SELIGMAN
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QUALITY
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MUNICIPAL
FUND, INC.
[Graphic Omitted]
[Logo Omitted]
THIRD QUARTER REPORT
JULY 31, 2000
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TO THE STOCKHOLDERS
For the three months ended July 31, 2000, Seligman Quality Municipal Fund
delivered a total return of 3.92% based on market price, and 4.40% based on net
asset value. The Fund's yield on July 31, 2000, based on market price, was
6.62%. For investors in higher tax brackets, the Fund may be a particularly
attractive choice -- at period-end, it offered a taxable equivalent yield of
10.67%, based on a federal tax bracket of 39.6%.
During this time, the US economy continued to expand, and the Federal
Reserve Board continued to worry that the strength of the economy could trigger
inflation. Within this three-month period, the Fed held two meetings. At the
first one on May 16, it raised the federal funds rate by a relatively aggressive
50 basis points. However, at its June meeting, it seemed to have gained more
confidence that the economy was slowing, and left rates unchanged. The Fed's
most recent meeting was held on August 22, and it again voted to leave rates
unchanged.
Signs that the economy was slowing benefited the bond markets. At the
beginning of the three-month period, the 10-year US Treasury note was yielding
6.26%; by the end of the period, it was yielding 6.03% -- a decrease of 23 basis
points. Municipal bonds benefited from the lower interest rate environment, and
from a significant slowdown in new municipal supply.
Looking ahead, we believe the Fed's restrictive policy actions of the past
year will ultimately be successful in keeping inflation at bay. While there may
be more tightening moves by the Fed before the year is over, the eventual
economic cooling should place some downward pressure on interest rates, which
would be positive for fixed-income securities.
In addition to our favorable outlook for interest rates, we believe that the
fundamentals underlying the municipal market are strong, allowing it to continue
to deliver positive performance. For higher-income investors, we believe that
municipal bonds remain a particularly attractive choice.
Seligman Quality Municipal Fund's 2000 annual meeting took place on May 18,
2000, in Pasadena, California. 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 7.
Thank you for your continued support of Seligman Quality Municipal Fund. We
look forward to serving your investment needs for many years to come. A
discussion with your Portfolio Manager, as well as the Fund's performance
history and financial statements, including a portfolio of investments, follows
this letter.
By order of the Board of Directors,
/s/ WILLIAM C. MORRIS
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William C. Morris
Chairman
/s/ THOMAS G. MOLES
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Thomas G. Moles
President
September 1, 2000
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
WHAT ECONOMIC AND MARKET FACTORS AFFECTED SELIGMAN QUALITY MUNICIPAL FUND DURING
THE THREE MONTHS ENDED JULY 31, 2000?
[Graphic Omitted]
Seligman Municipals Team: (standing from left) Audrey Kuchtyak, Theresa Barion,
Debra McGuinness, (seated from left) Eileen Comerford, Thomas G. Moles
(Portfolio Manager)
The past three months were positive for the fixed-income markets, including
the municipal bond market. Investor sentiment improved considerably during the
period as economic reports indicated that the pace of growth was slowing and
inflation remained stable. The Federal Reserve Board's decision in June to leave
the federal funds rate unchanged further reinforced the market's conviction that
the economy was cooling. After a brief uptick in yields in early May, long-term
municipal yields moved steadily lower throughout the period, resulting in
favorable investment results for Seligman Quality Municipal Fund. The municipal
market's strong performance was due primarily to a sharp slowdown in municipal
issuance. Year-to-date, municipal volume is 20% lower than for the same period
last year. Among many individual states, the falloff in issuance has been
substantial, resulting in a relative scarcity of bonds. Prices for municipal
bonds in states with supply shortages have appreciated more than the overall
market.
The sharp decline in municipal issuance was due primarily to the higher
interest rate environment, which increased the cost of borrowing for municipal
issuers, and resulted in the strong economy producing tax revenues above
estimates. As long as interest rates continue their downward trend, municipal
supply should improve. However, it is unlikely that municipal issuance will
increase dramatically. The unprecedented prosperity of the past decade has
improved the financial status of the nation's states and municipalities, and has
lessened the need for projects financed through municipal bond offerings.
WHAT WAS YOUR STRATEGY DURING THIS TIME?
Seligman Quality Municipal Fund's investment strategy reflected our positive
outlook for the economy and interest rates. During the period, we favored
long-term insured bonds. Long-term bonds now offer the highest yields and the
greatest potential for price appreciation if interest rates decline.
(Conversely, when interest rates rise, long-term bonds will depreciate more in
price than shorter-maturity bonds.)
Transportation bonds remain Seligman Quality Municipal Fund's largest sector,
followed by water and sewer bonds. The water and sewer sector posted the
strongest performance for the past three months, followed by the education
sector and the transportation sector. Health care is Seligman Quality Municipal
Fund's smallest sector, with holdings currently limited to a single insured,
AAA-rated hospital bond. The health care industry has been experiencing
financial difficulties, primarily as a result of government
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
cutbacks and the growth of managed care. Over the past few years, a significant
percentage of health care issuers have experienced rating downgrades, and many
remain vulnerable to further credit deterioration.
WHAT IS YOUR OUTLOOK?
The Federal Reserve Board is expected to leave monetary policy unchanged, at
least through the presidential election in November. While the Fed has not yet
declared victory in the war on inflation, it has lately indicated a willingness
to adopt a wait-and-see approach. We anticipate a period of stability in the
municipal bond market and a continuation of the positive fundamentals which have
resulted in Seligman Quality Municipal Fund's favorable performance during this
past fiscal quarter. Further, we expect demand for municipal securities, which
includes Seligman Quality Municipal Fund, to remain strong due to a combination
of attractive yields, market stability, and lackluster equity market returns.
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INVESTMENT RESULTS PER COMMONSHARE
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TOTAL RETURNS*
FOR PERIODS ENDED JULY 31, 2000
AVERAGE ANNUAL
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SINCE
THREE NINE ONE FIVE INCEPTION
MONTHS MONTHS YEAR YEARS 11/29/91
------ ------ ----- ----- --------
Market Price** 3.92% 10.29% 0.07% 4.66% 4.80%
Net Asset Value** 4.40 7.69 3.65 6.16 7.37
PRICE PER SHARE
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<CAPTION>
July 31, 2000 April 30, 2000 January 31, 2000 October 31, 1999
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<S> <C> <C> <C> <C>
Market Price $11.6875 $11.4375 $11.4375 $11.4375
Net Asset Value 13.52 13.17 12.86 13.55
</TABLE>
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE NINE MONTHS ENDED JULY 31, 2000
CAPITAL GAIN
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DIVIDENDS PAID+ PAID REALIZED UNREALIZED
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$0.581 $0.285 $0.068 $0.178++
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at July 31, 2000, was
6.62%, which is equivalent to a taxable yield of 10.67% based on the maximum
federal tax rate of 39.6%.
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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 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 3.70%
to 5.80%. 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 July 31, 2000.
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PORTFOLIO OF INVESTMENTS (unaudited) JULY 31, 2000
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FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
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<S> <C> <C>
ALABAMA -- 4.6% $5,000,000 Jefferson County Sewer Rev. (Capital Improvement
Warrants), 5.125% due 2/1/2039 ................... Aaa/AAA $ 4,461,550
ALASKA -- 2.8% 2,000,000 Alaska Energy Authority Power Rev. (Bradley Lake
Hydroelectric Project), 6% due 7/1/2021 .......... Aaa/AAA 2,115,560
630,000 Alaska Housing Finance Corporation (Collateralized
Veterans' Mortgage Program), 6.50% due 6/1/2034 .. Aaa/AAA 639,702
CALIFORNIA -- 13.8% 4,000,000 Foothill/Eastern Transportation Corridor Agency
Toll Road Rev., 5.75% due 1/15/2040 ..............Baa3/BBB- 3,837,160
5,000,000 San Diego Public Facilities Financing Authority
Sewer Rev., 5% due 5/15/2029 ..................... Aaa/AAA 4,593,150
5,000,000 San Francisco City and County Airports Commission
Rev. (International Airport), 5.80% due 5/1/2021*. Aaa/AAA 5,043,900
HAWAII -- 1.9% 1,750,000 Hawaii State Airports System Rev., 7% due 7/1/2020* Aaa/AAA 1,817,305
ILLINOIS -- 4.5% 5,000,000 Illinois Educational Facilities Authority Rev.
(University of Chicago), 5.125% due 7/1/2038 ..... Aa1/AA 4,429,750
KANSAS -- 3.2% 3,000,000 Burlington Pollution Control Rev. (Kansas Gas and
Electric Company Project), 7% due 6/1/2031 ....... Aaa/AAA 3,113,100
LOUISIANA -- 1.0% 855,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals, Inc. Project),
8% due 5/15/2012+ ................................ NR/AAA 994,793
MASSACHUSETTS -- 7.5% 4,000,000 Massachusetts Health & Educational Facilities
Authority Rev. (New England Medical Center),
6.625% due 7/1/2025 .............................. Aaa/AAA 4,202,000
3,000,000 Massachusetts Housing Finance Agency Rev.
(Residential Development), 6.875% due 11/15/2021.. Aaa/AAA 3,138,690
MINNESOTA -- 0.5% 500,000 Minneapolis-St. Paul Metropolitan Airports
Commission Rev., 5.75% due 1/1/2032 .............. Aaa/AAA 503,085
MISSOURI -- 3.4% 3,250,000 Missouri Housing Development Commission Rev.
(Single Family Mortgage), 6.375% due 9/1/2031* ... NR/AAA 3,305,055
MONTANA -- 5.6% 2,220,000 Forsyth Pollution Control Rev. (Puget Sound
Power & Light Co.), 7.25% due 8/1/2021* .......... Aaa/AAA 2,310,931
1,620,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020+ ............................. Aaa/AAA 1,683,018
845,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020+ ............................. Aaa/AAA 877,870
535,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020+ ............................. Aaa/AAA 555,811
NEW YORK -- 13.1% 3,000,000 Metropolitan Transportation Authority Rev.
(Commuter Facilities), 6.10% due 7/1/2026o ....... Aaa/AAA 3,269,970
</TABLE>
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See footnotes on page 6.
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PORTFOLIO OF INVESTMENTS (unaudited) (continued) JULY 31, 2000
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FACE RATINGS
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
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<S> <C> <C> <C> <C>
NEW YORK (continued) $2,105,000 New York City GOs, 6.25% due 4/15/2027 ........... A3/A- $ 2,180,001
5,000,000 New York City Municipal Water Finance Authority
(Water & Sewer System Rev.), 5.75% due 6/15/2026. Aaa/AAA 5,012,150
2,125,000 New York State Thruway Authority General Rev.,
6% due 1/1/2025o ................................ Aaa/AAA 2,279,126
PENNSYLVANIA -- 10.0% 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ..... Aaa/AAA 2,605,900
2,000,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.625% due 1/1/2022* .... Aaa/AAA 2,070,800
5,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* .. Aaa/AAA 5,078,550
SOUTH CAROLINA -- 2.4% 2,250,000 South Carolina Ports Authority Rev.,
6.75% due 7/1/2021*+ ............................ Aaa/AAA 2,339,303
TEXAS -- 4.6% 1,000,000 Houston Water & Sewer Systems Rev.,
6.125% due 12/1/2015o ........................... Aaa/AAA 1,069,380
2,000,000 Matagorda County Navigation District No. 1
Pollution Control Rev. (Central Power and Light
Co. Project), 6.125% due 5/1/2030* .............. Aaa/AAA 2,036,160
1,315,000 Texas State Veterans' Housing Assistance GOs,
6.80% due 12/1/2023* ............................ Aa1/AA 1,364,694
VIRGINIA -- 5.8% 2,500,000 Pocahontas Parkway Association Toll Road Rev.
(Route 895 Connector), 5.50% due 8/15/2028 ...... Baa3/BBB- 2,047,250
3,500,000 Virginia Housing Development Authority (Multi-
Family Housing), 7% due 11/1/2012 ............... Aa1/AA+ 3,649,100
WASHINGTON -- 8.0% 2,000,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
5.25% due 7/1/2033* ............................. Aaa/AAA 1,776,940
860,000 Douglas County Public Utility District No. 1
(Wells Hydroelectric Rev.), 7.80% due 9/1/2018* . Aa3/AA- 879,049
5,000,000 King County Sewer GOs, 6.125% due 1/1/2033 ....... Aaa/AAA 5,100,200
WISCONSIN -- 4.3% 4,000,000 Wisconsin Housing & Economic Development
Authority Housing Rev., 6.85% due 11/1/2012 ..... Aaa/AAA 4,163,720
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TOTAL MUNICIPAL BONDS (Cost $93,705,049) -- 97.0% ....................................... 94,544,723
VARIABLE RATE DEMAND NOTES (Cost $1,900,000) -- 2.0% .................................... 1,900,000
OTHER ASSETS LESS LIABILITIES -- 1.0% ................................................... 992,150
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NET INVESTMENT ASSETS -- 100.0% ......................................................... $97,436,873
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* Interest income earned from this security is subject to the federal
alternative minimum tax.
+ Escrowed-to-maturity security.
o Pre-refunded security.
Note: Investments in municipal securities and other short-term holdings maturing
in more than 60 days are valued based upon quotations provided by an independent
pricing service or, in their absence, at fair value determined in accordance
with procedures approved by the Board of Directors. Short-term holdings maturing
in 60 days or less are generally valued at amortized cost.
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PROXY RESULTS
Stockholders of Seligman Quality Municipal Fund, Inc. voted on the following
proposals at the Annual Meeting of Stockholders on May 18, 2000, in Pasadena,
California. 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
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John R. Galvin 4,373,485 67,810
William C. Morris 4,376,062 65,233
James. Q. Riordan 4,374,605 66,690
Robert L. Shafer 4,375,862 65,433
RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR 2000:
FOR AGAINST ABSTAIN
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4,396,889 22,611 21,795
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FOR MORE INFORMATION
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MANAGER INDEPENDENT AUDITORS IMPORTANT TELEPHONE NUMBERS
<S> <C> <C> <C>
J. & W. Seligman & Co. Incorporated Deloitte & Touche LLP (800) 874-1092 Stockholder Services
100 Park Avenue (212) 682-7600 Outside the United States
New York, NY 10017 STOCKHOLDER SERVICE AGENT (800) 622-4597 24-Hour Automated
Seligman Data Corp. Telephone Access
GENERAL COUNSEL 100 Park Avenue Service
Sullivan & Cromwell New York, NY10017
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Seligman Quality Municipal Fund, Inc.
MANAGED BY
[Logo Omitted]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
CESQF3c 7/00
