SELIGMAN
--------o--------
QUALITY
--------o--------
MUNICIPAL
FUND, INC.
[Graphic Omitted]
[Logo Omitted]
ANNUAL REPORT
OCTOBER 31, 2000
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
www.seligman.com
CESQF2 10/00
<PAGE>
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TO THE STOCKHOLDERS
For the fiscal year ended October 31, 2000, Seligman Quality Municipal Fund
delivered a total return of 10.29% based on market price and 10.26% based on net
asset value. The Fund's yield on October 31, 2000, based on market price,
remained attractive at 6.73%, which is the taxable equivalent yield of 10.81%,
based on a federal tax bracket of 39.6%.
During the past fiscal year, the Federal Reserve Board raised the federal
funds rate four times for a total of 125 additional basis points, pushing this
rate from 5.25% at the beginning of the period to 6.50% at period-end. While the
Fed remained vigilant regarding the strength of the economy and possible
inflationary pressures, the bond markets began to anticipate some relief ahead.
As a result, long-term rates actually fell. On September 30, 1999, the 10-year
US Treasury note was yielding 6.05%; one year later, this yield was down 29
basis points to 5.76%.
Municipal bond yields also declined, but their rates were not as volatile as
US government securities, primarily because of the continued slowdown in
municipal new-issue supply. In some states, issu- ance decline has been so great
that it has resulted in a scarcity of bonds. Municipal bonds also continued to
benefit from the ongoing improvement of the financial conditions of the nation's
states, cities, and municipalities.
The economy is now showing definite signs of a slowdown, and the Fed has
acknowledged this by leaving rates unchanged at its June, August, and October
meetings. Given these recent signs of economic weakness, the Fed may well reduce
its inflationary bias to neutral at its December meeting. Should this weakness
continue, it is possible that the Fed will reduce rates in early 2001.
Our outlook for municipal bonds remains positive. The slowdown in economic
activity should place downward pressure on interest rates, as should the reduced
supply of municipal bonds. In addition, the fundamentals of the municipal market
remain strong, and, for higher-income investors, municipal bonds continue to be
a compelling investment.
On November 16, 2000, the Board of Directors of the Fund approved a monthly
dividend payment of $0.0562 per share to Common Stockholders effective January
2001. This amount represents a $0.0083 per share reduction in the amount of the
monthly dividend previously paid to Common Stockholders.
The principal reason for this decision was the continued narrow spread
between the Fund's earnings from its investment portfolio and the dividend rate
paid on its Preferred Stock. There are basically two reasons for this narrow
spread. First, the preferred dividend rate, which is determined weekly by
auction, has remained higher than when the preferred stock was issued in early
1992. Second, the gross earnings on the portfolio have declined as the proceeds
from called bonds and coupon interest have been reinvested at lower current
market yields.
Thank you for your continued support of Seligman Quality Municipal Fund. We
look forward to serving your investment needs for many years to come.
By order of the Board of Directors,
/s/ WILLIAM C. MORRIS
---------------------
William C. Morris
Chairman
/s/ THOMAS G. MOLES
-------------------
Thomas G. Moles
President
November 29, 2000
1
<PAGE>
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
[Graphic Omitted]
SELIGMAN MUNICIPALS TEAM: (FROM LEFT) EILEEN COMERFORD, AUDREY KUCHTYAK, THERESA
BARION, DEBRA MCGUINNESS, THOMAS G. MOLES (PORTFOLIO MANAGER)
WHAT ECONOMIC AND MARKET FACTORS AFFECTED SELIGMAN QUALITY MUNICIPAL FUND OVER
THE PAST FISCAL YEAR?
The past 12 months have been eventful for the municipal bond market. At this
time last year, a robust economy, a tight labor market, and healthy consumer
spending were combining to fuel inflation fears, propelling long-term interest
rates to the highest levels in over three years. The Federal Reserve Board
continued to tighten monetary policy through a series of federal funds rate
increases in an attempt to slow the economy to a more sustainable rate of
growth. By the start of 2000, economic reports suggested that the Fed's actions
were beginning to have an effect, and that the economy had begun the
long-awaited slowdown. Long-term municipal yields fell sharply during the next
several months in response. However, the rally would prove premature as the
economy, once again, surprised the markets with its resilience, and yields
quickly retreated to January levels. It would take another round of tightening
action by the Fed to restore investor confidence and renew the bond market
rally. For the remainder of the Fund's fiscal year, the municipal market
remained relatively stable and yields fluctuated within a narrow trading range.
The net decline in long-term municipal yields over the past year resulted in
favorable performance results for the Fund's latest fiscal year.
During the past year, the municipal bond market exhibited much greater
stability than the US Treasury market, due mostly to a slowdown in municipal new
issue supply. Year-to-date, volume is approximately 17% lower than for the same
period last year. Among a number of individual states, the decline in issuance
has been substantial, resulting in a scarcity of bonds. The municipal market was
also impacted by swings in investor sentiment which influenced the demand for
municipal bonds. In particular, the rising yield environment of the first half
of the Fund's fiscal year led to increased demand for short-term defensive
bonds. These shifting supply and demand dynamics created opportunities for
improving the relative value of the Fund in several ways. Prices for Fund
holdings in states with supply shortages have, in many instances, appreciated
more than bonds in states with stable or growing supply, allowing the Fund to
sell these bonds and replace them with similar bonds from other states that were
trading at lower prices and higher yields. Additionally, the heavy demand for
the Fund's short-term defensive bonds ensured strong bids when these holdings
were sold to purchase long-term municipal bonds at historically attractive
yields.
The remarkable prosperity of the past decade has improved the financial
condition of the nation's states, cities, and municipalities. Credit rating
upgrades have exceeded downgrades by a wide margin for the past five years, a
trend that is expected to continue. In addition, the municipal bond insurance
industry has seen its profit picture improve as a result of more conservative
underwriting practices as well as an expansion into new, and often more
lucrative, markets (E.G., structured finance and overseas markets). The
creditworthiness of the Fund's sizeable insured holdings is enhanced by a
strengthening municipal insurance industry.
2
<PAGE>
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
WHAT WAS YOUR INVESTMENT STRATEGY DURING THIS PERIOD?
Seligman Quality Municipal Fund continues to maintain 80% of its portfolio in
AAA-rated municipal bonds with the balance in investment-grade bonds, as
required by its investment policies. Bonds purchased during the year were rated
AAA and had maturity dates in excess of 20 years. We selected long-term bonds
because their yields during the period were the highest they had been in three
years. Further, we anticipated that municipal bond yields would begin to move
lower during the year, and long-term bonds offer the greatest opportunity for
price appreciation during periods of declining interest rates. (Conversely,
during periods of rising interest rates, long-term bonds will depreciate more in
price than shorter-term bonds.)
In our continuing effort to improve the call protection of the Fund,
short-call positions were reduced and the average call date of the Fund was
extended. However, because these short-call bonds were issued when interest
rates were higher than they are today, the income they generate cannot be
completely replaced. By taking advantage of the relatively higher yields
available during the past year, we helped to offset some of the loss of income
to the Fund while lessening the Fund's near-term call exposure.
The Fund's largest sector is transportation, which is comprised of airport,
port facility, and highway system bonds. Transportation issues outperformed most
other sectors of the market this calendar year. In addition, transportation has
proven to be an exceptionally stable sector with positive credit trends. All
across the country, traffic continues to increase for roads, rails, and
airports, straining current facilities and underscoring the need for
infrastructure investment. Lastly, there has been widespread public support for
transportation projects, as evidenced by the number of transportation bond
issues that have received voter approval.
WHAT IS YOUR OUTLOOK?
In a widely anticipated move, the Fed voted to leave monetary policy
unchanged at its October meeting. The Fed's decision was motivated by growing
evidence of a slowdown in the pace of economic growth. Further, productivity
improvements continue to contain labor costs despite the lowest national
unemployment rate in over 30 years. However, the Fed stressed its intention to
remain vigilant for signs of a buildup in inflationary pressures given
prevailing tight labor markets and the more recent increase in energy costs.
Interest rates will likely continue to respond swiftly to any negative economic
reports until the Fed is satisfied that it has achieved its objective. However,
upward movements in long-term interest rates should continue to be tempered by
the supply contraction in the Treasury and municipal markets. Investment results
for Seligman Quality Municipal Fund's fiscal year ended October 31, 2000, were
competitive, and we anticipate continued favorable performance.
3
<PAGE>
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INVESTMENT RESULTS PER COMMON SHARE
--------------------------------------------------------------------------------
TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 2000
Average Annual
----------------------------------
Since
Three One Five Inception
Months Year Years 11/29/91
------ ----- ----- --------
Market Price** 0.01% 10.29% 4.68% 4.66%
Net Asset Value** 2.39 10.26 5.79 7.44
PRICE PER SHARE
<TABLE>
<CAPTION>
October 31, 2000 July 31, 2000 April 30, 2000 January 31, 2000 October 31, 1999
---------------- ------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Market Price $11.50 $11.6875 $11.4375 $11.4375 $11.4375
Net Asset Value 13.62 13.52 13.17 12.86 13.55
</TABLE>
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED OCTOBER 31, 2000
Capital Gain
------------------------------------
Dividends Paid+ Paid Realized Unrealized
-------------- ------- -------- -----------
$0.774 $0.285 $0.068 $0.283++
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at October 31, 2000,
was 6.73%, which is equivalent to a taxable yield of 10.81% based on the maximum
federal tax rate of 39.6%.
---------------------------------------------
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.
*Returns for periods of less than one year are not annualized.
**These rates of return reflect changes in 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 October 31, 2000.
--------------------------------------------------------------------------------
4
<PAGE>
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PORTFOLIO OF INVESTMENTS OCTOBER 31, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE RATINGS+
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA--4.6% $5,000,000 Jefferson County Sewer Rev. (Capital Improvement
Warrants), 5.125% due 2/1/2039 ................... Aaa/AAA $ 4,511,150
ALASKA--2.8% 2,000,000 Alaska Energy Authority Power Rev. (Bradley Lake
Hydroelectric Project), 6% due 7/1/2021 .......... Aaa/AAA 2,137,800
630,000 Alaska Housing Finance Corporation (Collateralized
Veterans' Mortgage Program), 6.50% due 6/1/2034 .. Aaa/AAA 642,783
CALIFORNIA--14.0% 4,000,000 Foothill/Eastern Transportation Corridor Agency
Toll Road Rev., 5.75% due 1/15/2040 .............. Baa3/BBB- 3,919,680
5,000,000 San Diego Public Facilities Financing Authority
Sewer Rev., 5% due 5/15/2029 ..................... Aaa/AAA 4,689,750
5,000,000 San Francisco City and County Airports Commission
Rev. (International Airport), 5.80% due 5/1/2021* Aaa/AAA 5,097,450
HAWAII--1.8% 1,750,000 Hawaii State Airports System Rev., 7% due 7/1/2020* Aaa/AAA 1,806,873
ILLINOIS--4.6% 5,000,000 Illinois Educational Facilities Authority Rev.
(University of Chicago), 5.125% due 7/1/2038 ..... Aa1/AA 4,464,350
KANSAS--3.2% 3,000,000 Burlington Pollution Control Rev. (Kansas Gas and
Electric Company Project), 7% due 6/1/2031 Aaa/AAA 3,095,910
LOUISIANA--1.0% 855,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals, Inc. Project),
8% due 5/15/2012++ ............................... NR/AAA 996,212
MASSACHUSETTS--7.5% 4,000,000 Massachusetts Health & Educational Facilities
Authority Rev. (New England Medical Center),
6.625% due 7/1/2025 .............................. Aaa/AAA 4,171,440
3,000,000 Massachusetts Housing Finance Agency Rev.
(Residential Development), 6.875% due 11/15/2021 . Aaa/AAA 3,135,570
MINNESOTA--0.5% 500,000 Minneapolis-St. Paul Metropolitan Airports
Commission Rev., 5.75% due 1/1/2032 .............. Aaa/AAA 506,675
MISSOURI--3.4% 3,250,000 Missouri Housing Development Commission Rev.
(Single Family Mortgage), 6.375% due 9/1/2031* ... NR/AAA 3,335,638
MONTANA--5.6% 2,220,000 Forsyth Pollution Control Rev. (Puget Sound
Power & Light Co.), 7.25% due 8/1/2021* .......... Aaa/AAA 2,298,166
1,620,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ............................ Aaa/AAA 1,712,761
845,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ............................ Aaa/AAA 893,385
535,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ............................ Aaa/AAA 565,634
NEW YORK--13.1% 3,000,000 Metropolitan Transportation Authority Rev.
(Commuter Facilities), 6.10% due 7/1/2026(0) ..... Aaa/AAA 3,279,420
</TABLE>
------------------------
See footnotes on page 6.
5
<PAGE>
PORTFOLIO OF INVESTMENTS (continued) OCTOBER 31, 2000
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------------------------------
FACE RATINGS+
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
--------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
NEW YORK (continued) $2,105,000 New York City GOs, 6.25% due 4/15/2027 ............ A3/A- $ 2,194,905
5,000,000 New York City Municipal Water Finance Authority
(Water & Sewer System Rev.), 5.75% due 6/15/2026 . Aaa/AAA 5,036,400
2,125,000 New York State Thruway Authority General Rev.,
6% due 1/1/20250 ................................. Aaa/AAA 2,286,776
PENNSYLVANIA--10.0% 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ...... Aaa/AAA 2,596,475
2,000,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.625% due 1/1/2022* ..... Aaa/AAA 2,065,660
5,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* ... Aaa/AAA 5,104,800
SOUTH CAROLINA--2.4% 2,250,000 South Carolina Ports Authority Rev.,
6.75% due 7/1/2021*++ ............................ Aaa/AAA 2,328,210
TEXAS--4.6% 1,000,000 Houston Water & Sewer Systems Rev.,
6.125% due 12/1/2015(0) .......................... Aaa/AAA 1,069,780
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 2,045,180
1,315,000 Texas State Veterans' Housing Assistance GOs,
6.80% due 12/1/2023* ............................. Aa1/AA 1,366,245
VIRGINIA--5.8% 2,500,000 Pocahontas Parkway Association Toll Road Rev.
(Route 895 Connector), 5.50% due 8/15/2028 ....... Baa3/BBB- 2,069,475
3,500,000 Virginia Housing Development Authority (Multi-
Family Housing), 7% due 11/1/2012 ................ Aa1/AA+ 3,641,715
WASHINGTON--7.1% 2,000,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
5.25% due 7/1/2033* .............................. Aaa/AAA 1,807,240
5,000,000 King County Sewer GOs, 6.125% due 1/1/2033 ........ Aaa/AAA 5,130,400
WISCONSIN--4.2% 4,000,000 Wisconsin Housing & Economic Development
Authority Housing Rev., 6.85% due 11/1/2012 ...... Aaa/AAA 4,152,000
-----------
TOTAL MUNICIPAL BONDS (Cost $92,818,082)--96.2% ................................................... 94,155,908
VARIABLE RATE DEMAND NOTES (Cost $1,700,000)--1.7% ................................................ 1,700,000
OTHER ASSETS LESS LIABILITIES--2.1% ............................................................... 2,015,877
-----------
NET INVESTMENT ASSETS--100.0% ..................................................................... $97,871,785
===========
</TABLE>
----------------
* Interest income earned from this security is subject to the federal
alternative minimum tax.
+ Ratings have not been audited by Deloitte & Touche LLP.
++ Escrowed-to-maturity security.
o Pre-refunded security.
See Notes to Financial Statements.
6
<PAGE>
--------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 2000
<TABLE>
<S> <C> <C>
ASSETS:
Investments at value:
Long-term holdings (cost $92,818,082)........................................ $94,155,908
Short-term holdings (cost $1,700,000)........................................ 1,700,000 $ 95,855,908
-----------
Cash.............................................................................................. 69,341
Interest receivable............................................................................... 2,097,068
Expenses prepaid to stockholder service agent..................................................... 4,934
Other............................................................................................. 7,729
-----------
TOTAL ASSETS...................................................................................... 98,034,980
-----------
LIABILITIES:
Accrued expenses and other........................................................................ 163,195
-----------
NET INVESTMENT ASSETS............................................................................. 97,871,785
Preferred Stock................................................................................... 33,600,000
-----------
NET ASSETS FOR COMMON STOCK ...................................................................... $64,271,785
-----------
NET ASSETS PER SHARE OF COMMON STOCK (Market value $11.50)........................................ $13.62
======
COMPOSITION OF NET INVESTMENT ASSETS:
Preferred Stock Series TH, $0.01 par value, liquidation preference and asset
coverage per share -- $50,000 and $145,643, respectively; Shares
authorized and outstanding-- 1,000 and 672, respectively....................................... $33,600,000
Common Stock, $0.01 par value: Shares authorized-- 49,999,000; issued
and outstanding-- 4,720,560.................................................................... 47,206
Additional paid-in capital........................................................................ 62,573,844
Dividends in excess of net investment income...................................................... (19,577)
Undistributed net realized gain................................................................... 332,486
Net unrealized appreciation of investments........................................................ 1,337,826
-----------
NET INVESTMENT ASSETS............................................................................. $97,871,785
===========
</TABLE>
-------------------
See Notes to Financial Statements.
7
<PAGE>
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STATEMENT OF OPERATIONS FOR THE YEAR ENDED OCTOBER 31, 2000
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
INTEREST.......................................................................................... $5,815,420
EXPENSES:
Management fee.................................................................. $ 626,641
Stockholder account and registrar services...................................... 92,584
Auditing and legal fees......................................................... 86,915
Auction agent fee............................................................... 83,852
Stockholder reports and communications.......................................... 48,616
Stockholders' meeting........................................................... 28,771
Custody and related services.................................................... 19,929
Directors' fees and expenses.................................................... 6,068
Miscellaneous................................................................... 22,674
---------
TOTAL EXPENSES.................................................................................... 1,016,050
----------
NET INVESTMENT INCOME............................................................................. 4,799,370*
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments................................................ 322,384
Net change in unrealized appreciation/depreciation of investments............... 1,607,402
---------
NET GAIN ON INVESTMENTS........................................................................... 1,929,786
----------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS ................................................ $6,729,156
==========
</TABLE>
-------------------
* Net investment income available for Common Stock is $3,375,851, which is net
of Preferred Stock dividends.
See Notes to Financial Statements.
8
<PAGE>
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STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>
Year Ended October 31,
---------------------------------
2000 2000
------------- --------------
<S> <C> <C>
OPERATIONS:
Net investment income........................................................ $ 4,799,370 $ 4,738,680
Net realized gain on investments............................................. 322,384 1,355,230
Net change in unrealized appreciation/depreciation of investments............ 1,607,402 (8,724,862)
----------- -----------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS FROM OPERATIONS................. 6,729,156 (2,630,952)
----------- -----------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series TH (per share: $2,118.33 and $1,759.74)........... (1,423,519) (1,182,545)
Common Stock (per share: $0.7158 and $0.7544)............................. (3,375,851) (3,556,135)
----------- -----------
Total..................................................................... (4,799,370) (4,738,680)
Dividends in excess of net investment income:
Common Stock (per share: $0.0582 and $0.0406)............................. (274,584) (191,568)
Net realized gain on investments:
Common Stock (per share: $0.285 and $0.314)............................... (1,343,590) (1,475,588)
----------- -----------
DECREASE IN NET INVESTMENT ASSETS FROM DISTRIBUTIONS......................... (6,417,544) (6,405,836)
----------- -----------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued in payment of dividends
(55,784 and 57,575 shares)................................................ 641,427 770,279
Value of shares of Common Stock issued in payment of gain
distribution (21,463 and 16,342 shares)................................... 237,166 245,457
Cost of shares purchased for investment plan
(77,500 and 47,400 shares)................................................ (890,269) (625,882)
----------- -----------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS FROM
CAPITAL SHARE TRANSACTIONS................................................. (11,676) 389,854
----------- -----------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS................................. 299,936 (8,646,934)
NET INVESTMENT ASSETS:
Beginning of year............................................................ 97,571,849 106,218,783
----------- -----------
END OF YEAR (net of dividends in excess of net investment
income of $19,577 and $20,178, respectively).............................. $97,871,785 $97,571,849
=========== ===========
</TABLE>
-----------------------
See Notes to Financial Statements.
9
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with accounting principles generally accepted in the
United States of America, which require management to make certain estimates and
assumptions at the date of the financial statements. The following summarizes
the significant accounting policies of the Fund:
a. SECURITY VALUATION -- All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by an
independent pricing service or, in their absence, at fair value determined in
accordance with procedures approved by the Board of Directors. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost.
b. FEDERAL TAXES -- The Fund has elected to be taxed as a regulated investment
company and intends to distribute substantially all net income and net gain
realized.
c. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments sold
is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Fund amortizes original
issue discounts and premiums paid on purchases of portfolio securities.
Discounts other than original issue discounts are not amortized.
d. DISTRIBUTIONS TO STOCKHOLDERS -- Dividends and distributions paid by the Fund
are recorded on the ex-dividend date.
The treatment for financial statement purposes of distributions made
during the year from net investment income or net realized 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, or realized capital
gain. Where such differences are permanent in nature, they are reclassified
in the components of net assets based on their ultimate characterization for
federal income tax purposes. Any such reclassification will have no effect on
net assets, results of operations, or net asset value per share of the Fund.
2. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding short-term investments, for the year ended October 31,
2000, amounted to $10,469,685 and $13,212,425, respectively.
At October 31, 2000, 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 $2,999,732 and $1,661,906, respectively.
3. DIVIDEND INVESTMENT PLAN -- Under the Fund's Charter, dividends or other
distributions on the Common Stock cannot be declared unless the Fund can satisfy
the requirements of two asset maintenance tests after giving effect to such
distributions. The Fund has satisfied these tests.
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, 2000, 77,500 shares were purchased
in the open market at a cost of $890,269, which represented a weighted average
discount of 13.45% from the net asset value of those acquired shares. A total of
77,247 shares were issued to Plan participants during this period for proceeds
of $878,593, a weighted average discount of 14.11% from the net asset value of
those shares.
4. CAPITALIZATION -- The Fund is authorized to issue 50,000,000 shares of
Capital Stock, par value $0.01 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.
10
<PAGE>
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $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
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 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. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS-- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees 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 $60,151 for stockholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager and/or Seligman Data Corp.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at October 31, 2000, of $19,577 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible by the Fund for federal income tax purposes until such amounts
are paid.
11
<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, based on average shares outstanding
during the period.
"Total investment return" 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.
The ratios of expenses and net investment income to average net investment
assets and to average net assets for Common Stock, for all years presented, do
not reflect the effect of dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
Year Ended October 31,
--------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE: 2000 1999 1998 1997 1996
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING
OF YEAR ...................................... $13.55 $15.47 $15.35 $15.18 $15.31
------ ------ ------ ------ ------
Net investment income .......................... 1.02 1.01 1.05 1.09 1.12
Net realized and unrealized
investment gain (loss) ....................... 0.42 (1.57) 0.51 0.43 0.06
------ ------ ------ ------ ------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS ........................ 1.44 (0.56) 1.56 1.52 1.18
Dividends paid from net investment
income on Preferred Stock .................... (0.30) (0.25) (0.27) (0.26) (0.27)
Dividends paid from net investment
income on Common Stock ....................... (0.72) (0.76) (0.78) (0.83) (0.90)
Dividends in excess of net investment
income paid on Common Stock .................. (0.06) (0.04) (0.12) (0.11) (0.04)
Distribution from net realized gain ............ (0.29) (0.31) (0.27) (0.15) (0.10)
------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET
ASSET VALUE .................................. 0.07 (1.92) 0.12 0.17 (0.13)
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ................... $13.62 $13.55 $15.47 $15.35 $15.18
====== ======== ======== ====== ======
MARKET VALUE, END OF YEAR ...................... $11.50 $11.4375 $15.5625 $15.00 $14.25
====== ======== ======== ====== ======
</TABLE>
12
<PAGE>
--------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
Year Ended October 31,
-------------------------------------------------------------------
TOTAL INVESTMENT RETURN: 2000 1999 1998 1997 1996
------- ------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Based upon market value .................................. 10.29% (20.38)% 12.04% 13.42% 12.62%
Based upon net asset value ............................... 10.26% (5.11)% 8.84% 8.95% 6.77%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
investment assets ...................................... 1.05% 1.12% 1.11% 1.11% 1.11%
Expenses to average net assets for
Common Stock ........................................... 1.62% 1.67% 1.63% 1.65% 1.65%
Net investment income to average
net investment assets .................................. 4.98% 4.61% 4.67% 4.88% 4.98%
Net investment income to average net
assets for Common Stock ................................ 7.64% 6.85% 6.85% 7.21% 7.36%
Portfolio turnover rate .................................. 11.15% 17.66% 14.17% 16.74% 14.05%
NET INVESTMENT ASSETS, END OF
YEAR (000s omitted):
For Common Stock ......................................... $64,272 $63,972 $ 72,619 $ 71,416 $ 70,468
For Preferred Stock ...................................... 33,600 33,600 33,600 33,600 33,600
------- ------- -------- -------- --------
TOTAL NET INVESTMENT ASSETS .............................. $97,872 $97,572 $106,219 $105,016 $104,068
======= ======= ======== ======== ========
</TABLE>
----------
See Notes to Financial Statements.
13
<PAGE>
--------------------------------------------------------------------------------
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, 2000, and the related statements of operations for the year then
ended and of changes in net investment assets for each of the two years in the
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 auditing standards generally accepted
in the United States of America. 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 as of October 31, 2000, 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, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Seligman Quality Municipal Fund, Inc. as of October 31, 2000, the results of its
operations for the year then ended and the changes in its net investment assets
and the financial highlights for all the respective stated periods, in
conformity with accounting principles generally accepted in the United States of
America.
DELOITTE & TOUCHE LLP
New York, New York
November 29, 2000
14
<PAGE>
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"), P.O. Box 9759, Providence, RI 02940-9759.
Under the Plan, Stockholders appoint the Fund as Plan Agent to invest dividends
in shares of the Fund. Such 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, 2000, the Fund purchased 77,500 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
shares certified from time to time by the broker or other nominee as
representing the total amount registered in the nominee's name and
15
<PAGE>
--------------------------------------------------------------------------------
DIVIDEND INVESTMENT PLAN (continued)
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, 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.
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, 2000.
16
<PAGE>
BOARD OF DIRECTORS
JOHN R. GALVIN (2,4)
DIRECTOR, Raytheon Company
RETIRED DEAN, Fletcher School of Law and
Diplomacy at Tufts University
ALICE S. ILCHMAN (3,4)
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON (2,4)
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW (2,4)
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York-Presbyterian Hospital
BETSY S. MICHEL (2,4)
TRUSTEE, The Geraldine R. Dodge Foundation
WILLIAM C. MORRIS (1)
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY (3,4)
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
LEROY C. RICHIE (4)
CHAIRMAN & CEO, Q Standards Worldwide, Inc.
JAMES Q. RIORDAN (3,4)
TRUSTEE, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
RICHARD R. SCHMALTZ (1)
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER (3,4)
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON (2,4)
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO (1)
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
VICE CHAIRMAN, ICI Mutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
FRED E. BROWN
DIRECTOR EMERITUS
----------
Member: (1) Executive Committee
(2) Audit Committee
(3) Director Nominating Committee
(4) Board Operations Committee
17
<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 AND TREASURER
FRANK J. NASTA
SECRETARY
--------------------------------------------------------------------------------
FOR MORE INFORMATION
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) 874-1092 Stockholder Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
18
