SELIGMAN
===============
SELECT
===============
MUNICIPAL
FUND, INC.
[GRAPHIC OMITTED]
[LOGO]
MID-YEAR REPORT
JUNE 30, 1999
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
CESEL3B 6/99
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TO THE STOCKHOLDERS
The six-month period ended june 30, 1999, was a difficult one for
fixed-income securities and for seligman select municipal fund. During this
time, bond yields moved higher, sending bond prices lower. Although economic
data indicated a benign inflationary environment, market participants correctly
anticipated that the federal reserve board would raise rates in response to the
improved global outlook and continued us economic strength. This tightening was
a partial reversal of the fed's actions last fall, when it lowered interest
rates three times in response to the global financial crisis.
The bond market remained under pressure until june 30 when the fed
surprised markets by changing its bias from a tightening stance to neutral, in
addition to raising rates by the expected 25 basis points. This bias shift was
primarily in response to current economic data, which did not suggest any
dramatic reversal of the generally positive operating environment. The fed's
announcement pushed the yield on the 30-year treasury bond back below 6%. Since
then, however, fears of additional interest rate hikes have surfaced, and the
30-year treasury bond yield has risen back above 6%.
During the past three months, although municipal bond prices declined in
response to rising rates, they still outperformed treasuries. Part of the reason
for the outperformance was a decline in new municipal issues, as rates moved
higher. Simultaneously, investor demand increased. We expect that this
outperformance will continue because of the positive fundamentals underlying the
municipal market.
As the millennium approaches, we have become concerned that the media's
focus on the year 2000 (y2k) computer issue, and the fears that this attention
may spark, will cause some investors to take actions that are not in their best
long-term interests. In our view, the primary danger to investors is losing
sight of their long-term financial goals and altering their portfolios and asset
allocations in an attempt to respond to the confusion surrounding this issue.
In the us, governments and businesses have committed substantial resources
to this issue and, while there may be scattered inconveniences, we believe that
the us will enter the year 2000 relatively seamlessly, and that much of the rest
of the developed world is also well positioned to deal with the new millennium.
For the past several years, j. & w. Seligman & co. Incorporated (seligman),
your fund's manager, and seligman data corp. (seligman data), your fund's
stockholder service agent, have been working to ensure that stockholders do not
experience any y2k-related inconveniences. We are pleased to report that the
early start has paid off. During the spring of this year, seligman and seligman
data participated in y2k testing conducted by the securities industry
association. These tests were completed without any y2k-related problems on the
part of seligman or seligman data. Tests with key service providers were also
conducted, all of which were successfully completed in a y2k environment.
Seligman select municipal fund's 1999 annual stockholders' meeting took
place on may 20, 1999, in palm beach, florida. All proposals set forth in the
proxy you received earlier in the year were passed. For complete results of the
vote, please refer to page 14.
Thank you for your continued support of seligman select municipal fund. We
look forward to serving your investment needs for many years to come.
By order of the board of directors,
/s/ William c. Morris
- ---------------------
William c. Morris
Chairman
/s/ Thomas G. Moles
-------------------
Thomas G. Moles
President
August 6, 1999
1
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
WHAT ECONOMIC AND MARKET FACTORS AFFECTED
[PHOTO OMITTED] SELIGMAN SELECT MUNICIPAL FUND OVER THE PAST
QUARTER?
SELIGMAN MUNICIPAL TEAM: During this period, concerns about inflation
(FROM LEFT) AUDREY KUCHTYAK, caused interest rates to rise and bond prices to
THERESA BARION, DEBRA fall accordingly. While recent economic data has
McGUINNESS, (SEATED) EILEEN indicated little or no inflation, strong consumer
COMERFORD, THOMAS G. MOLES demand and tight labor markets have sparked
(PORTFOLIO MANAGER) renewed vigilance by market participants and by
the Federal Reserve Board.
At its May meeting, the Fed signaled its
concerns by adopting a tightening bias. Then, on
June 30, in a move widely anticipated by the
markets, the Fed raised the federal funds rate by
25 basis points. This decision to wage a
preemptive strike against inflation suggests that
the Fed believes that economic growth in the US
may be strong enough to pose an inflationary
threat.
Although municipal bond prices fell as a result of rising yields, they
stabilized following the Fed's tightening. In addition, municipal bond prices
were less affected by the rising rate environment than were US Treasury bonds.
This outperformance was primarily the result of an imbalance in municipal supply
and demand. As interest rates rose, supply fell as municipalities issued fewer
bonds. At the same time, higher yields increased investor demand.
WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS PERIOD?
During the past quarter, we took advantage of the attractive yields that
were available and purchased longer-term bonds to lock in higher rates. At the
same time, we sold lower-yielding, shorter-term bonds. All new purchases were
high-quality bonds because there continues to be a very narrow yield spread
between higher- and lower-quality bonds, and we believe that lower-quality bonds
are not offering enough additional compensation for the increased credit risk.
We also took advantage of municipal bond supply differentials among
individual states. While total municipal issuance decreased year-to-date, new
issue volume varied widely between states. Therefore, we sold bonds where there
was a supply shortage, and purchased bonds where supply had increased or
remained stable.
Last, to improve diversification, we purchased bonds in sectors that had
been underweighted in the portfolio, specifically the education and general
obligation sectors, and sold bonds in sectors that had been overweighted.
WHAT IS YOUR OUTLOOK?
The Federal Reserve Board took the first step toward slowing the economy to
a more sustainable pace by raising rates in June. As the year progresses, the
Fed may become convinced that inflation is contained and that its last rate hike
was sufficient to slow the economy. However, many economists believe that the
Fed will find it necessary to tighten policy once again before year end. With
the Fed vigilant, we are optimistic that inflation will not become a serious
threat to the economy. However, until the economy exhibits definitive signs of
slowing, shifting inflation expectations are likely to contribute to additional
short-term volatility in the bond markets. We anticipate that the municipal
market will continue to outperform the Treasury market for the balance of the
year, as a result of the favorable supply and demand imbalance and the positive
credit outlook for the nation's municipalities.
2
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INVESTMENT RESULTS PER COMMON SHARE
- --------------------------------------------------------------------------------
TOTAL RETURNS*
FOR PERIODS ENDED JUNE 30, 1999
<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** (8.05)% (10.93)% (6.50)% 4.93% 6.45%
Net Asset Value** (2.94)% (2.32)% 1.38% 6.84% 8.09%
</TABLE>
PRICE PER SHARE
June 30, March 31, December 31,
1999 1999 1998
----------- ----------- -----------
Market Price $10.875 $12.00 $12.5625
Net Asset Value 11.67 12.20 12.29
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1999
Capital Gain
------------------------
Dividends Paid+ Realized Unrealized
------------ ------ ----------
$0.324 $0.038 $0.605++
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at June 30, 1999, was
5.96%, which is equivalent to a taxable yield of 9.87% 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 June 30, 1999.
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3
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PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
FACE RATINGS+
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA--6.1% $10,000,000 Jefferson County Sewer Rev.
(Capital Improvement Warrants),
5.125% due 2/1/2039 .......................... Aaa/AAA $ 9,321,400
5,000,000 McIntosh Industrial Development Board,
Environmental Facilities Rev. (CIBA Specialty
Chemicals), 5.375% due 6/1/2028 .............. A2/AA- 4,832,600
ALASKA--2.4% 5,215,000 Alaska Housing Finance Corp. (Collateralized
Home Mortgage Rev.), 7.65% due 6/1/2024 ...... Aaa/AAA 5,491,291
CALIFORNIA--15.5% 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+ 9,306,300
4,000,000 San DiegoPublic Facilities Financing Authority
Sewer Rev. Series 1999-A,
5% due 5/15/2029 ............................. Aaa/AAA 3,758,120
5,700,000 San Diego Public Facilities Financing Authority
Sewer Rev. Series 1999-B,
5% due 5/15/2029 ............................. Aaa/AAA 5,355,321
10,000,000 San Francisco City and County Airports
Commission Rev. (International Airport),
6.30% due 5/1/2025* .......................... Aaa/AAA 10,688,000
6,000,000 San Joaquin Hills Transportation Corridor Agency
Rev. (Orange County Senior Lien Toll Road),
6.75% due 1/1/2032 ........................... Aaa/AAA 6,597,300
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 5,209,950
FLORIDA--2.1% 1,635,000 Florida Housing Finance Agency (Home Ownership
Rev.), 7.90% due 3/1/2022* ................... Aaa/NR 1,708,591
3,060,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022* ........ Aaa/NR 3,161,347
ILLINOIS--3.1% 7,500,000 Chicago GOs, 5.25% due 1/1/2028 ................ Aaa/AAA 7,200,450
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 5,212,350
LOUISIANA--4.8% 9,325,000 Louisiana Public Facilities Authority
Hospital Rev. (Southern Baptist Hospitals, Inc.
Project),
8% due 5/15/2012 ............................ NR/AAA 11,004,526
MASSACHUSETTS--4.4% 5,500,000 Massachusetts Bay Transportation Authority
General Transportation System Rev.,
5.625% due 3/1/2026 ....................... Aaa/AAA 5,831,595
4,175,000 Massachusetts Housing Finance Agency Rev.
(Multi-Family Residential Development),
7.65% due 2/1/2028* .......................... Aaa/AAA 4,265,180
</TABLE>
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See footnotes on page 6.
4
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JUNE 30, 1999
<TABLE>
<CAPTION>
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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 $ 1,988,400
NEVADA--3.2% 7,000,000 Clark County Industrial Development Rev. (Nevada
Power Company Project),
7.80% due 6/1/2020* .......................... Aaa/AAA 7,358,750
NEW JERSEY--4.7% 7,000,000 New Jersey Economic Development Authority
Water Facilities Rev. (American Water Co. Inc.),
5.375% due 5/1/2032* ......................... Aaa/AAA 6,909,070
2,000,000 New Jersey Educational Facilities Authority Rev.
(Princeton University), 6% due 7/1/2024 ...... Aaa/AAA 2,140,440
1,700,000 New Jersey Housing & Mortgage Finance Agency
(Home Buyer Rev.), 7.70% due 10/1/2029* ...... Aaa/AAA 1,738,675
NEW YORK--9.3% 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 10,561,000
10,000,000 New York State Thruway Authority General Rev.,
6% due 1/1/2025 .............................. Aaa/AAA 10,855,000
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 6,663,540
OHIO--3.5% 3,895,000 Cleveland Waterworks Improvement First
Mortgage Rev., 5.75% due 1/1/2021 ............ Aaa/AAA 4,190,825
105,000 Cleveland Waterworks Improvement First
Mortgage Rev., 5.75% due 1/1/2021 ............ Aaa/AAA 107,552
3,675,000 Ohio Housing Finance Agency (Single Family
Mortgage Rev.), 7.65% due 3/1/2029* .......... NR/AAA 3,747,692
PENNSYLVANIA--7.1% 2,500,000 Allegheny County Airport Rev. (Greater
Pittsburgh International Airport),
6.80% due 1/1/2010* .......................... Aaa/AAA 2,657,950
3,000,000 Lehigh County Industrial Development Authority
Pollution Control Rev. (Pennsylvania Power &
Light Company Project), 6.15% due 8/1/2029 ... Aaa/AAA 3,188,070
10,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* Aaa/AAA 10,434,600
South Carolina--2.1% 5,000,000 South Carolina Ports Authority Rev.,
5.30% due 7/1/2026* .......................... Aaa/AAA 4,772,350
TENNESSEE--3.7% 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- 8,634,960
TEXAS--7.0% 3,000,000 Houston Higher Education Finance Corporation Rev.
(Rice University Project),
5.375% due 11/15/2029 ........................ Aaa/AAA 2,957,820
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 5,342,750
</TABLE>
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SEE FOOTNOTES ON PAGE 6.
5
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PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1999
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
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 $ 7,855,950
VIRGINIA--2.1% 5,000,000 Pocahontas Parkway Association Toll Road Rev.
(Route 895 Connector), 5.50% due 8/15/2028 ... Baa3/BBB- 4,749,600
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 5,083,994
5,000,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
6.35% due 7/1/2028* .......................... Aaa/AAA 5,351,450
10,000,000 King County Sewer GOs, 6.125% due 1/1/2033 ..... Aaa/AAA 10,540,300
------------
TOTAL MUNICIPAL BONDS (Cost $218,737,910)-- 98.6%............................................... 226,775,059
VARIABLE RATE DEMAND NOTES (Cost $2,200,000)-- 1.0%............................................. 2,200,000
OTHER ASSETS LESS LIABILITIEs-- 0.4%............................................................ 993,540
------------
Net Investment Assets-- 100.0%................................................................... $229,968,599
============
</TABLE>
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+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.
6
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STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments at value:
Long-term holdings (cost $218,737,910) ................ $226,775,059
Short-term holdings (cost $2,200,000) ................. 2,200,000 $228,975,059
------------
Cash .................................................................... 244,099
Interest receivable ..................................................... 3,915,369
Expenses prepaid to stockholder service agent ........................... 16,982
Other ................................................................... 21,252
------------
TOTAL ASSETS ............................................................ 233,172,761
------------
LIABILITIES:
Accrued expenses and other .............................................. 3,204,162
------------
NET INVESTMENT ASSETS ................................................... 229,968,599
Preferred Stock ......................................................... 75,000,000
------------
NET ASSETS FOR COMMON STOCK ............................................. $154,968,599
============
NET ASSETS PER SHARE OF COMMON STOCK (Market Value $10.875) ............. $11.67
======
COMPOSITION OF NET INVESTMENT ASSETS:
Preferred Stock Series A, $.01 par value, liquidation preference and
coverage per share--$100,000 and $306,625, respectively; shares
asset 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 $306,625, respectively;
shares authorized, issued and outstanding--375 ...................... 37,500,000
Common Stock, $.01 par value: shares authorized--49,999,250; issued and
outstanding--13,278,863 .............................................. 132,789
Additional paid-in capital .............................................. 146,066,342
Undistributed net investment income ..................................... 224,810
Undistributed net realized gain ......................................... 507,509
Net unrealized appreciation of investments .............................. 8,037,149
------------
NET INVESTMENT ASSETS ................................................... $229,968,599
============
</TABLE>
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See Notes to Financial Statements.
7
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STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
INTEREST ............................................................ $ 6,770,394
EXPENSES:
Management fee ........................................ $ 644,287
Stockholder account, transfer, and registrar services . 105,163
Preferred stock remarketing fee ....................... 93,108
Auditing and legal fees ............................... 31,037
Stockholder reports and communications ................ 30,484
Directors' fees and expenses .......................... 23,882
Custody and related services .......................... 18,705
Stockholders' meeting ................................. 17,801
Miscellaneous ......................................... 15,656
-----------
TOTAL EXPENSES ...................................................... 980,123
-----------
NET INVESTMENT INCOME ............................................... 5,790,271*
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments ...................... 507,509
Net change in unrealized appreciation of investments .. (9,061,532)
-----------
NET LOSS ON INVESTMENTS ............................................. (8,554,023)
-----------
DECREASE IN NET INVESTMENT ASSETS FROM OPERATIONS ................... $(2,763,752)
===========
</TABLE>
- -----------
* Net investment income available for Common Stock is $4,584,777, which is net
of Preferred Stock dividends.
See Notes to Financial Statements.
8
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STATEMENT OF CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>
Six Months Year
Ended Ended
June 30, 1999 December 31, 1998
-------------- ------------------
<S> <C> <C>
OPERATIONS:
Net investment income ............................................. $ 5,790,271 $ 11,919,890
Net realized gain on investments .................................. 507,509 1,430,172
Net change in unrealized appreciation of investments .............. (9,061,532) 602,983
------------- -------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS FROM OPERATIONS ...... (2,763,752) 13,953,045
------------- -------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series A (per share: $1,500.50 and $3,894.95).. (562,688) (1,460,606)
Preferred Stock, Series B (per share: $1,714.15 and $3,520.69).. (642,806) (1,320,259)
Common Stock (per share: $0.324 and $0.737) .................... (4,301,478) (9,755,973)
------------- -------------
Total .......................................................... (5,506,972) (12,536,838)
Dividends in excess of net investment income:
Common Stock (per share: $0.031) ............................... -- (416,270)
Net realized gain on investments:
Common Stock (per share: $0.108) ............................... -- (1,431,625)
------------- -------------
DECREASE IN NET INVESTMENT ASSETS FROM DISTRIBUTIONS .............. (5,506,972) (14,384,733)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued for investment plan
(27,343 and 64,241 shares) ..................................... 313,226 793,243
Value of shares of Common Stock issued in payment of gain
distribution (18,595 shares) ................................... -- 227,975
Cost of shares purchased for investment plan
(27,700 and 26,400 shares) ..................................... (322,935) (325,032)
------------- -------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS FROM
CAPITAL SHARE TRANSACTIONS ..................................... (9,709) 696,186
------------- -------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS ...................... (8,280,433) 264,498
NET INVESTMENT ASSETS:
Beginning of period ............................................... 238,249,032 237,984,534
------------- -------------
END OF PERIOD (including undistributed/(distributions in excess of)
net investment income of $224,810 and $(58,489), respectively).. $ 229,968,599 $ 238,249,032
============= =============
</TABLE>
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See Notes to Financial Statements.
9
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- All 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.
b. FEDERAL TAXES -- 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. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- 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. DISTRIBUTIONS TO STOCKHOLDERS -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend date.
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 cau9sed by differences in the timing of the
recognition of certain components of income, expense, or realized 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 SECURITIES -- Purchases and sales of portfolio
securities, excluding short-term investments, for the six months ended June 30,
1999, amounted to $24,591,705 and $20,782,918, respectively.
At June 30, 1999, 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 $9,708,633 and $1,671,484, respectively.
3. DIVIDEND INVESTMENT PLAN -- 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, 1999, 27,700 shares were
purchased in the open market at a cost of $322,935, which represented a weighted
average discount of 4.18% from the net asset value of those acquired shares. A
total of 27,343 shares were issued to Plan participants during the period for
proceeds of $314,781, a weighted average discount of 4.87% from the net asset
value of those shares.
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, 1999.
4. CAPITALIZATION -- 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.
10
<PAGE>
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NOTES TO FINANCIAL STATEMENTS
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. The 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. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- 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 $79,034 for stockholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at June 30, 1999, of $62,437 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
11
<PAGE>
================================================================================
FINANCIAL STATEMENTS
The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance, on a per Common share basis, from the beginning net asset value to
the ending net asset value, so that investors 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, based on average shares
outstanding.
"Total investment return" measures the Fund's performance assuming that
investors purchased Fund shares at market value or net asset value as of the
beginning of the period, invested 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 or net asset value 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 for periods of
less than one year is not annualized.
The ratios of expenses and net investment income to average net assets and
to average net assets for Common Stock, for the 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: 6/30/99 1998 1997 1996 1995 1994
-------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $12.29 $12.33 $12.16 $12.51 $11.54 $13.14
------- -------- ------- ------- ------- -------
Net investment income ........................................... 0.44 0.90 0.96 1.02 1.03 1.05
Net realized and unrealized investment gain (loss) .............. (0.65) 0.15 0.44 (0.29) 1.11 (1.61)
------- -------- ------- ------- ------- -------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................................... (0.21) 1.05 1.40 0.73 2.14 (0.56)
Dividends paid from net investment income
on Preferred Stock ........................................... (0.09) (0.21) (0.21) (0.20) (0.23) (0.17)
Dividends in excess of net investment income paid
on Common Stock .............................................. -- (0.03) -- -- -- --
Dividends paid from net investment income
on Common Stock .............................................. (0.32) (0.74) (0.84) (0.84) (0.84) (0.84)
Distribution from net realized gain ............................. -- (0.11) (0.18) (0.04) (0.10) (0.03)
-------- ------- ------- ------- ------- -------
NET INCREASE (DECREASE) IN NET ASSET VALUE ...................... (0.62) (0.04) 0.17 (0.35) 0.97 (1.60)
-------- -------- ------- ------- ------- -------
NET ASSET VALUE, END OF PERIOD .................................. $11.67 $12.29 $12.33 $12.16 $12.51 $11.54
======== ======== ======= ======= ======= =======
MARKET VALUE, END OF PERIOD ..................................... $10.875 $12.5625 $13.9375 $12.50 $12.50 $10.50
======== ======== ========= ======= ======= =======
TOTAL INVESTMENT RETURN FOR PERIOD:
Based upon market value ......................................... (10.93)% (3.28)% 20.97% 7.49% 28.58% (13.05)%
Based upon net asset value ...................................... (2.32)% 6.98% 10.01% 4.48% 17.09% (5.46)%
RATIOS/SUPPLEMENTAL DATA:
EXPENSES TO AVERAGE NET INVESTMENT ASSETS ....................... 0.84%+ 0.88% 0.90% 0.86% 0.91% 0.90%
Expenses to average net assets for Common Stock ................. 1.23%+ 1.28% 1.32% 1.27% 1.34% 1.32%
Net investment income to average net
investment assets ............................................ 4.94%+ 5.00% 5.35% 5.70% 5.74% 5.84%
Net investment income to average net assets for
Common Stock ................................................. 7.24%+ 7.29% 7.87% 8.40% 8.45% 8.60%
Portfolio turnover .............................................. 9.04% 16.85% 27.83% 21.74% 13.37% 10.74%
NET INVESTMENT ASSETS, END OF PERIOD (000S omitted):
FOR COMMON STOCK ................................................ $154,969 $163,249 $162,985 $159,399 $162,953 $150,100
FOR PREFERRED STOCK ............................................. 75,000 75,000 75,000 75,000 75,000 75,000
---------- -------- -------- -------- -------- ---------
TOTAL NET INVESTMENT ASSETS ..................................... $229,969 $238,249 $237,985 $234,399 $237,953 $225,100
========== ======== ======== ======== ======== =========
</TABLE>
- -------------
+Annualized.
See Notes to Financial Statements.
12
<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 June
30, 1999, 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, 1998, 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, 1999, 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 referred to
above present fairly, in all material respects, the financial position of
Seligman Select Municipal Fund, Inc. as of June 30, 1999, 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
August 6, 1999
13
<PAGE>
================================================================================
PROXY RESULTS
Stockholders of Seligman Select Municipal Fund, Inc. voted on the following
proposals at the Annual Meeting of Stockholders on May 20, 1999, in Palm Beach,
Florida. The description of each proposal and number of shares voted are as
follows:
ELECTION OF DIRECTORS:
Election by Holders of Preferred Shares and Common Shares:
FOR WITHHELD
---------- ----------
John E. Merow 10,798,535 136,177
James C. Pitney 10,799,435 135,277
Election by Holders of Preferred Shares:
FOR WITHHELD
---------- ----------
Betsy S. Michel 706 --
James N. Whitson 706 --
RATIFICATION OF DELOITTE &TOUCHE LLP AS INDEPENDENT AUDITORS FOR 1999:
FOR AGAINST ABSTAIN
--------- --------- ---------
10,779,399 39,643 115,670
================================================================================
EXECUTIVE OFFICERS
WILLIAM C. MORRIS AUDREY G. KUCHTYAK THOMAS G. ROSE
CHAIRMAN VICE PRESIDENT TREASURER
THOMAS G. MOLES LAWRENCE P. VOGEL FRANK J. NASTA
PRESIDENT VICE PRESIDENT SECRETARY
EILEEN A. COMERFORD
VICE PRESIDENT
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
<S> <C> <C>
FOR MORE INFORMATION
MANAGER INDEPENDENT AUDITORS IMPORTANT TELEPHONE NUMBERS
J. & W. Seligman & Co. Incorporated Deloitte & Touche LLP (800) 874-1092 Stockholder Services
100 Park Avenue
New York, NY 10017 STOCKHOLDER SERVICE AGENT (212) 682-7600 Outside the United States
Seligman Data Corp. (800) 622-4597 24-Hour Automated
GENERAL COUNSEL 100 Park Avenue Telephone Access Service
Sullivan & Cromwell New York, NY 10017
</TABLE>
14
<PAGE>
================================================================================
BOARD OF DIRECTORS
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
Chairman, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2, 4
Retired Chairman and Senior Partner,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
TRUSTEE, The New York and Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER,
Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICIMutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. & W. Seligman & Co. Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
15
