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TO THE STOCKHOLDERS
The three months ended September 30, 1999, were a difficult period for
fixed-income securities, in general, and for municipal bonds, in particular.
During calendar year 1999, taxable interest rates rose steadily, causing
taxable bond prices to fall. Municipal bonds, however, remained relatively
stable, due primarily to a lack of new-issue supply during the first six months
of the year. During the past fiscal quarter, however, municipal bonds then began
to react to the broader environment -- of robust growth, a tighter Federal
Reserve Board policy, and inflation worries -- which was generally unfavorable
to fixed-income securities. By the end of the quarter, municipal bond yields had
risen to their highest levels of the year.
Looking ahead, we believe that the US economy will slow, as was intended by
the Fed's recent restrictive actions, and that inflation fears will thus subside
and reduce bond market volatility. We anticipate that the municipal market will
outperform the Treasury market for the balance of the Fund's fiscal year, as a
result of the positive and continually improving municipal market fundamentals,
the most significant of which is the expected slowdown in municipal issuance
which should continue into the new year.
J. & W. Seligman & Co. Incorporated, your Fund's manager, and Seligman Data
Corp., your Corporation's stockholder service agent, have completed preparations
for potential computer problems related to the Year 2000 (Y2K). As of June 30,
1999, all internal mission-critical systems, software, and interfaces had been
tested for Y2K compliance with successful results. This is an issue to which we
have devoted considerable time and resources for the past several years. We
believe that the Corporation's stockholders will not be inconvenienced or
experience disruptions as a result of Y2K-related issues at Seligman.
Thank you for your continued support of Seligman Select Municipal Fund. We
look forward to serving your investment needs for many years to come. A
discussion with your Portfolio Manager, as well as the Fund's portfolio of
investments and performance history, follows this letter.
By order of the Board of Directors,
/s/ William C. Morris
- ---------------------
William C. Morris
Chairman
/s/ Thomas G. Moles
-------------------
Thomas G. Moles
President
November 5, 1999
1
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
[PHOTO OMITTED]
SELIGMAN MUNICIPALS TEAM: (STANDING FROM LEFT) AUDREY KUCHTYAK, THERESA BARION,
DEBRA MCGUINNESS, (SEATED) EILEEN COMERFORD, THOMAS G. MOLES (PORTFOLIO MANAGER)
WHAT ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN SELECT MUNICIPAL FUND OVER
THE PAST THREE MONTHS?
For most of calendar year 1999, the bond markets were pulled down by tighter
monetary policy, uncertainty regarding the future direction of interest rates,
and inflation fears. Up until this past fiscal quarter, however, municipal bonds
remained relatively stable and outperformed US Treasury bonds due to a lack of
new municipal issues on the market.
During the past three months, however, this trend began to reverse as mutual
fund redemptions intensified, causing institutional demand for municipal bonds
to decline. By the end of the quarter, long-term municipal bond yields had moved
to their highest levels of the year. In contrast, the yield on the 30-year
Treasury bond spiked sharply in mid-August, but abruptly retreated to end the
quarter almost unchanged from the start of the quarter. The rising interest rate
environment in the municipal bond market caused Seligman Select Municipal Fund's
net asset value to decline during the period.
WHAT WAS YOUR INVESTMENT STRATEGY?
Over the past three months, long-term municipal yields rose to levels not
seen in several years. This pre-sented an opportunity to intensify our ongoing
effort to maintain Seligman Select Municipal Fund's monthly dividend level. Over
the past few years of generally falling rates, municipal bond funds, including
Seligman Select Municipal Fund, have had their investment income negatively
impacted by the loss of older, higher-coupon bonds through bond calls and
redemptions. In an effort to offset the effects of these calls and redemptions,
we took advantage of higher current interest rates by purchasing
higher-yielding, longer-term bonds.
As a result of this strategy, however, Seligman Select Municipal Fund's net
asset value declined more than it would have had we purchased shorter-term,
lower-yielding bonds. In general, the longer the maturity of a bond, the more
sensitive it is to changes in interest rates. During periods of declining
interest rates, longer-term bonds outperform shorter-term bonds. However, during
periods of rising interest rates, such as we have been experiencing recently,
longer-term bonds decline more in price than shorter-term bonds.
WHAT IS YOUR OUTLOOK?
The long-awaited economic slowdown has yet to materialize, increasing the
risk that the rate of inflation will accelerate. In response, bond yields have
been rising steadily year to date. For the remainder of calendar year 1999, the
bond markets will likely experience continued volatility until solid signs that
the economy is moderating emerge. Many market participants expect the Fed to
raise rates once more before year-end. This, together with higher market rates,
may ease inflationary pressures and spark a bond-market rally.
As we head toward the new millennium, we believe that there is much to be
optimistic about. In the year 2000, the US economy will likely enter its tenth
year of expansion, an extraordinary achievement. The financial well being of the
nation's states, cities, and municipalities continues to improve, with many
reporting record budget surpluses. The jobless rate remains below 5% nationally,
and consumer confidence remains high. Finally, as one of the few remaining
possible ways to shelter income, municipal bond funds currently offer attractive
yields compared to the after-tax yields of many taxable bond investments.
2
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INVESTMENT RESULTS PER COMMON SHARE
- --------------------------------------------------------------------------------
TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 1999
Average Annual
----------------------------
Since
Three Nine One Five Inception
Months Months Year Years 2/15/90
------ ------ ---- ----- -------
Market Price** (8.91)% (18.87)% (15.67)% 4.14% 5.26%
Net Asset Value** (2.31)% (4.58)% (4.31)% 6.18% 7.61%
PRICE PER SHARE
September 30, June 30, March 31, December 31,
1999 1999 1999 1998
----------- ----------- ----------- -----------
Market Price $ 9.75 $10.875 $12.00 $12.5625
Net Asset Value 11.22 11.67 12.20 12.29
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
Capital Gain
--------------------
Dividends Paid+ Realized Unrealized
--------------- -------- ----------
$0.486 $0.055 $0.126++
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at September 30,
1999, was 6.65%, which is equivalent to a taxable yield of 11.00% based on the
maximum federal tax rate of 39.6%.
------------------------------------------------------------------
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.
* Returns for periods of less than one year are not annualized.
** These rates of return reflect changes in the market price or net asset
value, as applicable, and assume that all distributions within the period
are invested in additional shares.
+ Preferred Stockholders were paid dividends at annual rates ranging from
2.995% to 3.75%. Earnings on the Fund's assets in excess of the Preferred
dividend requirements constituted dividend income for Common Stockholders.
++ Represents the per share amount of unrealized appreciation of portfolio
securities as of September 30, 1999.
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3
<PAGE>
PORTFOLIO OF INVESTMENTS (unaudited)
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------
FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA--5.9% $10,000,000 Jefferson County Sewer Rev.
(Capital Improvement Warrants),
5.125% due 2/1/2039 .............................. Aaa/AAA $ 8,684,700
5,000,000 McIntosh Industrial Development Board,
Environmental Facilities Rev. (CIBASpecialty
Chemicals), 5.375% due 6/1/2028 .................. A2/AA- 4,580,750
ALASKA--2.4% 5,215,000 Alaska Housing Finance Corp. (Collateralized
Home Mortgage Rev.), 7.65% due 6/1/2024 ........... Aaa/AAA 5,442,948
CALIFORNIA--17.2% 9,130,000 California Pollution Control Financing Authority
Sewage and Solid Waste Disposal Facilities
Rev. (Anheuser-Busch Project),
5.75% due 12/1/2030* ............................. A1/A+ 9,037,696
4,100,000 Foothill/Eastern Transportation
Corridor Agency Toll Road Rev.,
5.75% due 1/15/2040 .............................. Baa3/BBB- 3,896,968
4,000,000 San DiegoPublic Facilities Financing Authority
Sewer Rev. Series 1999-A,
5% due 5/15/2029 ................................. Aaa/AAA 3,559,720
5,700,000 San Diego Public Facilities Financing Authority
Sewer Rev. Series 1999-B,
5% due 5/15/2029 ................................. Aaa/AAA 5,072,601
10,000,000 San Francisco City and County Airports
Commission Rev. (International Airport),
6.30% due 5/1/2025* .............................. Aaa/AAA 10,428,500
6,000,000 San Joaquin Hills Transportation Corridor Agency
Rev. (Orange County Senior Lien Toll Road),
6.75% due 1/1/2032o .............................. Aaa/AAA 6,588,120
DELAWARE--2.3% 5,000,000 Delaware Economic Development Authority
Exempt Facilities Rev. (Delmarva Power and
Light Co. Project), 7.60% due 3/1/2020* .......... Aaa/AAA 5,164,400
FLORIDA--1.9% 1,405,000 Florida Housing Finance Agency (Home Ownership
Rev.), 7.90% due 3/1/2022* ....................... Aaa/NR 1,455,931
2,680,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022* ............ Aaa/NR 2,762,329
ILLINOIS--3.0% 7,500,000 Chicago GOs, 5.25% due 1/1/2028 .................... Aaa/AAA 6,766,425
INDIANA--2.3% 5,000,000 Indiana Employment Development Commission
Environmental Rev. (Public Service Company of
Indiana Inc.), 7.50% due 3/15/2015* .............. Aaa/AAA 5,167,800
LOUISIANA--4.7% 8,940,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals, Inc. Project), 8%
due 5/15/2012+ ................................... NR/AAA 10,464,449
MASSACHUSETTS--2.6% 5,500,000 Massachusetts Bay Transportation Authority General
Transportation System Rev., 5.625% due 3/1/2026o.. Aaa/AAA 5,800,960
</TABLE>
- ------------------------
See footnotes on page 6.
4
<PAGE>
<TABLE>
<CAPTION>
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SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------------------
FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MICHIGAN--0.9% $ 2,000,000 Kalamazoo Hospital Finance Authority Rev.
(Bronson Methodist Hospital),
5.50% due 5/15/2028 .............................. Aaa/NR $ 1,892,560
NEVADA--3.3% 7,000,000 Clark County Industrial Development Rev. (Nevada
Power Company Project), 7.80% due 6/1/2020* ...... Aaa/AAA 7,290,220
NEW JERSEY--4.6% 7,000,000 New Jersey Economic Development Authority
Water Facilities Rev. (American Water Co. Inc.),
5.375% due 5/1/2032* ............................. Aaa/AAA 6,615,070
2,000,000 New Jersey Educational Facilities Authority Rev.
(Princeton University), 6% due 7/1/2024o ......... Aaa/AAA 2,129,560
1,435,000 New Jersey Housing & Mortgage Finance Agency
(Home Buyer Rev.), 7.70% due 10/1/2029*o ......... Aaa/AAA 1,464,762
NEW YORk--9.4% 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 10,246,800
10,000,000 New York State Thruway Authority General Rev.,
6% due 1/1/20250 ................................. Aaa/AAA 10,798,500
NEW YORK AND 6,500,000 Port Authority of New York and New Jersey
NEW JERSEY--2.9% (JFK International Air Terminal LLC Project
Rev.), 5.75% due 12/1/2022* ...................... Aaa/AAA 6,544,200
OHIO--1.4% 2,895,000 Cleveland Waterworks Improvement First
Mortgage Rev., 5.75% due 1/1/2021o ............... Aaa/AAA 3,097,853
105,000 Cleveland Waterworks Improvement First
Mortgage Rev., 5.75% due 1/1/2021 ................ Aaa/AAA 105,262
PENNSYLVANIA--7.1% 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ...... Aaa/AAA 2,644,725
3,000,000 Lehigh County Industrial Development Authority
Pollution Control Rev. (Pennsylvania Power &
Light Company Project), 6.15% due 8/1/2029 ....... Aaa/AAA 3,055,650
10,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* .... Aaa/AAA 10,066,000
SOUTH CAROLINA--2.0% 5,000,000 South Carolina Ports Authority Rev.,
5.30% due 7/1/2026* .............................. Aaa/AAA 4,538,600
TENNESSEE--3.8% 8,000,000 Humphreys County Industrial Development Board
Solid Waste Disposal Rev. (E.I. duPont de
Nemours & Co. Project), 6.70% due 5/1/2024* ...... Aa3/AA- 8,528,880
TEXAS--6.9% 3,000,000 Houston Higher Education Finance Corporation Rev.
(Rice University Project), 5.375% due 11/15/2029.. Aaa/AAA 2,787,090
5,000,000 Lower Neches Valley Authority Industrial
Development Corp. Sewer Facilities Rev. (Mobil
Oil Refining Corp. Project), 6.40% due 3/1/2030*.. Aa2/AA 5,151,200
</TABLE>
- ---------------------
See footnotes on page 6.
5
<PAGE>
<TABLE>
<CAPTION>
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PORTFOLIO OF INVESTMENTS (unaudited) (continued) SEPTEMBER 30, 1999
- ---------------------------------------------------------------------------------------------------------------
FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
TEXAS (continued) $ 7,500,000 Matagorda County Navigation District No. 1
Pollution Control Rev. (Central Power and Light
Co. Project), 6.125% due 5/1/2030* ............... Aaa/AAA $ 7,581,750
VIRGINIA--2.0% 5,000,000 Pocahontas Parkway Association Toll Road Rev.
(Route 895 Connector), 5.50% due 8/15/2028 ....... Baa3/BBB- 4,488,850
WASHINGTON--9.1% 4,795,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
6.25% due 7/1/2017* .............................. Aaa/AAA 4,953,475
5,000,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
6.35% due 7/1/2028* .............................. Aaa/AAA 5,205,850
10,000,000 King County Sewer GOs, 6.125% due 1/1/2033 ......... Aaa/AAA 10,313,600
------------
TOTAL MUNICIPAL BONDS (Cost $212,697,347)--95.7% .............................................. 214,374,754
VARIABLE RATE DEMAND NOTES (Cost $5,300,000)--2.4% ............................................ 5,300,000
OTHER ASSETS LESS LIABILITIES--1.9% ........................................................... 4,355,120
------------
NET INVESTMENT ASSETS-- 100.0% ................................................................ $224,029,874
============
</TABLE>
- -------------------
* Interest income earned from this security is subject to the federal
alternative minimum tax.
+ Escrowed-to-maturity security.
o Pre-refunded security.
Note: Investments in municipal securities and other short-term holdings maturing
in more than 60 days are valued based upon quotations provided by an independent
pricing service or, in their absence, at fair value determined in accordance
with procedures approved by the Board of Directors. Short-term holdings maturing
in 60 days or less are generally valued at amortized cost.
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
MANAGER IMPORTANT TELEPHONE NUMBERS
J. & W. Seligman & Co. Incorporated (800) 874-1092 Stockholder Services
100 Park Avenue (212) 682-7600 Outside the United
New York, NY 10017 States
(800) 622-4597 24-Hour Automated
Telephone Access
STOCKHOLDER SERVICE AGENT Service
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
6
<PAGE>
SELIGMAN
===============
SELECT
===============
MUNICIPAL
FUND, INC.
[PHOTO OMITTED]
Seligman Select Municipal Fund, Inc.
MANAGED BY
[LOGO OMITTED] [LOGO OMITTED]
J. & W. SELIGMAN & CO. THIRD QUARTER REPORT
INCORPORATED SEPTEMBER 30, 1999
Investment Managers and Advisors
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
PHOTO: COURTESY MICHIGAN TRAVEL BUREAU
CESEL3c 9/99
