===============================================================================
TO THE STOCKHOLDERS
During Seligman Quality Municipal Fund's second fiscal quarter, municipal bond
yields rose in response to continued reports of the economy's strength, which
reignited inflation concerns. This resulted in a price decline of municipal
bonds in general, and in Seligman Quality Municipal Fund's net asset value in
particular. However, the Fund continued to provide monthly income free from
regular income tax to its Stockholders during the period. The Fund's investment
results for Common Stockholders appear on page 3.
Even though the economy has continued its expansion to date without
provoking a significant increase in inflationary pressures, the Federal Reserve
Board increased the federal funds rate -- the interest rate charged for
interbank loans -- from 5.25% to 5.50% on March 25, due to concerns that strong
consumer demand could lead to higher levels of inflation. Prior to this action,
yields had already begun to rise, anticipating the event.
Interest rates moved from 5.73% on January 31, 1997, to 5.87% on April 30,
as measured by the Bond Buyer 20-Bond General Obligation Index, a benchmark for
the municipal market. Since then, interest rates have been more stable as the
Fed chose to leave rates unchanged at its May 21 meeting. However, municipal
market participants remain alert for any signs of a resurgence in inflation,
which would prompt another Fed move.
Long-term municipal bonds continue to outperform other fixed-income
investments due to encouraging municipal market fundamentals. We anticipate that
municipal bonds will continue to provide investors with attractive yields
compared with the after-tax yields of US Treasury bonds.
Seligman Quality Municipal Fund's Annual Meeting was held on Thursday, May
15, in Boston, Massachusetts. All the proposals outlined in the proxy, which was
mailed to Stockholders in April, were passed.
On a final note, we have regretfully accepted Fred E. Brown's decision to
formally retire from your Fund's Board of Directors. Mr. Brown has been elected
Director Emeritus of the Board, and Seligman Quality Municipal Fund will still
be able to benefit from his invaluable advice and counsel. Mr. Brown, who was
Chairman and CEO of J. & W. Seligman from 1965 to 1988, joined your Fund's Board
at its incorporation in 1990.
A discussion with your Portfolio Manager, portfolio holdings, and financial
statements follow this letter.
We thank you for your continued interest in Seligman Quality Municipal
Fund, and look forward to serving your investment needs in the 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
May 30, 1997 President
1
<PAGE>
===============================================================================
INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
[PHOTO]
Seligman Municipals Team: (from left) Audrey Kuchtyak, Theresa Barion, Debra
McGuinness, (seated) Eileen Comerford, Thomas G. Moles (Portfolio Manager)
Which economic factors affected Seligman Quality Municipal Fund in its second
fiscal quarter?
Due to the enduring strength of the economy, yields in the municipal market rose
from a low of 5.56% on February 20 to a high of 5.88% on April 10, first in
anticipation, and then as a result of the Federal Reserve Board's March 25
decision to increase the federal funds rate to 5.50% from 5.25%. Although
inflation has remained under control year-to-date, there is increasing concern
that pressures are building in certain areas, particularly in the labor market.
Which market factors affected the Fund in the period?
The municipal market has been experiencing a record number of bond calls and
redemptions, as older, higher-coupon bonds are retired by the states and
municipalities that issued them. For 1997, it is estimated that the amount of
bonds redeemed could approach the amount of new bonds issued, which would keep
the total outstanding supply essentially unchanged. This slowdown in the growth
of supply is having a beneficial impact on the municipal market. The supply
slowdown is also the primary reason why the long end of the municipal market
outperformed and exhibited greater stability than the US Treasury market during
Seligman Quality Municipal Fund's second quarter.
What was your investment strategy?
This quarter, we anticipated that long-term municipal yields would remain in a
narrow trading range. Therefore, we focused on maximizing yields by purchasing
current coupon bonds -- bonds priced at or near their face value (par). In the
absence of significant interest rate volatility, there was no incentive to
purchase premium coupon bonds or discount coupon bonds. Additionally, our
objective was to protect Seligman Quality Municipal Fund from excessive bond
calls, which have the potential to reduce the Fund's yield when the call
proceeds are reinvested at lower yields. To achieve this, the Fund's call
exposure was continually reduced through the sale of shorter-call bonds and the
purchase of longer-call bonds. (Callable bonds are bonds which are redeemable on
specified dates and at specified prices -- prior to maturity -- at the option of
the issuer.) As always, your Fund's Manager continued to perform in-depth credit
analyses of all the Fund's municipal bonds to ensure the financial stability and
the overall quality of the portfolio holdings.
What is the outlook?
Looking forward, we anticipate that positive municipal market fundamentals will
further contribute to the market's relative stability versus other fixed-income
sectors. However, the possibility exists that long-term municipal yields could
rise if the economy fails to slow to an acceptable rate of growth. Nonetheless,
we expect that any increase in long-term yields would be temporary and would
present an opportunity for Seligman Quality Municipal Fund to purchase municipal
bonds at lower prices and higher yields.
2
<PAGE>
================================================================================
INVESTMENT RESULTS PER COMMON SHARE
- --------------------------------------------------------------------------------
TOTAL RETURNS*
For Periods Ended April 30, 1997
<TABLE>
<CAPTION>
Average Annual
-----------------------------------------------
Since
Three Six One Five Inception
Months Months Year Years 11/29/91
------ ------ ---- ------- --------
<S> <C> <C> <C> <C> <C>
Market Price (0.12)% 3.50% 15.12% 7.59% 6.30%
Net Asset Value 0.56 1.59 7.77 9.19 8.47
</TABLE>
<TABLE>
<CAPTION>
PRICE PER SHARE
April 30, 1997 January 31, 1997 October 31, 1996
-------------- ---------------- ----------------
<S> <C> <C> <C>
Market Price $14.125 $14.375 $14.25
Net Asset Value 14.77 14.93 15.18
</TABLE>
DIVIDEND AND CAPITAL GAIN INFORMATION
For the Six Months Ended April 30, 1997
<TABLE>
<CAPTION>
Capital Gain
---------------------------------------------
Dividends Paid** Paid Realized Unrealized+
-------------- ---- -------- ----------
<S> <C> <C> <C>
$0.4692 $0.154 $0.268 $0.967
</TABLE>
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at April 30, 1997,
was 6.64%, which is equivalent to a taxable yield of 10.61% based on the maximum
federal tax rate of 39.6%.
------------------------------------------------------
* These rates of return reflect changes in market price or net asset value,
as applicable, and assume that all distributions within the period are
invested in additional shares. 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.
** Preferred Stockholders were paid dividends at annual rates ranging from
3.25% to 5.05%. Earnings on the Fund's assets in excess of the preferred
dividend requirements constituted dividend income for Common Stockholders.
A portion of dividends paid to Common Stockholders is taxable as ordinary
income.
+ Represents the per share amount of net unrealized appreciation of portfolio
securities as of April 30, 1997.
- --------------------------------------------------------------------------------
3
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
PORTFOLIO OF INVESTMENTS
- -----------------------------------------------------------------------------------------------------------------------------------
Percent of Net
Investment Face Ratings
State Assets Amount Municipal Bonds Moody's/S&P+ Market Value
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Alaska 3.0 $1,275,000 Alaska Housing Finance Corporation (Collateralized
Mortgage Obligation), 7.05% due 6/1/2025 ............ Aaa/AAA $ 1,335,103
1,720,000 Alaska Housing Finance Corporation (Collateralized
Veterans' Mortgage Program), 6 1/2% due 6/1/2034 ..... Aaa/AAA 1,748,363
California 12.7 5,000,000 San Francisco City and County Airport Commission
International Airport Rev., 5.80% due 5/1/2021* ..... Aaa/AAA 4,892,300
2,750,000 San Joaquin Hills Transportation Corridor Agency Rev.
(Senior Lien Toll Road), 6 3/4% due 1/1/2032 ......... NR/NR 2,871,578
5,000,000 University of California Regents Rev. (Multiple
Purpose Project), 6 3/8% due 9/1/2024 ................ Aaa/AAA 5,248,400
Georgia 3.0 3,000,000 Atlanta Airport Facilities Rev., 6 1/4% due 1/1/2021* ... Aaa/AAA 3,061,230
Hawaii 1.9 1,750,000 Hawaii State Airports System Rev., 7% due 7/1/2020* .... Aaa/AAA 1,895,495
Illinois 3.2 3,000,000 Regional Transportation Authority GOs,
6.70% due 11/1/2011 ................................. Aaa/AAA 3,248,880
Kansas 3.2 3,000,000 Burlington Pollution Control Rev. (Kansas Gas and
Electric Company Project), 7% due 6/1/2031 .......... Aaa/AAA 3,241,500
Louisiana 3.2 970,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals Inc. Project),
8% due 5/15/2012 .................................... NR/AAA 1,135,705
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 2,106,800
Massachusetts 7.2 4,000,000 Massachusetts Health & Educational Facilities
Authority Rev. (New England Medical Center),
6 5/8% due 7/1/2025 .................................. Aaa/AAA 4,263,880
3,000,000 Massachusetts Housing Finance Agency Rev.
(Residential Development), 6 7/8% due 11/15/2021 ..... Aaa/AAA 3,148,860
Montana 5.6 2,220,000 Forsyth Pollution Control Rev. (Puget Sound
Power & Light Co.), 7 1/4% due 8/1/2021* ............. Aaa/AAA 2,413,762
1,620,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6 7/8% due 6/1/2020 .................................. Aaa/AAA 1,773,220
845,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6 7/8% due 6/1/2020 .................................. Aaa/AAA 924,920
` 535,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6 7/8% due 6/1/2020 .................................. Aaa/AAA 585,600
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
APRIL 30, 1997
- -----------------------------------------------------------------------------------------------------------------------------------
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 18.2 $3,000,000 Metropolitan Transportation Authority Rev.
(Commuter Facilities), 6.10% due 7/1/2026 ........... Aaa/AAA $ 3,070,470
2,000,000 Metropolitan Transportation Authority Rev.,
(Transit Facilities), 6.10% due 7/1/2026 ............ Aaa/AAA 2,046,980
5,000,000 New York City GOs, 6 1/4% due 4/15/2027 ................. Baa1/BBB+ 4,979,700
5,125,000 New York State Thruway Authority Rev.,
6% due 1/1/2025 ..................................... Aaa/AAA 5,180,657
3,000,000 New York State Local Government Assistance
Corporation, 7% due 4/1/2021 ........................ Aaa/AAA 3,298,770
Pennsylvania 9.6 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ......... Aaa/AAA 2,684,725
2,000,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6 5/8% due 1/1/2022* ......... Aaa/AAA 2,088,860
5,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* ........ Aaa/AAA 5,040,900
South Carolina 8.7 4,000,000 South Carolina Public Service Authority Rev. (Santee
Cooper), 6.10% due 7/1/2027 ......................... Aaa/AAA 4,057,480
4,500,000 South Carolina State Ports Authority Rev., 6 3/4% due
7/1/2021* ........................................... Aaa/AAA 4,792,275
Texas 1.8 1,730,000 Texas State Veterans' Housing Assistance GOs,
6.80% due 12/1/2023* ................................ Aa/AA 1,794,685
Virginia 3.6 3,500,000 Virginia Housing Development Authority (Multi-
Family Housing), 7% due 11/1/2012 ................... Aa1/AA+ 3,718,575
Washington 6.9 860,000 Douglas County Public Utilities District #1
Hydroelectric Rev., 7.80% due 9/1/2018* ............. A/A+ 932,429
5,000,000 King County Sewer GOs, 6 1/8% due 1/1/2033 .............. Aaa/AAA 5,078,300
1,000,000 Municipality of Metropolitan Seattle Sewer Rev.,
6.60% due 1/1/2032 .................................. Aaa/AAA 1,079,790
Wisconsin 4.1 4,000,000 Wisconsin Housing & Economic Development
Authority Housing Rev., 6.85% due 11/1/2012 ......... Aaa/AAA 4,197,600
- - ------------
Total Municipal Bonds (Cost $93,449,245)-- 95.9% ................................................................. 97,937,792
Short-Term Holdings (Cost $2,100,000)-- 2.0% ..................................................................... 2,100,000
Other Assets Less Liabilities-- 2.1% ............................................................................. 2,127,206
-------------
Net Investment Assets-- 100.0% ................................................................................... $102,164,998
============
- ------------------------
+ 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.
5
</TABLE>
<PAGE>
<TABLE>
===================================================================================================================================
STATEMENT OF ASSETS AND LIABILITIES APRIL 30, 1997
<S> <C> <C>
Assets:
Investments at value:
Long-term holdings (cost $93,449,245)....................................... $97,937,792
Short-term holdings (cost $2,100,000)....................................... 2,100,000 $100,037,792
-----------
Cash............................................................................ 98,053
Interest receivable............................................................. 2,104,490
Receivable for securities sold.................................................. 30,000
Expenses prepaid to stockholder service agent................................... 21,724
Other........................................................................... 14,531
------------
Total Assets.................................................................... 102,306,590
------------
Liabilities:
Accrued expenses, taxes, and other.............................................. 141,592
------------
Net Investment Assets........................................................... 102,164,998
Preferred Stock................................................................. 33,600,000
------------
Net Assets for Common Stock .................................................... $ 68,564,998
============
Net Assets per Share of Common Stock (Market value $14.125)..................... $14.77
======
Composition of Net Investment Assets:
Preferred Stock Series TH, $.01 par value, liquidation preference and asset
coverage per share--$50,000 and $152,031, 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-- 4,643,477................................................. 46,435
Additional paid-in capital...................................................... 62,987,779
Dividends in excess of net investment income.................................... (207,202)
Undistributed net realized gain................................................. 1,249,439
Net unrealized appreciation of investments...................................... 4,488,547
------------
Net Investment Assets........................................................... $102,164,998
============
- ----------------------------
See Notes to Financial Statements.
</TABLE>
6
<PAGE>
<TABLE>
====================================================================================================
STATEMENT OF OPERATIONS For the Six Months Ended April 30, 1997
<S> <C> <C>
Investment Income:
Interest....................................................... $3,098,372
Expenses:
Management fee................................................. $ 332,022
Stockholder account and registrar services..................... 62,124
Auction agent fee.............................................. 41,926
Auditing and legal fees........................................ 36,510
Stockholder reports and communications......................... 27,040
Custody and related services................................... 14,575
Stockholders' meeting.......................................... 14,000
Directors' fees and expenses................................... 6,596
Miscellaneous.................................................. 5,045
----------
Total Expenses................................................. 539,838
-----------
Net Investment Income.......................................... 2,558,534*
Net Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments............................... 1,246,048
Net change in unrealized appreciation of investments........... (2,246,201)
----------
Net Loss on Investments........................................ (1,000,153)
----------
Increase in Net Investment Assets from Operations.............. $1,558,381
==========
- -------------
* Net investment income available for Common Stock is $1,984,485, which is net
of Preferred Stock dividends.
See Notes to Financial Statements.
7
<PAGE>
===================================================================================================================
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
Six Months Ended Year Ended
April 30, 1997 October 31, 1996
------------- ----------------
Operations:
<S> <C> <C>
Net investment income ......................................................... $ 2,558,534 $ 5,169,116
Net realized gain on investments .............................................. 1,246,048 716,096
Net change in unrealized appreciation of investments .......................... (2,246,201) (415,682)
------------- -------------
Increase in net investment assets from operations ............................. 1,558,381 5,469,530
------------- -------------
Distributions to Stockholders:
Net investment income:
Preferred Stock, Series TH (per share: $854.24 and $1,844.31) ............. (574,049) (1,239,376)
Common Stock (per share: $.4277 and $.8951) ............................... (1,984,485) (4,151,518)
------------- -------------
Total ..................................................................... (2,558,534) (5,390,894)
Dividends in excess of net investment income
(per share: $.0415 and $.0433) ............................................ (192,558) (200,782)
Net realized gain on investments:
Common Stock (per share: $.154 and $.103) ................................. (713,041) (477,034)
------------- -------------
Decrease in net investment assets from distributions .......................... (3,464,133) (6,068,710)
------------- -------------
Capital Share Transactions:
Value of shares of Common Stock issued for investment plan
(35,241 and 74,829 shares) ................................................ 507,208 1,046,819
Value of shares of Common Stock issued in payment of gain
distribution (10,157 and 6,982 shares) .................................... 145,346 99,912
Cost of shares purchased for investment plan
(44,800 and 82,300 shares) ................................................ (650,150) (1,162,776)
------------- -------------
Increase (decrease) in net investment assets from capital share transactions ... 2,404 (16,045)
------------- -------------
Decrease in net investment assets .............................................. (1,903,348) (615,225)
Net Investment Assets:
Beginning of period ............................................................ 104,068,346 104,683,571
------------- -------------
End of period (including dividends in excess of net investment
income of $207,202 and $14,644, respectively) ............................. $ 102,164,998 $ 104,068,346
============= =============
</TABLE>
- ---------------------
See Notes to Financial Statements.
8
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. 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. 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. The Fund has elected to be taxed as a regulated investment company and
intends to distribute substantially all taxable net income and net gain
realized.
c. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal income
tax purposes. Interest income is recorded on the accrual basis. The Fund
amortizes original issue discounts and premiums paid on purchases of
portfolio securities. Discounts other than original issue discounts are not
amortized.
d. Dividends and distributions paid by the Fund are recorded on the
ex-dividend date.
e. The treatment for financial statement purposes of distributions made during
the year from net investment income or net realized gain may differ from
their ultimate treatment for federal income tax purposes. These differences
are caused primarily by differences in the timing of the recognition of
certain components of income, expense, and 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 portfolio securities, excluding short-term
investments, for the six months ended April 30, 1997, amounted to $16,680,615
and $18,600,870, respectively.
At April 30, 1997, 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 $4,653,645 and $165,098, respectively.
3. Under the Fund's Charter, dividends or other distributions on the Common
Stock cannot be declared unless the Fund can satisfy the requirements of two
separate asset maintenance tests after giving effect to such distributions.
The Fund, in connection with its Dividend Investment Plan (the "Plan"),
acquires and issues shares of its own Common Stock, as needed, to satisfy Plan
requirements. For the six months ended April 30, 1997, 44,800 shares were
purchased in the open market at a cost of $650,150, which represented a weighted
average discount of 3.79% from the net asset value of those acquired shares. A
total of 45,398 shares were issued to Plan participants during this period for
proceeds of $652,554, a discount of 3.27% 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 April 30, 1997.
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 accu-
9
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
mulated 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 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 seven 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 $45,356 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 $7,000 were incurred by the Fund for the legal services of Sullivan
& Cromwell, a retired 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 cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at April 30, 1997, of
$15,797 is included in other liabilities. Deferred fees and related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
10
<PAGE>
===============================================================================
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. "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, 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.
"Total investment return for period" measures the Fund's performance but
assumes 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. Total returns for periods of less than one
year are not annualized.
The ratios of expenses to average net assets and net investment income to
average net assets for all periods presented do not reflect the effect of
dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C> <C>
Six Months Year Ended October 31, 11/29/91*
Ended -------------------------------------------------- to
PER SHARE OPERATING PERFORMANCE: 4/30/97 1996 1995 1994 1993 10/31/92
---------- ----- ----- ----- ---- --------
Net asset value, beginning
of period .............................. $15.18 $15.31 $13.76 $16.49 $14.05 $14.06
------- ------ ------- ------ ------ -------
Net investment income** ................... 0.55 1.12 1.13 1.13 1.13 0.96
Net realized and unrealized
investment gain (loss) ................. (0.22) 0.06 1.72 (2.45) 2.46 0.29
------- ------ ------- ------ ------ -------
Increase (decrease) from investment
operations ............................. 0.33 1.18 2.85 (1.32) 3.59 1.25
Dividends paid from net investment
income on Preferred Stock .............. (0.12) (0.27) (0.29) (0.20) (0.19) (0.14)
Dividends paid from net investment
income on Common Stock ................. (0.43) (0.90) (0.94) (0.94) (0.94) (0.70)
Dividends in excess of net investment
income paid on Common Stock ............ (0.04) (0.04) -- -- -- --
Distribution from net realized gain ....... (0.15) (0.10) (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 ............................ (0.41) (0.13) 1.55 (2.73) 2.44 (0.01)
------- ------ ------- ------ ------ -------
Net asset value, end of period ............ $14.77 $15.18 $15.31 $13.76 $16.49 $14.05
======= ====== ======= ====== ====== =======
Market value, end of period ............... $14.125 $14.25 $13.625 $11.50 $15.75 $14.125
======= ====== ======= ====== ====== =======
- --------------------------
See page 12 for footnotes.
11
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
===================================================================================================================================
Financial Highlights (continued)
<S> <C> <C> <C> <C> <C> <C>
Six Months 11/29/91*
Ended ----------------------------------------------------- to
Total Investment Return for Period: 4/30/97 1996 1995 1994 1993 10/31/92
---------- ------- -------- --------- ------- --------
Based upon market value .................... 3.50% 12.62% 27.87% (20.50)% 18.79% (1.90)%
Based upon net asset value ................. 1.59% 6.77% 20.09% (9.15)% 25.03% 5.01%
Ratios/Supplemental Data:**
Expenses to average net assets ............. 1.06% 1.11% 1.08% 1.11% 1.17% 0.94%+
Net investment income to average
net assets .............................. 5.00% 4.98% 5.19% 5.06% 4.96% 6.17%+
Portfolio turnover rate .................... 16.79% 14.05% 8.63% 12.36% 10.69% 9.33%
Net investment assets, end of period
(000s omitted):
For Common Stock ........................ $ 68,565 $ 70,468 $ 71,084 $63,906 $ 76,588 $65,262
For Preferred Stock ..................... 33,600 33,600 33,600 33,600 33,600 33,600
-------- -------- -------- ------- -------- -------
Total net investment assets ................ $102,165 $104,068 $104,684 $97,506 $110,188 $98,862
======== ======== ======== ======= ======== =======
- -----------------------
*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.
</TABLE>
12
<PAGE>
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REPORT OF INDEPENDENT AUDITORS
THE BOARD OF DIRECTORS AND SHAREHOOLDERS,
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
April 30, 1997, 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 October 31, 1996, 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 April 30, 1997, 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
April 30, 1997, 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
May 30, 1997
13
<PAGE>
===============================================================================
BOARD OF DIRECTORS
FRED E. BROWN
Director Emeritus
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
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
JOHN E. MEROW
Retired Chairman and Senior 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,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
JAMES C. PITNEY 3
Retired 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
RICHARD R.SCHMALTZ 1
Managing Director,
J. & W. Seligman & Co. Incorporated
Trustee Emeritus, Colby College
ROBERT L. SHAFER 3
Director or Trustee,
Various Organizations
JAMES N. WHITSON 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
President, J. & W. Seligman & Co. Incorporated
Chairman and President, Seligman Data Corp.
- -------------------
Member 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
14
<PAGE>
===============================================================================
EXECUTIVE OFFICERS
WILLIAM C. MORRIS
CHAIRMAN
THOMAS G. MOLES
PRESIDENT
EILEEN A. COMERFORD
VICE PRESIDENT
AUDREY G. KUCHTYAK
VICE PRESIDENT
LAWRENCE P. VOGEL
VICE PRESIDENT
THOMAS G. ROSE
TREASURER
FRANK J. NASTA
SECRETARY
- -------------------------------------------------------------------------------
MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
STOCKHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 622-4597 24-Hour Automated Telephone Access Service
(800) 874-1092 Stockholder Services
15
<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
CESQF3b 4/97
SELIGMAN
===================
QUALITY
===================
MUNICIPAL
FUND, INC.
[PHOTO]
[LOGO]
Mid-Year Report
April 30, 1997
<PAGE>
