- --------------------------------------------------------------------------------
To the Stockholders
We are pleased to update you on Seligman Quality Municipal Fund with this
Annual Report.
INVESTMENT RESULTS
During the three months ended October 31, 1995, your Fund paid Common
Stockholders federally tax-free monthly dividends of $0.0782 per share on August
23, September 25, and October 25, bringing total dividends for the three months
to $0.2346 per share and for the 12 months to $0.9384 per share. The annualized
distribution rate based on current market price was 6.89% at October 31, which
is equivalent to a taxable yield of 11.41% based on the maximum federal tax rate
of 39.6%.
At October 31, your Fund's net asset value was $15.31 per share, compared
to $13.76 a year ago and your Fund's market price was $13.625 per share,
compared to $11.50 a year ago.
Total return based on net asset value for the 12-month period was 20.09%,
and based on market price was 27.87%. (Total return reflects change in price,
net asset or market value, as applicable, and assumes that any distributions
paid within the period are reinvested in additional shares.)
ECONOMIC COMMENT
Encouraged by second quarter economic reports that suggested the U. S.
economy had begun to moderate, the Federal Reserve Board voted on July 6, 1995,
to lower the federal funds rate. Initially, the bond market reacted positively
to this news. However, it wasn't long before the next round of economic reports
proved surprisingly robust, prompting speculation that the economy was not as
weak as believed. Consequently, long-term yields reversed their decline and
spiked sharply. By late August, however, signs of economic strength abated and
the bond market resumed its rally. For the year ended October 31, long-term
municipal yields declined by almost a full percentage point.
Despite the positive performance of the municipal bond market, long-term
municipals have been underperforming the U.S. Treasury market since the second
quarter of 1995. The principal reason has been concern about tax reform
legislation. Investors have been demanding higher yields on municipal securities
as compensation for the uncertainty. As a result, municipal bonds are more
attractive, compared with U.S. Treasuries, than they have been all year.
CHANGE IN DIVIDEND POLICY
On November 16, the Board of Directors of your Fund approved the
continuance of the monthly dividend payment to Common Stockholders of $0.0782
per share. The Board voted that, when required, a small portion of the monthly
dividend may constitute a RETURN OF CAPITAL that, under tax laws, would be
taxable as ordinary income.
The narrowing of the spread between long-term and short-term interest rates
is the primary reason for the need to include a small RETURN OF CAPITAL to
maintain the monthly dividend to Common Stockholders. Seligman Quality Municipal
Fund invests the capital behind each share of the Common and Preferred Stocks
primarily in high-quality, long-term municipal securities. However, the
Preferred Stock's dividend rate is directly related to the movement of
short-term interest rates and the earnings from the investment of the capital
behind each share of Preferred Stock in excess of the Preferred Stock dividend
requirements constitute additional dividend income for the Common Stock.
Short-term interest rates have significantly risen in the past 18 months while
long-term interest rates have generally declined; accordingly, there is less
additional investment income available to pay the monthly dividend to Common
Stockholders.
Additionally, to a lesser extent, the proceeds from called bonds
and coupon interest in the portfolio are being reinvested in lower-yielding
municipal securities because long-term interest rates have trended lower for the
past year. This has decreased the overall earnings of the portfolio.
1
<PAGE>
- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS (continued)
Your Fund's Board of Directors made the decision to maintain the monthly
dividend to Common Stockholders with a small RETURN OF CAPITAL, rather than
decrease the dividend, because it believed that this will have less of an impact
on your Fund's market price discount to net asset value.
Based on current market conditions, your Fund's Manager estimates that
$0.07 per share of the monthly dividend would remain tax-exempt, while the
balance of $0.0082 per share would be a RETURN OF CAPITAL. The exact amount of
the return of capital that will be taxable as ordinary income will not be
determinable until after the end of the Fund's 1996 fiscal year.
Nevertheless, Seligman Quality Municipal Fund continues to offer
competitive yields. The Fund remains invested in high-quality, long-term
municipal bonds. Long-term municipals offer significantly higher yields than
short-term municipals. New purchases have been concentrated in current coupon
bonds, which allow the Fund to maintain its high yield but which still have the
potential to appreciate in price as interest rates decline.
By order of the Board of Directors,
/s/ William C. Morris
William C. Morris
Chairman
/s/ Thomas G. Moles
Thomas G. Moles
President
December 1, 1995
PROXY RESULTS
Seligman Quality Municipal Fund Stockholders voted on the following
proposals at the Annual Meeting of Stockholders on May 18, 1995, in Milwaukee,
WI. The description of each proposal and number of shares voted are as follows:
Election of Directors:
FOR AGAINST
-------- -------
Fred E. Brown 3,842,561 66,522
John R. Galvin 3,850,033 59,049
Alice S. Ilchman 3,852,033 57,049
Frank A. McPherson 3,850,033 59,049
Ronald T. Schroeder 3,852,033 57,049
Ratification of the selection of Deloitte & Touche LLP as independent auditors:
FOR AGAINST ABSTAIN
--------- --------- ---------
3,812,899 24,549 71,634
STOCKHOLDER SERVICES
One of the most important services Seligman Data Corp., your Fund's
stockholder service agent, provides the Seligman Group of Funds is stockholder
services. Trained professionals respond quickly and thoroughly to all
stockholder inquiries and requests about investments in the Fund, whether by
telephone or written correspondence. Each representative is selected based on
his or her sincere interest in providing meaningful and prompt responses to a
variety of requests.
FOR INFORMATION AND ASSISTANCE
For any inquiries or concerns you may have about your Fund or your
investment in its shares, please call Seligman Data Corp.'s Stockholder Services
Department toll-free at 1-800-874-1092 Monday through Friday 8:30 am to 6:00 pm
EST. You may write Stockholder Services at Seligman Data Corp., 100 Park Avenue,
New York, NY 10017.
2
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS October 31, 1995
PERCENT OF NET
INVESTMENT FACE RATINGS
STATE ASSETS AMOUNT MUNICIPAL BONDS MOODY'S/S&P+ MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
ALASKA 3.5 $1,425,000 Alaska Housing Finance Corporation (Collateralized
Mortgage Obligation), 7.05% due 6/1/2025 Aaa/AAA $ 1,488,199
2,175,000 Alaska Housing Finance Corporation (Collateralized
Veterans' Mortgage Program), 6 1/2% due 6/1/2034 Aaa/AAA 2,200,708
CALIFORNIA 7.7 2,750,000 San Joaquin Hills Transportation Corridor Agency Rev.
(Senior Lien Toll Road), 6 3/4% due 1/1/2032 NR/NR 2,807,998
5,000,000 University of California Regents Rev. (Multiple
Purpose Project), 6 3/8% due 9/1/2024 Aaa/AAA ` 5,238,250
FLORIDA 3.3 3,000,000 Miami Health Facilities Authority Rev. (Mercy
Hospital Project), 6 3/4% due 8/1/2020 Aaa/AAA 3,404,460
GEORGIA 2.9 3,000,000 Atlanta Airport Facilities Rev., 6 1/4% due 1/1/2021* Aaa/AAA 3,069,120
HAWAII 1.8 1,750,000 Hawaii State Airports System Rev., 7% due 7/1/2020* Aaa/AAA 1,891,208
ILLINOIS 6.4 3,000,000 Cook County G.O.'s, 6 3/4% due 11/1/2018 Aaa/AAA 3,405,930
3,000,000 Regional Transportation Authority G.O.'s,
6.70% due 11/1/2011 Aaa/AAA 3,250,860
KANSAS 3.2 3,000,000 Burlington Pollution Control Rev. (Kansas Gas and
Electric Company Project), 7% due 6/1/2031 Aaa/AAA 3,333,000
LOUISIANA 3.1 1,000,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals Inc. Project),
8% due 5/15/2012 NR/AAA 1,191,350
2,000,000 Louisiana Public Facilities Authority Hospital Rev.
(Our Lady of Lourdes Regional Medical Center
Project), 6.45% due 2/1/2022 Aaa/AAA 2,083,120
MASSACHUSETTS 7.1 4,000,000 Massachusetts Health & Educational Facilities
Authority Rev. (New England Medical Center),
6 5/8% due 7/1/2025 Aaa/AAA 4,286,600
3,000,000 Massachusetts Housing Finance Agency Rev.
(Residential Development), 6 7/8% due 11/15/2021 Aaa/AAA 3,134,610
MONTANA 5.6 2,220,000 Forsyth Pollution Control Rev. (Puget Sound
Power & Light Co.), 7 1/4% due 8/1/2021* Aaa/AAA 2,510,864
2,155,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6 7/8% due 6/1/2020 Aaa/AAA 2,369,035
845,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6 7/8% due 6/1/2020 Aaa/AAA 949,957
NEW HAMPSHIRE 4.5 5,000,000 New Hampshire Higher Educational & Health
Facilities Authority Rev. (Dartmouth College),
5 3/8% due 6/1/2023 Aaa/AA+ 4,775,150
NEW YORK 11.6 5,000,000 Metropolitan Transportation Authority Rev.
(Commuter Facilities), 61/4% due 7/1/2017 Aaa/AAA 5,185,550
3,500,000 New York State Thruway Authority Rev.,
6% due 1/1/2025 Aaa/AAA 3,559,500
3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued) October 31, 1995
PERCENT OF NET
INVESTMENT FACE RATINGS
STATE ASSETS AMOUNT MUNICIPAL BONDS MOODY'S/S&P+ MARKET VALUE
- ---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NEW YORK (cont'd.) $3,000,000 New York State Local Government Assistance
Corporation, 7% due 4/1/2021 Aaa/AAA $ 3,422,670
PENNSYLVANIA 9.4 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* Aaa/AAA 2,736,600
2,000,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6 5/8% due 1/1/2022* Aaa/AAA 2,094,000
5,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* Aaa/AAA 5,061,850
SOUTH CAROLINA 8.9 4,000,000 South Carolina Public Service Authority (Santee
Cooper), 6 1/2% due 7/1/2024 Aaa/AAA 4,503,160
4,500,000 South Carolina State Ports Authority Rev., 6 3/4% due
7/1/2021* Aaa/AAA 4,809,150
TEXAS 4.9 3,000,000 Houston Water and Sewer System Rev., 6 1/2% due
12/1/2021 Aaa/AAA 3,189,450
1,915,000 Texas State Veterans' Housing Assistance G.O.'s,
6.80% due 12/1/2023* Aa/AA 1,972,565
VIRGINIA 3.6 3,500,000 Virginia Housing Development Authority (Multi-
family Housing), 7% due 11/1/2012 Aa/AA+ 3,723,230
WASHINGTON 5.1 860,000 Douglas County Public Utilities District #1
Hydroelectric Rev., 7.80% due 9/1/2018* A/A+ 958,814
1,000,000 Municipality of Metropolitan Seattle Sewer Rev.,
6.60% due 1/1/2032 Aaa/AAA 1,057,060
3,000,000 Washington Public Power Supply System Rev.
(Nuclear Project #1), 7% due 7/1/2011 Aaa/AAA 3,320,850
WISCONSIN 4.1 4,000,000 Wisconsin Housing & Economic Development
Authority Housing Rev., 6.85% due 11/1/2012 Aaa/AAA 4,245,680
------------
TOTAL MUNICIPAL BONDS (COST $94,080,118) -- 96.7% ....................................................... 101,230,548
SHORT-TERM HOLDINGS (COST $1,100,000) -- 1.1% ........................................................... 1,100,000
OTHER ASSETS LESS LIABILITIES -- 2.2% ................................................................... 2,353,023
------------
NET INVESTMENT ASSETS-- 100.0% .......................................................................... $104,683,571
============
- ----------------
* 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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES October 31, 1995
ASSETS:
<S> <C> <C>
Investments at value:
Long-term holdings (cost $94,080,118) ............................. $101,230,548
Short-term holdings (cost $1,100,000) ............................. 1,100,000 $102,330,548
Cash ...................................................................... ------------ 181,871
Interest receivable ....................................................... 2,250,668
Expenses prepaid to stockholder service agent ............................. 21,914
Deferred organizational expenses .......................................... 19,339
Other ..................................................................... 11,128
------------
TOTAL ASSETS .............................................................. 104,815,468
------------
LIABILITIES:
Accrued expenses, taxes, and other ........................................ 131,897
------------
NET INVESTMENT ASSETS ..................................................... 104,683,571
Preferred Stock ........................................................... 33,600,000
------------
NET ASSETS FOR COMMON STOCK ............................................... $ 71,083,571
------------
Net Assets per share of Common Stock (Market value $13.625) ............... $15.31
======
COMPOSITION OF NET INVESTMENT ASSETS:
Preferred Stock Series TH, $.01 par value, liquidation preference and asset
coverage per share--$50,000 and $155,779, respectively; Shares
authorized and outstanding--1,000 and 672, respectively ................ $ 33,600,000
Common Stock, $.01 par value: Shares authorized--49,999,000; issued
and outstanding--4,643,368 ........................................ 46,434
Additional paid-in capital ................................................ 63,270,613
Undistributed net investment income ....................................... 145,195
Undistributed net realized gain ........................................... 470,899
Unrealized appreciation of investments .................................... 7,150,430
------------
NET INVESTMENT ASSETS ..................................................... $104,683,571
============
- ------------------
See notes to financial statements.
</TABLE>
5
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the year ended October 31, 1995
INVESTMENT INCOME:
Interest ........................................... $6,345,913
EXPENSES:
Management fee ..................................... $ 657,915
Stockholder account and registrar services ......... 137,272
Auction agent fee .................................. 83,852
Auditing and legal fees ............................ 75,231
Custody and related services ....................... 33,385
Stockholders' meeting .............................. 32,710
Stockholder reports and communications ............. 32,468
Amortization of organizational expenses ............ 17,849
Directors' fees and expenses ....................... 11,559
Miscellaneous ...................................... 14,599
------
TOTAL EXPENSES ..................................... 1,096,840
---------
NET INVESTMENT INCOME .............................. 5,249,073*
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ................... 477,370
Net change in unrealized depreciation of investments 7,461,108
---------
NET GAIN ON INVESTMENTS ............................ 7,938,478
----------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS .. $13,187,551
===========
* Net investment income available for Common Stock is $3,897,338, which is net
of Preferred Stock dividends. See notes to financial statements.
6
<PAGE>
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
Year Ended October 31,
-----------------------------
1995 1994
------------ -------------
OPERATIONS:
<S> <C> <C>
Net investment income ...................................................... $ 5,249,073 $ 5,268,577
Net realized gain on investments ........................................... 477,370 307,991
Net change in unrealized appreciation/depreciation of investments .......... 7,461,108 (11,673,722)
------------- -------------
Increase (decrease) in net investment assets from operations ............... 13,187,551 (6,097,154)
------------- -------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series TH (per share: $2,011.51 and $1,396.83) .... (1,351,735) (938,670)
Common Stock (per share: $.9384 and $.9384) ........................ (4,352,107) (4,350,638)
------------- -------------
Total .............................................................. (5,703,842) (5,289,308)
------------- -------------
Net realized gain on investments:
Common Stock (per share: $.067 and $.273) .......................... (310,666) (1,265,747)
------------- -------------
Decrease in net investment assets from distributions ....................... (6,014,508) (6,555,055)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued for investment plan
(83,797 and 88,277 shares) ......................................... 1,105,465 1,229,855
Value of shares of Common Stock issued in payment of gain
distribution (3,774 and 14,068 shares) ............................. 46,458 213,607
Cost of shares purchased for investment plan
(87,900 and 102,300 shares) ........................................ (1,147,174) (1,473,275)
------------- -------------
Increase (decrease) in net investment assets from capital share transactions 4,749 (29,813)
------------- -------------
Increase (decrease) in net investment assets ............................... 7,177,792 (12,682,022)
NET INVESTMENT ASSETS:
Beginning of year .......................................................... 97,505,779 110,187,801
------------- -------------
End of year (including undistributed net investment income
of $145,195 and $599,964) .......................................... $ 104,683,571 $ 97,505,779
============= =============
</TABLE>
- ------------------
See notes to financial statements.
- --------------------------------------------------------------------------------
7
NOTES TO FINANCIAL STATEMENTS
1. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. All tax-exempt securities and other short-term holdings maturing in more than
60 days are valued based upon quotations provided by an independent pricing
service or, in their absence, at fair value determined in accordance with
procedures approved by the Board of Directors. Short-term holdings maturing
in 60 days or less are generally valued at amortized cost.
b. The Fund has elected to be taxed as a regulated investment company and
intends to distribute substantially all taxable net income and net gain
realized.
c. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal income tax
purposes. Interest income is recorded on the accrual basis. The Fund
amortizes original issue discounts and premiums paid on purchases of
portfolio securities. Discounts other than original issue discounts are not
amortized.
d. Deferred organizational expenses incurred by the Fund in connection with its
initial offering are being amortized on a straight-line basis over a
five-year period beginning with the commencement of operations of the Fund.
e. Dividends and distributions paid by the Fund are recorded on the ex-dividend
date.
f. The treatment for financial statement purposes of distributions made during
the year from net investment income or net realized gain 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 October 31,
1995, amounted to $8,392,355 and $9,000,060, respectively.
At October 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 $7,163,830 and $13,400, 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 October 31, 1995, 87,900 shares were purchased
in the open market at a cost of $1,147,174, which represented a weighted average
discount of 10.38% from the net asset value of those acquired shares. A total of
87,571 shares were issued to Plan participants during this period for proceeds
of $1,151,923, a discount of 9.39% 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 1,000 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 $50,000 per share plus any accumulated but
unpaid dividends. The Preferred Stock is also subject to mandatory redemption at
$50,000 per share plus any accumulated but unpaid dividends if certain
requirements relating to the composition of the assets and liabilities of the
8
<PAGE>
- --------------------------------------------------------------------------------
7
NOTES TO FINANCIAL STATEMENTS (continued)
Fund as set forth in its Charter are not satisfied. Liquidation preference of
the Preferred Stock is $50,000 per share plus accumulated and unpaid dividends.
Dividends on Preferred Shares are cumulative at a rate established at the
initial public offering and are typically reset every 7 days based on the rate
per annum or such other period as determined by the Fund that results from an
auction.
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 0.65% per annum of the Fund's average daily net assets.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost, $99,543 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
de-ferred balances. The annual cost of such fees and interest is included in
directors' fees and expenses, and the accumulated balance thereof at October 31,
1995, of $11,688 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
-----------------------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Total investment income .................... $1,609 $1,563 $1,590 $1,584
Income for Common Stock .................... $1,018 $940 $961 $978
per common share ................... $ .22 $.20 $.21 $.21
Net realized and unrealized investment
gain ..................................... $2,309 $2,339 $1,515 $1,775
Per Common Share .................... $.50 $.51 $.33 $.38
</TABLE>
<TABLE>
<CAPTION>
FOR QUARTERS ENDED IN THE YEAR 1994
-----------------------------------------------------
JANUARY 31 APRIL 30 JULY 31 OCTOBER 31
---------- -------- ------- ----------
<S> <C> <C> <C> <C>
Total investment income .................... $1,637 $1,596 $1,588 $1,598
Income for Common Stock .................... $1,131 $1,107 $1,052 $1,040
Per Common Share .................... $.24 $.24 $.23 $.22
Net realized and unrealized investment
gain (loss) .............................. $700 $(7,821) $766 $(5,011)
per Common Share ................... $.15 $(1.68) $.16 $(1.08)
</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 total returns for the period of less than one
year are not annualized.
The ratios of expenses to average net assets and net investment income to
average net assets for all periods presented do not reflect the effect of
dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 11/29/91*
-------------------------- TO
1995 1994 1993 10/31/92
---- ---- ---- --------
<S> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
Net asset value, beginning of period ............. $13.76 $16.49 $14.05 $14.06
------- ------ ------ -------
Net investment income** .......................... 1.13 1.13 1.13 0.96
Net realized and unrealized investment gain (loss) 1.72 (2.45) 2.46 0.29
------- ------ ------ -------
Increase (decrease) from investment operations ... 2.85 (1.32) 3.59 1.25
Dividends paid on Preferred Stock ................ (0.29) (0.20) (0.19) (0.14)
Dividends paid on Common Stock ................... (0.94) (0.94) (0.94) (0.70)
Distribution from net realized gain .............. (0.07) (0.27) (0.02) --
Offering costs of Common Stock ................... -- -- -- (0.21)
Offering costs of Preferred Stock ................ -- -- -- (0.08)
Preferred Stock underwriting discount ............ -- -- -- (0.13)
------- ------ ------ -------
Net increase (decrease) in net asset value ....... 1.55 (2.73) 2.44 (0.01)
------- ------ ------ -------
Net asset value, end of period ................... $15.31 $13.76 $16.49 $14.05
======= ====== ====== =======
Market value, end of period ...................... $13.625 $11.50 $15.75 $14.125
======= ====== ====== =======
</TABLE>
- ---------------------
See page 11 for footnotes.
10
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31, 11/29/91*
-------------------------- to
1995 1994 1993 10/31/92
---- ---- ---- --------
<S> <C> <C> <C> <C>
TOTAL INVESTMENT RETURN FOR PERIOD:
Based upon market value ................... 27.87% (20.50)% 18.79% (1.90)%
Based upon net asset value ................ 20.09% (9.15)% 25.03 5.01%
RATIOS/SUPPLEMENTAL DATA:**
Expenses to average net assets ............ 1.08% 1.11% 1.17% 0.94%+
Net investment income to average net assets 5.19% 5.06% 4.96% 6.17%+
Portfolio turnover rate ................... 8.63% 12.36% 10.69% 9.33%
Net investment assets, end of period
(000's omitted):
For Common Stock .................. $ 71,084 $63,906 $ 76,588 $65,262
For Preferred Stock ............... 33,600 33,600 33,600 33,600
-------- ------- -------- -------
Total net investment assets ............... $104,684 $97,506 $110,188 $98,862
======== ======= ======== =======
</TABLE>
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* Commencement of operations.
** During the period November 29, 1991, to October 31, 1992, had the Manager, at
its discretion, not waived a portion of its fee, the per share net investment
income would have been $0.94. The annualized ratios of expenses to average net
assets and net investment income to average net assets would have been 1.11% and
6.00%, respectively.
+ Annualized.
See notes to financial statements.
11
<PAGE>
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REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND STOCKHOLDERS,
SELIGMAN QUALITY MUNICIPAL FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Quality Municipal Fund, Inc. as of
October 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 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 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 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 October
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 Quality
Municipal Fund, Inc. as of October 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
December 1, 1995
12
<PAGE>
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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 additional shares. Shares will be acquired by the Fund for
stockholders either through open market purchases if the Fund is trading at a
discount or through the issuance of authorized but unissued shares of Common
Stock if the Fund is trading at a premium. If the market price of a share on the
payable date of a dividend is at or above the Fund's net asset value per share
on such date, the number of shares to be issued by the Fund to each stockholder
receiving shares in lieu of cash dividends will be determined by dividing the
amount of the cash distribution to which such stockholder would be entitled by
the greater of the net asset value per share on such date or 95% of the market
price of a share on such date. If the market price of a share on such a
distribution date is below the net asset value per share, the number of shares
to be issued to such stockholder will be determined by dividing such amount by
the per share market price.
Purchases will be made by the Fund from time to time on the New York Stock
Exchange (the "Exchange") or elsewhere to satisfy dividend and distribution
investment requirements under the Plan. Purchases will be suspended on any day
when the closing price (or closing bid price if there were no sales) of the
shares on the Exchange on the preceding trading day was higher than the net
asset value per share. If on the dividend payable date, purchases by the Fund
are insufficient to satisfy dividend investments and on the last trading day
immediately preceding the dividend payable date the closing sale or bid price of
the shares is lower than or the same as the net asset value per share, the Fund
will continue to purchase shares until all investments by stockholders have been
completed or the closing sale or bid price of the shares becomes higher than the
net asset value, in which case the Fund will issue the necessary additional
shares from authorized but unissued shares. If on the last trading day
immediately preceding the dividend payable date, the closing sale or bid price
of the shares of Common Stock is higher than the net asset value per share, and
if the number of shares previously purchased on the Exchange or elsewhere is
insufficient to satisfy dividend investments, the Fund will issue the necessary
additional shares from authorized but unissued shares of Common Stock. There
will be no brokerage charges with respect to shares of Common Stock issued
directly by the Fund to satisfy the dividend investment requirements. However,
each participant will pay a pro rata share of brokerage commissions incurred
with respect to the Fund's open market purchases of shares. In each case, the
cost per share of shares purchased for each Common Stockholder's account will be
the average cost, including brokerage commissions, of any shares of Common Stock
purchased in the open market plus the cost of any shares issued by the Fund. For
the year ended October 31, 1995, the Fund purchased 87,900 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
13
<PAGE>
DIVIDEND INVESTMENT PLAN (continued)
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.
A Common Stockholder who has elected to participate in the Plan may
withdraw from the Plan at any time. There will be no penalty for withdrawal from
the Plan, and Common Stockholders who have previously withdrawn from the Plan
may rejoin it at any time. Changes in elections must be in writing and should
include the Common Stockholder's name and address as they appear on the account
registration or in respect of an account held at DTC, the account registration.
An election to withdraw from the Plan will, until such election is changed, be
deemed to be an election by a Common Stockholder to take all subsequent
distributions in cash. An election will be effective only for a dividend or gain
distribution if it is received by Seligman Data on or before such record date.
Seligman Data will maintain all Common Stockholders' accounts in the Plan
not held by DTC, and furnish written confirmation of all transactions in the
account, including information needed by Common Stockholders for tax records.
Shares in the account of each Plan participant may be held by the Plan Agent in
non-certificated form in the name of the participant, and each Common
Stockholder's proxy will include those shares purchased or received pursuant to
the Plan.
The Fund seeks to pay dividends that are exempt from regular federal income
taxes; however, to the extent that any dividends or distributions do not qualify
as exempt from regular federal income taxes or are subject to state income taxes
(see page one for Change in Dividend Policy), 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 Corp.
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 October 31, 1995.
14
<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, Daniel Industries, 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
Chairman of the Board and Director,
Seligman Data Corp.
- ---------------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
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) 622-4597 24-HOUR AUTOMATED TELEPHONE ACCESS SERVICE
(800) 874-1092 STOCKHOLDER SERVICES
<PAGE>
SELIGMAN QUALITY MUNICIPAL FUND, INC.
MANAGED BY
[Logo]
J. & W. SELIGMAN & CO.
INCORPORATED
INVESTMENT MANAGERS AND ADVISORS
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
CESQF2 10/95
SELIGMAN
=========
QUALITY
=========
MUNICIPAL
FUND, INC.
[Logo]
Annual Report
October 31, 1995
