<PAGE>
================================================================================
To the Shareholders
Seligman Select Municipal Fund had a positive second quarter as it continued to
provide monthly tax-free income to its Stockholders.
In the first half of 1996, the Federal Reserve Board's continuing efforts to
achieve a "soft landing" -- a healthy moderation of economic growth that does
not slip into recession -- appeared to have come to fruition. Inflation remained
low and, more important, commodity price indices declined from their recent
eight-year highs, which suggested that future inflationary pressures were in
check. Additionally, economic data for the second quarter of 1996 indicated
continued growth in output, employment, and incomes. More than half the early
corporate earnings reports reflected the positive effects of the strong economy,
and earnings estimates rose to higher levels. Overall, the economy seemed quite
healthy at the end of the second quarter.
Within the municipal bond market, long-term interest rates continued to
fluctuate as investors remained concerned with the economy's rate of growth and
the potential for inflation to re-accelerate. Despite a rise in yields, and a
decline in prices, the municipal market continued to outperform the US Treasury
market. The combination of higher yields and redemptions within the municipal
market resulted in a reduction in municipal supply at the same time that demand
was stimulated by the higher yields. These favorable supply and demand
conditions prevented long-term municipal yields from declining as much as
long-term US Treasury yields.
The constantly changing investment environment reminds us of the importance
of long-term investing. Since the ups and downs of the financial markets are
unavoidable, it benefits you, our Stockholders, to adopt a long-term investment
plan whenever possible. Time is a powerful investment tool that succeeds where
market timing often fails. If you invest over the long term, short-term market
swings have less of an impact on your overall financial goals. With the help of
your investment advisor, you can formulate a long-term investment strategy that
reduces your risk and increases your diversification.
For specific performance information and a discussion with your Portfolio
Manager about the second quarter of 1996, please refer to page 2.
By order of the Board of Directors,
/s/ William C. Morris
- --------------------------
William C. Morris
Chairman
/s/ Thomas G. Moles
---------------------
Thomas G. Moles
President
July 31, 1996
1
<PAGE>
================================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER
Thomas G. Moles
WHAT ECONOMIC FACTORS INFLUENCED SELIGMAN SELECT MUNICIPAL FUND IN THE PAST
THREE MONTHS?
During the first quarter of 1996, the economy began to exhibit signs of
strength, increasing the potential for a pickup in the rate of inflation. In
response, yields on municipal bonds rose sharply. By the second quarter,
investor concern regarding growth and inflationary pressure intensified due to a
continuation of strong economic data. Long-term municipal yields set a new high
for the year. However, the higher yields contributed to a reduction in new-issue
supply and stimulated retail demand, which helped stabilize the municipal market
during the second quarter.
HOW DID THE MARKET'S FLUCTUATIONS AFFECT YOUR INVESTMENT STRATEGY?
Despite rising interest rates, our long-term outlook remains positive. The
increase in long-term yields provided us with opportunities to purchase
long-term municipal bonds at levels not seen since the third quarter of 1995.
Given the market's current volatility, we are concentrating the Fund's long-term
purchases in current coupon bonds, as they are less sensitive to changes in
interest rates than discount bonds.
By focusing on long-term municipal bonds, rather than lower yielding short-term
bonds, we can better maintain the Fund's monthly dividend. In spite of the
rising interest rate environment, which has negatively affected the investment
results of the Fund, we anticipate an overall stabilization and an eventual
decline in rates. In a stable or declining interest rate environment, long-term
bonds should outperform shorter-term bonds. We chose not to employ a short-term
defensive strategy, although it would lessen the Fund's sensitivity to rising
interest rates, as such a strategy would impede the achievement of our long-term
objectives. We believe that our investment strategy will continue to benefit the
Fund over the long term.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Going forward, the fixed-income markets may continue to experience volatility
until the economy resumes its moderate pace. However, should the economy
continue to accelerate, the Federal Reserve Board is expected to act swiftly to
prevent inflation from rising. Currently, Seligman Select Municipal Fund is
positioned to benefit from a stable or declining interest rate environment as it
is mostly invested in long-term, current coupon bonds. However, the Fund does
hold several defensive positions in order to lessen its volatility in the
present market environment.
2
<PAGE>
================================================================================
INVESTMENT RESULTS PER COMMON SHARE
- --------------------------------------------------------------------------------
TOTAL RETURNS
For Periods Ended June 30, 1996
<TABLE>
<CAPTION>
Average Annual
---------------------------------
Since
Three Six One Five Inception
Months Months Year Years 2/15/90
------ ------ ---- ----- -------
<S> <C> <C> <C> <C> <C>
Market Price 3.79% 5.57% 12.37% 9.04% 8.62%
Net Asset Value 1.08 (0.64) 6.19 8.62 8.94
</TABLE>
PRICE PER SHARE
<TABLE>
<CAPTION>
June 30, 1996 March 31, 1996 December 31, 1995
------------- -------------- -----------------
<S> <C> <C> <C>
Market Price $12.75 $12.50 $12.50
Net Asset Value 12.01 12.09 12.51
</TABLE>
DIVIDENDS AND CAPITAL GAIN INFORMATION
For the Six Months Ended June 30, 1996
Capital Gain (Loss)
--------------------------
Dividends Paid Realized Unrealized*
------------- -------- ----------
$0.42 $(0.004) $0.851
*Represents the per share amount of unrealized appreciation of portfolio
securities as of June 30, 1996.
These rates of return reflect changes in market price or net asset value, as
applicable, and assume that all distributions within the period are reinvested
in additional shares. The rates of return will vary and the principal value of
an investment will fluctuate. Shares, if redeemed, may be worth more or less
than their original cost. Past performance is not indicative of future
investment results.
- --------------------------------------------------------------------------------
3
<PAGE>
================================================================================
Portfolio of Investments
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Face Ratings
State Amount Municipal Bonds Moody's/S&P+ Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Alaska -- 4.5% $10,000,000 Alaska Housing Finance Corp. (Collateralized
Home Mortgage Rev.), 7.65% due 6/1/2024.... Aaa/AAA $ 10,479,500
California-- 7.0% 10,000,000 San Francisco City and County Airports
Commission (San Francisco International
Airport Rev.), 6.30% due 5/1/2005*......... Aaa/AAA 10,168,300
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 6,171,720
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 7,063,420
District of 9,000,000 Metropolitan Washington, D.C. Airports
Columbia-- 7.8% Authority Airport System Rev., 7.60%
due 10/1/2014*............................. A1/AA- 9,782,550
7,500,000 District of Columbia G.O.'s, 7 1/2%
due 6/1/2009 .............................. Aaa/AAA 8,248,050
Florida-- 7.9% 5,700,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .............................. Aaa/AAA 6,116,556
975,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .............................. Aaa/AAA 1,037,098
2,890,000 Florida Housing Finance Agency (Home
Ownership Rev.), 7.90% due 3/1/2022*....... Aaa/NR 3,052,562
3,000,000 Florida Municipal Power Agency Rev.
(St. Lucie Project), 5 1/2% due 10/1/2012.. Aaa/AAA 2,935,740
4,815,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022*...... Aaa/NR 5,066,343
Illinois-- 2.3% 5,000,000 Chicago O'Hare International Airport
International Terminal Special Rev.,
7 5/8% due 1/1/2010*........................ Aaa/AAA 5,424,150
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 5,427,000
Louisiana-- 5.0% 10,000,000 Louisiana Public Facilities Authority Hospital
Rev. (Southern Baptist Hospitals, Inc.
Project), 8% due 5/15/2012.................. NR/AAA 11,591,600
Massachusetts -- 3.4% 5,370,000 Massachusetts Housing Finance Agency (Multi-
Family Residential Development Rev.), 7.65%
due 2/1/2028*.............................. Aaa/AAA 5,634,258
2,125,000 Massachusetts State G.O.'s Consolidated Loan,
7 3/8% due 12/1/2008........................ Aaa/AAA 2,317,355
Michigan-- 2.7% 6,000,000 Royal Oak, MI Hospital Finance Authority Rev.
(William Beaumont Hospital),
6 3/4% due 1/1/2020 ........................ Aa/AA 6,305,340
Nebraska-- 1.6% 3,530,000 Nebraska Investment Finance Authority (Single
Family Mortgage Rev.), 8 1/8% due 8/15/2038* Aaa/AAA 3,701,452
Nevada-- 5.6% 7,000,000 Clark County Industrial Development Rev.
(Nevada Power Company Project),
7.80% due 6/1/2020* ........................ Aaa/AAA 7,681,940
5,000,000 Washoe County Water Facility Rev. (Sierra
Pacific Power Company Project), 6.65%
due 6/1/2017* .............................. Aaa/AAA 5,252,950
New Hampshire-- 5.9% 5,760,000 New Hampshire Housing Finance Authority
(Single Family Residential Mortgage Rev.),
7.90% due 7/1/2022*......................... Aa/A+ 6,069,542
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 7,557,708
</TABLE>
4
<PAGE>
================================================================================
June 30, 1996
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------
Face Ratings
State Amount Municipal Bonds Moody's/S&P+ Market Value
- ------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
New Jersey-- 2.4% $ 2,000,000 New Jersey Educational Facilities
Authority Rev. (Princeton University),
6% due 7/1/2024............................ Aaa/AAA$ $ 2,019,720
3,350,000 New Jersey Housing & Mortgage Finance Agency
(Home Buyer Rev.), 7.70% due 10/1/2029*.... Aaa/AAA 3,481,488
New York-- 7.6% 10,000,000 New York State Energy Research & Development
Authority Electric Facilities Rev.
(Consolidated Edison Co. NY Inc. Project),
6.10% due 8/15/2020 ....................... Aaa/AAA 10,079,700
7,500,000 New York State Thruway Authority Rev., 6% due
1/1/2025................................... Aaa/AAA 7,558,050
New York and 6,000,000 Port Authority of New York and New Jersey, 8%
New Jersey-- 2.7% due 12/1/2023*............................. Aaa/AAA 6,137,760
Ohio-- 4.6% 6,465,000 Ohio Housing Finance Agency (Single Family
Mortgage Rev.), 7.65% due 3/1/2029*........ NR/AAA 6,785,535
4,000,000 Ohio Turnpike Commission (Turnpike Rev.),
5.70% due 2/15/2017....................... Aaa/AAA 3,961,400
Pennsylvania-- 6.8% 2,500,000 Allegheny County Airport Rev. (Greater
Pittsburgh International Airport), 6.80%
due 1/1/2010* ............................. Aaa/AAA 2,679,850
3,000,000 Lehigh County Industrial Development
Authority Pollution Control Rev.
(Pennsylvania Power & Light Company
Project), 6.40% due 11/1/2021 ............. Aaa/AAA 3,097,410
10,000,000 Philadelphia, PA Airport Rev., 6.10% due
6/15/2025*................................. Aaa/AAA 10,023,500
South Dakota-- 3.8% 8,315,000 South Dakota Student Loan Corporation Student
Loan Rev., 7 5/8% due 8/1/2006*............ Aaa/AAA 8,836,267
Tennessee-- 2.7% 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* Aa3/AA- 6,318,180
Texas-- 4.5% 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 5,000,000
Matagorda County Navigation District No. 1
Pollution Control Rev. (Central Power
And Light CO. Project), 7 7/8% due 12/1/2016* AAA/AAA 5,174,450
Washington -- 4.0% 2,000,000 Grant County Public Utility District No. 002
(Priest Rapids Hydroelectric
Development Rev.), 7.70% due 1/1/2018* A1/A+ 2,145,200
6,000,000 Snohomish County Public Utility District
Rev., 6% due 1/1/2018...................... Aaa/AAA 6,003,900
1,000,000 Spokane Regional Solid Waste Management
System Rev., 7 3/4% due 1/1/2011*.......... Aaa/AAA 1,081,000
------------
Total Municipal Bonds (Cost $216,515,217)-- 98.1%............................................. 227,628,144
Short-Term Holdings (Cost $400,000)-- 0.2%.................................................... 400,000
Other Assets Less Liabilities-- 1.7%.......................................................... 3,903,029
------------
NET INVESTMENT ASSETS-- 100.0%................................................................ $231,931,173
============
</TABLE>
- ----------
* 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.
5
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES June 30, 1996
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments at value:
Long-term holdings (cost $216,515,217)..................................... $227,628,144
Short-term holdings (cost $400,000)........................................ 400,000 $228,028,144
------------
Cash............................................................................................ 41,353
Interest receivable............................................................................. 4,048,380
Expenses prepaid to Stockholder service agent................................................... 25,299
Other........................................................................................... 39,658
------------
Total Assets.................................................................................... 232,182,834
------------
LIABILITIES:
Accrued expenses, taxes, and other.............................................................. 251,661
------------
NET INVESTMENT ASSETS........................................................................... 231,931,173
Preferred Stock................................................................................. 75,000,000
------------
NET ASSETS FOR COMMON STOCK..................................................................... $156,931,173
============
NET ASSETS PER SHARE OF COMMON STOCK (market value $12.75)...................................... $12.01
======
COMPOSITION OF NET ASSETS:
Preferred Stock Series A, $.01 par value, liquidation preference and asset
coverage per share--$100,000 and $309,242, 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 $309,242, respectively; shares authorized, issued and
outstanding--375.............................................................................. 37,500,000
Common Stock, $.01 par value: shares authorized--49,999,250; issued and
outstanding--13,064,868....................................................................... 130,649
Additional paid-in capital....................................................................... 143,837,006
Undistributed net investment income.............................................................. 1,905,602
Accumulated net realized loss.................................................................... (55,011)
Net unrealized appreciation of investments....................................................... 11,112,927
------------
Net Investment Assets............................................................................ $231,931,173
============
</TABLE>
- ----------
See notes to financial statements.
6
<PAGE>
================================================================================
STATEMENT OF OPERATIONS For the six months ended June 30, 1996
<TABLE>
<S> <C> <C>
Investment Income:
Interest........................................................................................ $7,666,231
Expenses:
Management fee................................................................ $ 638,984
Stockholder account, transfer, and registrar services......................... 119,165
Preferred stock remarketing fee............................................... 93,750
Auditing and legal fees....................................................... 33,405
Stockholder reports and communications........................................ 29,563
Stockholders' meeting......................................................... 27,173
Custody and related services.................................................. 25,129
Directors' fees and expenses.................................................. 16,754
Miscellaneous................................................................. 8,408
----------
TOTAL EXPENSES.................................................................................. 992,331
----------
NET INVESTMENT INCOME........................................................................... 6,673,900*
Net Realized and Unrealized Loss on Investments:
Net realized loss on investments.............................................. (55,011)
Net change in unrealized appreciation of investments.......................... (6,307,977)
----------
NET LOSS ON INVESTMENTS......................................................................... (6,362,988)
----------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS............................................... $ 310,912
==========
</TABLE>
- ----------
* Net investment income available for Common Stock is $5,309,511, which is net
of Preferred Stock dividends.
See notes to financial statements.
7
<PAGE>
===============================================================================
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>
Six months
ended Year ended
6/30/96 12/31/95
------------ ------------
<S> <C> <C>
OPERATIONS:
Net investment income......................................................... $ 6,673,900 $ 13,420,693
Net realized gain (loss) on investments....................................... (55,011) 1,237,692
Net change in unrealized appreciation of investments.......................... (6,307,977) 13,171,520
------------ ------------
Increase in net investment assets from operations............................. 310,912 27,829,905
------------ ------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series A (per share: $1,971.42 and $4,004.38)............. (739,283) (1,501,642)
Preferred Stock, Series B (per share: $1,666.95 and $4,000.69)............. (625,106) (1,500,259)
Common Stock (per share: $.42 and $.84).................................... (5,477,049) (10,926,597)
------------ ------------
Total................................................................... (6,841,438) (13,928,498)
Net realized gain on investments:
Common Stock (per share: $.096)............................................ -- (1,248,854)
------------ ------------
Decrease in net investment assets from distributions.......................... (6,841,438) (15,177,352)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued for investment plan
(41,719 and 88,591 shares)................................................. 508,222 1,069,268
Value of shares of Common Stock issued in payment of gain
distribution (16,144 shares)............................................... -- 200,250
Cost of shares purchased for investment plan (88,200 shares).................. -- (1,068,255)
------------ ------------
Increase in net investment assets from capital share transactions............. 508,222 201,263
------------ ------------
Increase (decrease) in net investment assets.................................. (6,022,304) 12,853,816
NET INVESTMENT ASSETS:
Beginning of period........................................................... 237,953,477 225,099,661
------------ ------------
End of period (including undistributed net investment
income of $1,905,602 and $2,073,140)....................................... $231,931,173 $237,953,477
============ ============
- ----------
See notes to financial statements.
</TABLE>
8
<PAGE>
================================================================================
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 pro-cedures 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. Dividends and distributions paid by the Fund are recorded on the ex-dividend
date.
e. 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 six months ended June 30, 1996, amounted to $16,081,000,
and $14,069,752, respectively.
At June 30, 1996, 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 $11,385,555 and $272,628,
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 six months ended June 30, 1996, there were no shares
purchased in the open market.
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
six months ended June 30, 1996.
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
9
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
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.
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 average daily net assets.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $94,442 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 $8,000 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 cost of such fees and interest is included in directors' fees and
expenses, and the accumulated balance thereof at June 30, 1996, of $43,929 is
included in other liabilities. Deferred fees and related accrued interest are
not deductible for federal income tax purposes until such amounts are paid.
10
<PAGE>
================================================================================
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>
SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED --------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 6/30/96 1995 1994 1993 1992 1991
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of period ......... $12.51 $11.54 $13.14 $12.45 $11.95 $11.15
-------- ------- ------- ------- ------- -------
Net investment income ........................ 0.51 1.03 1.05 1.05 1.09 1.10
Net realized and unrealized investment
gain (loss) ................................ (0.49) 1.11 (1.61) 0.85 0.45 0.81
-------- ------- ------- ------- ------- -------
Increase (decrease) from investment
operations ................................. 0.02 2.14 (0.56) 1.90 1.54 1.91
Dividends paid on Preferred Stock ............ (0.10) (0.23) (0.17) (0.15) (0.18) (0.27)
Dividends paid on Common Stock ............... (0.42) (0.84) (0.84) (0.84) (0.84) (0.84)
Net realized gain paid on Common Stock ....... -- (0.10) (0.03) (0.22) (0.02) --
-------- ------- ------- ------- ------- -------
Net increase (decrease) in net
asset value ................................ (0.50) 0.97 (1.60) 0.69 0.50 0.80
-------- ------- ------- ------- ------- -------
Net asset value, end of period ............... $12.01 $12.51 $11.54 $13.14 $12.45 $11.95
======== ======= ======= ======= ======= =======
Market value, end of period .................. $12.75 $12.50 $10.50 $13.00 $12.75 $12.25
======== ======= ======= ======= ======= =======
TOTAL INVESTMENT RETURN:
Based upon market value .................... 5.57% 28.58% (13.05)% 10.55% 11.67% 17.10%
Based upon net asset value ................. (0.64)% 17.09% (5.46)% 14.44% 11.78% 15.25%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............... 0.85%* 0.91% 0.90% 0.92% 0.90% 0.90%
Net investment income to average
net assets ................................. 5.74%* 5.74% 5.84% 5.58% 6.06% 6.33%
Portfolio turnover ........................... 6.19% 13.37% 10.74% 15.83% 3.90% 7.36%
Net investment assets, end of period
(000's omitted):
For Common Stock ........................... $156,931 $162,953 $150,100 $170,645 $160,844 $153,501
For Preferred Stock ........................ 75,000 75,000 75,000 75,000 75,000 75,000
-------- -------- -------- -------- -------- --------
Total net investment assets .................. $231,931 $237,953 $225,100 $245,645 $235,844 $228,501
======== ======== ======== ======== ======== ========
</TABLE>
- ----------
* Annualized.
See notes to financial statements.
11
<PAGE>
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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 June
30, 1996, the related statements of operations for the six months then ended and
of changes in net investment assets for the six months then ended and for the
year ended December 31, 1995, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and 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 June 30,
1996, 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 June 30, 1996, 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.
DELOITTE & TOUCHE LLP
New York, New York
July 31, 1996
12
<PAGE>
================================================================================
BOARD OF DIRECTORS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
JOHN R. GALVIN 2
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
Director, USLIFE Corporation
ALICE S. ILCHMAN 3
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic Development
DIRECTOR, NYNEX
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2
CHAIRMAN AND CEO, Kerr-McGee Corporation
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
PARTNER, Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Aluminum Corporation
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, Kerr-McGee Corporation
JAMES C. PITNEY 3
PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
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
RONALD T. SCHROEDER 1
MANAGING DIRECTOR,
J. & W. Seligman & Co. Incorporated
ROBERT L. SHAFER 3
DIRECTOR OR TRUSTEE,
Various Organizations
JAMES N. WHITSON 2
EXECUTIVE VICE PRESIDENT AND DIRECTOR,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
MANAGING DIRECTOR,
J. & W. Seligman & Co. Incorporated
- ----------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
<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 &Cromwell
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
- --------------------------------------------------------------------------------
PROXY RESULTS
Seligman Select Municipal Fund, Inc. Stockholders voted on the following
proposals at the Annual Meeting of Stockholders on May 16, 1996, in San
Francisco, CA. The description of each proposal and number of shares voted are
as follows:
FOR WITHHELD
--- --------
Election of Directors:
John E. Merow 11,155,899 136,244
James C. Pitney 11,156,174 135,970
Brian T. Zino 11,161,968 130,176
Ratification of Deloitte & Touche LLP as independent auditors:
FOR AGAINST ABSTAIN
--- ------- -------
11,125,457 31,663 135,024
- --------------------------------------------------------------------------------
14
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This Page Intentionally Left Blank.
<PAGE>
SELIGMAN
================================================================================
SELECT
================================================================================
MUNICIPAL
FUND, INC.
(PHOTO AND LOGO OMITTED)
Mid-Year Report
June 30, 1996
Seligman Select Municipal Fund, Inc.
Managed by
[LOGO OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors
ESTABLISHED 1864
100 Park Avenue, New York, NY 10017
Photo: Courtesy Michigan Travel Bureau
CESEL3b 6/96
