that may be payable (or required to be withheld) on such
dividends. Stockholders receiving dividends or distributions in the form of
additional shares pursuant to the Plan should be treated for federal income tax
purposes as receiving a distribution in an amount equal to the amount of money
that the Stockholders receiving cash dividends or distributions will receive and
should have a cost basis in the shares received equal to such amount.
The Fund reserves the right to amend or terminate the Plan as applied to any
dividend paid subsequent to written notice of the change sent to participants in
the Plan at least 90 days before the record date for such dividend. There is no
service charge to participants in the Plan; however, the Fund reserves the right
to amend the Plan to include a service charge payable to the Fund by the
participants. All correspondence concerning the Plan, including requests for
additional information about the Plan, should be directed to Seligman Data.
The Fund may make additional purchases of its Common Stock in the open market
and elsewhere at such prices and in such amounts as the Board of Directors may
deem advisable. No such additional purchases were made during the year ended
December 31, 1994.
13
<PAGE>
================================================================================
Board of Directors
Fred E. Brown
Director and Consultant,
J. & W. Seligman & Co. Incorporated
Alice S. Ilchman 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Trustee, The Rockefeller Foundation
John E. Merow
Partner, Sullivan & Cromwell, Attorneys
Betsy S. Michel 2
Director or Trustee,
Various Organizations
William C. Morris 1
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Daniel Industries, Inc.
Director, Kerr-McGee Corporation
Douglas R. Nichols, Jr. 2
Management Consultant
James C. Pitney 3
Partner, Pitney, Hardin, Kipp & Szuch, Attorneys
Director, Public Service Enterprise Group
James Q. Riordan 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
Herman J. Schmidt 2
Director, H. J. Heinz Company
Director, HON Industries, Inc.
Director, MAPCO, Inc.
Ronald T. Schroeder 1
Managing Director,
J. & W. Seligman & Co. Incorporated
Robert L. Shafer 3
Vice President, Pfizer Inc.
Director, USLIFE Corporation
James N. Whitson 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Brian T. Zino 1
Managing Director,
J. & W. Seligman & Co. Incorporated
- - ----------
Member:
1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
14
<PAGE>
================================================================================
Executive Officers
William C. Morris
Chairman
Thomas G. Moles
President
Eileen A. Comerford
Vice President
Audrey G. Kuchtyak
Vice President
Lawrence P. Vogel
Vice President
Thomas G. Rose
Treasurer
Frank J. Nasta
Secretary
- - --------------------------------------------------------------------------------
Manager
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
General Counsel
Sullivan & romwell
Independent Auditors
Deloitte & Touche LLP
Stockholder Service Agent
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
Important Telephone Numbers
(800) 874-1092 Stockholder
Services
(800) 622-4597 24-Hour Automated
Telephone Access
Service
15
<PAGE>
Seligman Select Municipal Fund, Inc.
Managed by
[JWS Logo]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Photo: Courtesy Michigan Travel Bureau
CESEL2 12/94
