TO THE STOCKHOLDERS
We are pleased to provide you with Seligman Select Municipal Fund's 1995
Annual Report.
During each of the past three months, your Fund paid Common Stockholders
federally tax-free monthly dividends of $0.07 per share, which brings total
dividends for the year to $0.84. The annualized distribution rate based on
current market price was 6.72% at December 31, which is equivalent to a taxable
yield of 11.13% based on the maximum federal tax rate of 39.6%.
Preferred Stockholders were paid dividends at annual rates ranging from
3.79% to 4.05%. Earnings on your Fund's assets in excess of the preferred
dividend requirements constituted dividend income for Common Stockholders.
At December 31, your Fund's net asset value was $12.51 per share, compared
to $11.54 a year ago, and your Fund's market price was $12.50 per share,
compared to $10.50 a year ago. Total return based on net asset value for the
12-month period was 17.09% and based on market price was 28.58%. (Total return
assumes that distributions paid are reinvested in additional shares.)
During the first half of 1995, the Federal Reserve Board (FRB) continued
to pursue restrictive monetary policy, raising the federal funds rate once again
on February 1, 1995. Market participants were encouraged by the FRB action and
the bond market rally intensified. Long-term yields continued to trend lower
through the first and second quarters in response to consistent reports of
economic weakness.
The municipal bond market, however, began to underperform the US Treasury
market during the second quarter as investors increasingly focused on
tax reform legislation. At the same time, the lower yields caused a pick-up in
municipal new issue supply, putting additional pressure on the municipal market.
In July, the FRB, prompted by a slowing economy, voted to lower the federal
funds rate to lessen the risk of a recession. However, subsequent economic
reports proved surprisingly robust, prompting speculation that the economy was
not as weak as believed. Long-term yields temporarily reversed their decline but
by mid-August, signs of strength had abated and interest rates resumed their
decline.
Concerns regarding tax reform legislation continue to impact the
performance of the municipal market as investors demand higher yields on
municipal securities as compensation. This uncertainty most likely will persist
throughout 1996, with municipal bonds remaining at historically cheap levels
compared with US Treasury Bonds.
We thank you for your continued confidence in Seligman Select Municipal
Fund and look forward to serving your investment needs in the future.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Thomas G. Moles
Thomas G. Moles
President
February 2, 1996
<PAGE>
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 President and Senior
Portfolio Manager of the Seligman Tax-Exempt mutual funds, which include 19
separate portfolios. Mr. Moles, who has more than 23 years of experience, is
responsible for approximately $2 billion in tax-exempt securities and has
spearheaded Seligman's tax-exempt efforts since joining the firm in 1983. Mr.
Moles is supported by a team of seasoned research and trading professionals who
assist him in selecting securities in accordance with your Fund's objective.
INVESTMENT STRATEGY
"Given the generally positive outlook for interest rates in 1995, Seligman
Select Municipal Fund remained fully invested in long-term municipal bonds
throughout the year. Consistent with our interest rate expectations,
we began to reduce holdings of prerefunded bonds. These are defensive
bonds that are used to minimize principal loss during periods of rising
interest rates. When yields are falling, as they did throughout most of
1995, prerefunded bonds will limit a portfolio's upside potential.
"New purchases were concentrated in long-term, current coupon bonds. Had
Seligman Select purchased more discount bonds, market appreciation would
have been greater. However, we believed that enough of a downside risk existed
in the market to justify avoiding too aggressive a strategy."
ECONOMIC FACTORS AFFECTING SELIGMAN SELECT MUNICIPAL FUND
"Throughout 1995, the bond market experienced a sustained rally--a direct
result of efforts by the Federal Reserve Board to slow the economy and contain
the rate of inflation. The dramatic decline in long-term rates that
characterized most of 1995 resulted in double-digit total returns for the
majority of long-term municipal bond funds, including Seligman Select."
OUTLOOK FOR THE YEAR AHEAD
"Tax reform legislation will continue to influence the performance of the
municipal market until either tax reform is abandoned as an issue, or
legislation is enacted, ending speculation about the impact on municipal
securities. In the interim, investors will continue to demand higher
yields on municipal bonds. For investors who are comfortable with a period of
uncertainty, long-term municipal bonds offer a substantial yield advantage, on
an after-tax basis, when compared with taxable bonds.
"Additionally, the supply of new municipal issues is expected to vary
little from the $155 billion issued in 1995. However, it is estimated that
principal redemptions will range between $140-150 billion. As a result, the
supply of outstanding municipals should remain essentially unchanged, which will
help to stabilize the market during periods of volatility."
2
<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 $ 10,708,800
ARIZONA-- 0.9% 2,000,000 Phoenix Street and Highway User Rev.,
6 1/2% due 7/1/2009 ................... NR/AA 2,149,300
CALIFORNIA-- 2.7% 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 6,365,220
DELAWARE-- 3.1% 6,500,000 Delaware Economic Development Authority
Exempt Facilities Rev.(Delmarva Power
and Light Co. Project), 7.60% due
3/1/2020* ............................. Aaa/AAA 7,342,205
DISTRICT OF METROPOLITAN WASHINGTON, D.C. AIRPORTS
COLUMBIA-- 7.8% 9,000,000 Authority Airport System Rev., 7.60% due
10/1/2014* ............................ A1/AA- 10,088,280
7,500,000 District of Columbia G.O.'s, 7 1/2% due
6/1/2009 .............................. Aaa/AAA 8,441,850
FLORIDA-- 8.0% 5,700,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .......................... Aaa/AAA 6,215,622
1,105,000 Brevard County Utility Rev., 7 3/8%
due 3/1/2014 .......................... Aaa/AAA 1,197,698
3,015,000 Florida Housing Finance Agency (Home
Ownership Rev.), 7.90% due 3/1/2022*... Aaa/NR 3,189,538
3,000,000 Florida Municipal Power Agency Rev.
(St. Lucie Project), 5 1/2% due
10/1/2012 ............................. Aaa/AAA 3,060,270
5,150,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022* Aaa/NR 5,484,596
ILLINOIS-- 2.3% 5,000,000 Chicago O'Hare International Airport
International Terminal Special Rev.,
7 5/8% due 1/1/2010* .................. Aaa/AAA 5,557,000
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 5,558,150
LOUISIANA-- 5.2% 10,000,000 Louisiana Public Facilities Authority
Hospital Rev. (Southern Baptist
Hospitals, Inc. Project), 8%
due 5/15/2012 ......................... NR/AAA 12,374,200
MASSACHUSETTS-- 3.4% 5,370,000 Massachusetts Housing Finance Agency
(Multi-Family Residential Development
Rev.), 7.65% due 2/1/2028* ............ Aaa/AAA 5,724,366
2,125,000 Massachusetts State G.O.'s Consolidated
Loan, 7 3/8% due 12/1/2008 ............ Aaa/AAA 2,359,961
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 6,445,800
NEBRASKA-- 1.7% 3,835,000 Nebraska Investment Finance Authority
(Single Family Mortgage Rev.),
8 1/8% due 8/15/2038* ................. Aaa/AAA 4,040,940
NEVADA-- 5.6% 7,000,000 Clark County Industrial Development Rev.
(Nevada Power Company Project), 7.80%
due 6/1/2020* ......................... Aaa/AAA 7,896,070
5,000,000 Washoe County Water Facility Rev.
(Sierra Pacific Power Company Project),
6.65% due 6/1/2017* ................... Aaa/AAA 5,438,000
NEW HAMPSHIRE-- 6.0% 6,040,000 New Hampshire Housing Finance Authority
(Single Family Residential Mortgage
Rev.), 7.90% due 7/1/2022* ............ Aa/A+ 6,379,327
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 7,766,833
3
<PAGE>
PORTFOLIO OF INVESTMENTS (Continued)
- ---------------------------------------------------------------------------------------------------------------
FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P+ MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------
NEW JERSEY-- 1.8% $ 4,060,000 New Jersey Housing & Mortgage Finance
Agency (Home Buyer Rev.), 7.70% due
10/1/2029* ............................ Aaa/AAA $ 4,264,827
NEW YORK-- 7.8% 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 10,673,600
7,500,000 New York State Thruway Authority
Rev., 6% due 1/1/2025 ................. Aaa/AAA 7,888,800
NEW YORK AND 6,000,000 PORT AUTHORITY OF NEW YORK AND
NEW JERSEY-- 2.6% New Jersey -- 8% due 12/1/2023* ....... Aaa/AAA 6,140,580
OHIO-- 2.9% 6,570,000 Ohio Housing Finance Agency (Single
Family Mortgage Rev.), 7.65% due
3/1/2029* ............................. NR/AAA 6,881,681
PENNSYLVANIA-- 6.9% 2,500,000 Allegheny County Airport Rev. (Greater
Pittsburgh International Airport),
6.80% due 1/1/2010* ................... Aaa/AAA 2,775,025
3,000,000 Lehigh County Industrial Development
Authority Pollution Control Rev.
Pennsylvania Power & Light Company
Project), 6.40% due 11/1/2021 ......... Aaa/AAA 3,221,460
10,000,000 Philadelphia, PA Airport Rev.,
6.10% due 6/15/2025* Aaa/AAA 10,496,200
SOUTH DAKOTA-- 3.7% 8,315,000 South Dakota Student Loan Corporation
Student Loan Rev., 7 5/8% due
8/1/2006* ............................. Aaa/AAA 8,887,405
TENNESSEE-- 2.8% 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- 6,560,580
TEXAS-- 8.8% 10,000,000 Lower Colorado River Authority Rev.,
6% due 1/1/2017 ....................... Aaa/AAA 10,330,100
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 5,258,000
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 5,273,650
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+ 2,240,600
6,000,000 Snohomish County Public Utility District
Rev., 6% due 1/1/2018 ................. Aaa/AAA 6,228,060
1,000,000 Spokane Regional Solid Waste Management
System Rev., 7 3/4% due 1/1/2011*...... Aaa/AAA 1,106,420
------------
TOTAL MUNICIPAL BONDS (COST $214,590,110) -- 97.5% .............................. 232,011,014
SHORT-TERM HOLDINGS (COST $1,800,000) -- 0.8% ................................... 1,800,000
OTHER ASSETS LESS LIABILITIES -- 1.7% ........................................... 4,142,463
------------
NET INVESTMENT ASSETS-- 100.0% $237,953,477
============
</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.
4
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES DECEMBER 31, 1995
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments at value:
Long-term holdings (cost $214,590,110) ..... $232,011,014
Short-term holdings (cost $1,800,000) ...... 1,800,000 $233,811,014
------------
141,372
Interest receivable ................................................ 4,378,597
Expenses prepaid to stockholder service agent ...................... 39,100
Other .............................................................. 15,177
------------
TOTAL ASSETS ....................................................... 238,385,260
------------
LIABILITIES:
Accrued expenses, taxes, and other ................................. 431,783
------------
Net Investment Assets .............................................. 237,953,477
Preferred Stock .................................................... 75,000,000
------------
NET ASSETS FOR COMMON STOCK ........................................ $162,953,477
============
NET ASSETS PER SHARE OF COMMON STOCK (market value $12.50) ......... $12.51
======
COMPOSITION OF NET ASSETS:
Preferred Stock Series A, $.01 par value, liquidation
preference and asset coverage per share--$100,000
and $317,271, 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
$317,271, respectively; shares authorized, issued and
outstanding--375 ................................................. 37,500,000
Common Stock, $.01 par value: shares authorized--49,999,250;
issued and outstanding--13,023,149 ............................... 130,231
Additional paid-in capital ......................................... 143,329,202
Undistributed net investment income ................................ 2,073,140
Net unrealized appreciation of investments ......................... 17,420,904
------------
NET INVESTMENT ASSETS .............................................. $237,953,477
============
</TABLE>
- ----------
See notes to financial statements.
5
<PAGE>
STATEMENT OF OPERATIONS FOR THE YEAR ENDED DECEMBER 31, 1995
INVESTMENT INCOME:
Interest ......................................................... $ 15,552,556
Expenses:
Management fee ...................................... $ 1,286,306
Stockholder account, transfer, and
registrar services ................................ 308,628
Preferred stock remarketing fee ..................... 187,500
Auditing and legal fees ............................. 68,050
Custody and related services ........................ 53,226
Stockholder reports and communications .............. 43,145
Stockholders' meeting ............................... 42,466
Directors' fees and expenses ........................ 34,278
Miscellaneous ....................................... 108,264
-----------
TOTAL EXPENSES ................................................... 2,131,863
-----------
NET INVESTMENT INCOME ............................................ 13,420,693*
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .................... 1,237,692
Net change in unrealized appreciation ............... 13,171,520
----------
NET GAIN ON INVESTMENTS .......................................... 14,409,212
-----------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS $27,829,905
===========
- ----------
* Net investment income available for Common Stock is $10,418,792, which is
net of Preferred Stock dividends.
See notes to financial statements.
6
<PAGE>
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
YEAR ENDED DECEMBER 31,
------------------------------
1995 1994
-------------- -------------
OPERATIONS:
Net investment income ........................ $ 13,420,693 $ 13,660,382
Net realized gain on investments ............. 1,237,692 345,488
Net change in unrealized appreciation ........ 13,171,520 (21,357,953)
------------ ------------
Increase (decrease) in net investment
assets from operations ..................... 27,829,905 (7,352,083)
------------ ------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series A
(per share: $4,004.38 and $2,903.58) ..... (1,501,642) (1,088,842)
Preferred Stock, Series B
(per share: $4,000.69 and $2,907.55) ..... (1,500,259) (1,090,331)
Common Stock (per share: $.84 and $.84) .... (10,926,597) (10,919,152)
------------ ------------
Total ....................................... (13,928,498) (13,098,325)
Net realized gain on investments:
Common Stock (per share: $.096 and $.027) .. (1,248,854) (350,970)
------------ ------------
Decrease in net investment assets
from distributions ......................... (15,177,352) (13,449,295)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued
for investment plan (88,591 and 94,425 shares) 1,069,268 1,110,989
Value of shares of Common Stock issued
in payment of gain distribution
(16,144 and 5,318 shares) .................. 200,250 57,488
Cost of shares purchased for investment plan
(88,200 and 78,800 shares) ................. (1,068,255) (912,503)
------------ ------------
Increase in net investment assets from capital
share transactions ......................... 201,263 255,974
------------ ------------
Increase (decrease) in net investment assets . 12,853,816 (20,545,404)
NET INVESTMENT ASSETS:
Beginning of year ............................ 225,099,661 245,645,065
------------ ------------
End of year (including undistributed net
investment income of $2,073,140
and $2,580,945) ............................ $237,953,477 $225,099,661
============ ============
- ----------
See notes to financial statements.
7
<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 year ended December 31, 1995, amounted to $33,835,610, and
$29,880,856, respectively.
At December 31, 1995, 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 $17,458,649 and $37,745, 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, 1995, 88,200 shares were purchased
in the open market at a cost of $1,068,255, which represented a weighted average
discount of 1.28% from the net asset value of those acquired shares. A total of
89,122 shares were issued to Plan participants during the period for proceeds of
$1,078,303, a discount of 1.18% 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
<PAGE>
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, $256,524 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 $16,000 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, 1995, of
$39,453 is included in other liabilities. Deferred fees and 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 1995
----------------------------------------------
MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31
-------- ------- ------------ -----------
<S> <C> <C> <C> <C>
Total investment income ................ $3,956 $3,902 $3,799 $3,896
Net Investment income for Common Stock . $2,586 $2,664 $2,525 $2,644
Per Common Share ..................... $.20 $.20 $.20 $.20
Net realized and unrealized investment
gain (loss) .......................... $7,555 $1,407 $1,503 $3,944
Per Common Share ..................... $.58 $.11 $.12 $.30
</TABLE>
<TABLE>
<CAPTION>
FOR QUARTERS ENDED IN THE YEAR 1995
----------------------------------------------
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)
</TABLE>
9
<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 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,
----------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 1995 1994 1993 1992 1991
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year ................. $11.54 $13.14 $12.45 $11.95 $11.15
------ ------ ------ ------ -------
Net investment income .............................. 1.03 1.05 1.05 1.09 1.10
Net realized and unrealized
investment gain (loss) ............................ 1.11 (1.61) 0.85 0.45 0.81
------ ------ ------ ------ ------
Increase (decrease) from investment
operations ....................................... 2.14 (0.56) 1.90 1.54 1.91
Dividends paid on Preferred Stock .................. (0.23) (0.17) (0.15) (0.18) (0.27)
Dividends paid on Common Stock ..................... (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 ...................................... 0.97 (1.60) 0.69 0.50 0.80
------ ------ ------ ------ ------
Net asset value, end of year ....................... $12.51 $11.54 $13.14 $12.45 $11.95
====== ====== ====== ====== ======
Market value, end of year .......................... $12.50 $10.50 $13.00 $12.75 $12.25
====== ====== ====== ====== ======
TOTAL INVESTMENT RETURN:
Based upon market value .................... 28.58% (13.05)% 10.55% 11.67% 17.10%
Based upon net asset value ................. 17.09% (5.46)% 14.44 11.78% 15.25%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ..................... 0.91% 0.90% 0.92% 0.90% 0.90%
Net investment income to average
net assets ....................................... 5.74% 5.84% 5.58% 6.06% 6.33%
Portfolio turnover ................................. 13.37% 10.74% 15.83% 3.90% 7.36%
Net investment assets, end of year
(000's omitted):
For Common Stock ........................... $162,953 $150,100 $170,645 $160,844 $153,501
For Preferred Stock ........................ 75,000 75,000 75,000 75,000 75,000
-------- -------- -------- -------- --------
Total net investment assets ........................ $237,953 $225,100 $245,645 $235,844 $228,501
======== ======== ======== ======== ========
</TABLE>
- ----------
See notes to financial statements.
10
<PAGE>
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, 1995, 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 each of the years in the
five-year period then ended. 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, 1995, 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, 1995, 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
February 2, 1996
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 by 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 of 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, 1995, the Fund purchased 88,200 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 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.
12
<PAGE>
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' account 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, 1995.
13
<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
Vice President, Pfizer Inc.
Director, USLIFE Corporation
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
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 & 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
15
<PAGE>
Seligman
Select
Municipal
Fund, Inc.
[LOGO]
Annual Report
December 31, 1995
Seligman Select Municipal Fund, Inc.
Managed by
[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 12/95
