- --------------------------------------------------------------------------------
TO THE STOCKHOLDERS
The fiscal year ended October 31, 1999, was a period of steadily rising rates,
which produced a difficult environment for all fixed-income investments,
including municipal bonds.
In October 1998, prior to the start of this fiscal year, taxable bond yields
had fallen to their lowest levels in more than 30 years. This was a result of a
"flight to quality" to the US Treasury market, precipitated by turmoil in
international equity markets, particularly in Asia.
However, as world equity markets recovered from the 1998 global financial
crisis, yields began to move steadily higher and continued to do so throughout
this fiscal year. Initially, municipal bonds remained relatively stable because
of a lack of new issue supply. However, during the last six months of this
fiscal year, municipal bond prices declined, reacting to an economic environment
of robust growth, a tighter Federal Reserve Board policy, and inflation worries.
By the end of the fiscal year, municipal bond yields had risen to their highest
levels in more than three years.
During periods of rising rates, fixed-income securities generally decline in
price, and the holdings in the Fund's portfolio were no exception. This caused
the Fund's net asset value (NAV) to decline. On a more positive note, rising
rates allowed the Fund to take advantage of some attractive yields during the
period. Accordingly, the Fund reduced its holdings in shorter-term bonds and
purchased longer-term bonds, which enabled the portfolio to lock in higher
yields.
Looking ahead, we believe that the US economy will slow, as was intended by
the Fed's recent restrictive actions, and that inflation fears will thus
subside, reducing bond market volatility. We anticipate that the municipal
market will outperform the Treasury market during the coming fiscal year as a
result of the positive and continually improving municipal market fundamentals,
the most significant of which is the slowdown in municipal issuance, which is
expected to continue into the new year.
J. & W. Seligman & Co. Incorporated, your Fund's manager, and Seligman Data
Corp., your Fund's stockholder service agent, have completed preparations for
potential Year 2000 (Y2K)-related computer problems. All internal
mission-critical systems, software, and interfaces have been tested for Y2K
compliance with successful results. This is an issue to which we have devoted
considerable time and resources for the past several years. We believe that the
Fund's stockholders will not be inconvenienced or experience disruptions as a
result of Y2K-related issues at Seligman.
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, portfolio of investments, and financial statements, follows this
letter.
By order of the Board of Directors,
/s/ William C. Morris
- ----------------------
William C. Morris
Chairman
/s/ Thomas G. Moles
-------------------
Thomas G. Moles
President
December 3, 1999
1
<PAGE>
- --------------------------------------------------------------------------------
INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
WHAT ECONOMIC AND MARKET FACTORS AFFECTED SELIGMAN QUALITY MUNICIPAL FUND OVER
THE PAST FISCAL YEAR?
At the end of the Fund's last fiscal year in October 1998, turmoil in world
equity markets produced a "flight to quality," in which investors around the
world pursued the relative safety of US Treasury securities, which drove yields
for these securities to their lowest levels in 30 years. While municipal bond
yields did not fall to the same degree, their yields also declined in that
environment and their yields hit 29-year lows. For the next several months,
municipal bond yields fluctuated within a narrow trading range.
[PHOTO OMITTED]
SELIGMAN MUNICIPALS TEAM: (FROM LEFT) AUDREY KUCHTYAK, THERESA BARION, DEBRA
MCGUINNESS, (SEATED) EILEEN COMERFORD, THOMAS G. MOLES (PORTFOLIO MANAGER)
As calendar year 1999 began, however, a number of key economic releases
suggested that economic growth was strengthening, and the resulting inflation
fears sent US Treasury yields sharply higher. Initially, the rise in municipal
yields was restrained by a slowdown in the supply of municipal bonds. However,
as concern regarding the pace of economic activity intensified, the lack of
supply was not enough to keep long-term municipal yields from rising. The
Federal Reserve Board's decision to raise the federal funds rate in June and
again in August subdued some inflation worries, which temporarily stabilized the
bond markets. Investors, however, soon began to worry once again about tight
labor markets and recovering world economies, and bond yields resumed their
upward climb. By the end of Seligman Quality Municipal Fund's fiscal year,
municipal yields were at their highest levels in more than three years.
WHAT WAS YOUR INVESTMENT STRATEGY?
During the past fiscal year, we focused on achieving two primary objectives:
increasing the yields of the Fund's holdings and improving overall call
protection for the Fund's portfolio. As long-term municipal yields began to rise
during the second half of the fiscal year, we intensified portfolio activity to
take advantage of the higher yields that were available. We concentrated these
new purchases in essential service revenue bonds such as transportation, sewer,
and school district bonds, and sought bonds that provided at least nine years of
call protection. At the same time, we reduced the portfolio's exposure to bonds
with short calls. We also purchased bonds with maturities ranging from 25 to 40
years. In general, the long end of the municipal market offers the highest
yields as well as increased liquidity. However, during periods of rising
interest rates, such as we have been experiencing, longer-term bonds decline
more in price than shorter-term bonds. As a result, Seligman Quality Municipal
Fund's net asset value fell more than it would have had we purchased securities
with shorter maturities. However, if interest rates fall during the coming
fiscal year, as we expect, longer-term bonds will appreciate more than
shorter-term bonds.
2
<PAGE>
- --------------------------------------------------------------------------------
INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES
Seligman Quality Municipal Fund remains well diversified among all major
sectors of the municipal marketplace. Most sectors have been stable with the
exception of health care, which remains vulnerable to further credit-quality
deterioration, mainly as a result of government cutbacks and the growth of
managed care. Many well-managed health care providers with consistently sound
finances are suddenly facing serious budget deficits. As a result of this
alarming trend, we have been particularly diligent in monitoring the Fund's
health care holdings. Despite the current situation, this sector continues to
offer selective opportunities. Through in-depth credit analysis, we endeavor to
identify strong health care credits to include in the Fund's portfolio.
WHAT IS YOUR OUTLOOK?
The long-awaited economic slowdown has yet to materialize, which has raised
inflationary concerns and has caused bond yields to rise steadily in response.
For the remainder of 1999, bond markets will likely experience continued
volatility until signs emerge that the economy is moderating. However, the
Federal Reserve Board's decision on November 16 to further tighten monetary
policy is a clear indication that the Fed will remain vigilant regarding
inflation.
As we approach the new millennium, we believe that there is much to be
optimistic about. In the year 2000, the US economy will likely enter its tenth
year of expansion. The financial wellbeing of the nation's states, cities, and
municipalities continues to improve, with many reporting record budget
surpluses. The jobless rate remains below 5% nationally, and consumer confidence
remains high. Last, as one of the few remaining possible ways to shelter income,
municipal bond funds offer a significant yield advantage over the after-tax
yields of many taxable bond investments.
3
<PAGE>
- --------------------------------------------------------------------------------
INVESTMENT RESULTS PER COMMON SHARE
- --------------------------------------------------------------------------------
TOTAL RETURNS*
FOR PERIODS ENDED OCTOBER 31, 1999
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------
SINCE
THREE ONE FIVE INCEPTION
MONTHS YEAR YEARS 11/29/91
------ ----- ----- --------
<S> <C> <C> <C> <C>
Market Price** (9.27)% (20.38)% 7.82% 3.97%
Net Asset Value** (3.75) (5.11) 7.61 7.09
<CAPTION>
PRICE PER SHARE
OCTOBER 31, 1999 JULY 31, 1999 APRIL 30, 1999 JANUARY 31, 1999 OCTOBER 31, 1998
---------------- ------------- -------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C>
Market Price $11.4375 $12.8125 $14.00 $13.50 $15.5625
Net Asset Value 13.55 14.31 14.94 15.17 15.47
<CAPTION>
DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED OCTOBER 31, 1999
CAPITAL GAIN (LOSS)
------------------------------------
DIVIDENDS PAID+ PAID REALIZED UNREALIZED
-------------- ------- -------- -----------
<C> <C> <C> <C>
$0.795 $0.314 $0.287 $(0.057)++
</TABLE>
ANNUAL DISTRIBUTION RATE
The annual distribution rate based on current market price at October 31, 1999,
was 6.95%, which is equivalent to a taxable yield of 11.28% 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 3.00%
to 4.85%. 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 depreciation of portfolio
securities as of October 31, 1999.
- --------------------------------------------------------------------------------
4
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE RATINGS+
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ALABAMA--4.3% $5,000,000 Jefferson County Sewer Rev. (Capital Improvement
Warrants), 5.125% due 2/1/2039 .......................... Aaa/AAA $ 4,224,850
ALASKA--1.0% 70,000 Alaska Housing Finance Corporation (Collateralized
Mortgage Obligation), 7.05% due 6/1/2025 ................ Aaa/AAA 72,678
825,000 Alaska Housing Finance Corporation (Collateralized
Veterans' Mortgage Program), 6.50% due 6/1/2034 ......... Aaa/AAA 841,797
CALIFORNIA--13.1 % 4,000,000 Foothill/Eastern Transportation Corridor Agency Toll
Road Rev., 5.75% due 1/15/2040 .......................... Baa3/BBB- 3,672,160
5,000,000 San Diego Public Facilities Financing Authority Sewer
Rev., 5% due 5/15/2029 .................................. Aaa/AAA 4,305,700
5,000,000 San Francisco City and County Airports Commission
Rev. (International Airport), 5.80% due 5/1/2021* ....... Aaa/AAA 4,839,050
HAWAII--1.9% 1,750,000 Hawaii State Airports System Rev., 7% due 7/1/2020* ...... Aaa/AAA 1,837,972
ILLINOIS--4.3% 5,000,000 Illinois Educational Facilities Authority Rev.
(University of Chicago), 5.125% due 7/1/2038 ............ Aa1/AA 4,227,100
KANSAS--3.2% 3,000,000 Burlington Pollution Control Rev. (Kansas Gas and
Electric Company Project), 7% due 6/1/2031 .............. Aaa/AAA 3,151,440
LOUISIANA--1.1% 895,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals, Inc. Project),
8% due 5/15/2012++ ...................................... NR/AAA 1,037,395
MASSACHUSETTS--7.6% 4,000,000 Massachusetts Health & Educational Facilities
Authority Rev. (New England Medical Center),
6.625% due 7/1/2025 ..................................... Aaa/AAA 4,194,520
3,000,000 Massachusetts Housing Finance Agency Rev.
(Residential Development), 6.875% due 11/15/2021 ........ Aaa/AAA 3,173,820
MONTANA--5.6% 2,220,000 Forsyth Pollution Control Rev. (Puget Sound
Power & Light Co.), 7.25% due 8/1/2021* ................. Aaa/AAA 2,340,968
1,620,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ................................... Aaa/AAA 1,698,505
845,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ................................... Aaa/AAA 885,949
535,000 Montana State Board of Investments Payroll Tax
Rev. (Workers' Compensation Program),
6.875% due 6/1/2020++ ................................... Aaa/AAA 560,926
NEW YORK--13.5% 3,000,000 Metropolitan Transportation Authority Rev.
(Commuter Facilities), 6.10% due 7/1/20260 .............. Aaa/AAA 3,247,770
2,105,000 New York City GOs, 6.25% due 4/15/2027 ................... A3/A- 2,122,703
195,000 New York City GOs, 6.25% due 4/15/20270 .................. A3/A- 212,004
</TABLE>
- -----------------
See footnotes on page 6.
5
<PAGE>
- --------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS (continued)
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
FACE RATINGS+
STATE AMOUNT MUNICIPAL BONDS MOODY'S/S&P MARKET VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
NEW YORK (continued) $3,000,000 New York Local Government Assistance
Corporation, 7% due 4/1/20210 ........................... Aaa/AAA $ 3,171,630
4,125,000 New York State Thruway Authority General Rev.,
6% due 1/1/20250 ........................................ Aaa/AAA 4,415,524
PENNSYLVANIA--9.9% 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ............. Aaa/AAA 2,635,700
2,000,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.625% due 1/1/2022* ............ Aaa/AAA 2,082,920
5,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* .......... Aaa/AAA 4,953,500
SOUTH CAROLINA--4.9% 2,250,000 South Carolina Ports Authority Rev.,
6.75% due 7/1/2021*++ ................................... Aaa/AAA 2,379,015
2,250,000 South Carolina Ports Authority Rev.,
6.75% due 7/1/2021*++ ................................... Aaa/AAA 2,379,015
TEXAS--8.9% 5,000,000 Houston Water & Sewer Systems Rev.,
6.125% due 12/1/20150 ................................... Aaa/AAA 5,356,850
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 1,982,260
1,315,000 Texas State Veterans' Housing Assistance GOs,
6.80% due 12/1/2023* .................................... Aa1/AA 1,368,586
VIRGINIA--6.0% 2,500,000 Pocahontas Parkway Association Toll Road Rev.
(Route 895 Connector), 5.50% due 8/15/2028 .............. Baa3/BBB- 2,138,775
3,500,000 Virginia Housing Development Authority (Multi-
Family Housing), 7% due 11/1/2012 ....................... Aa1/AA+ 3,689,140
WASHINGTON--7.8% 2,000,000 Chelan County Public Utility District No. 001
(Chelan Hydro Consolidated System Rev.),
5.25% due 7/1/2033* ..................................... Aaa/AAA 1,729,860
860,000 Douglas County Public Utility District No. 1
(Wells Hydroelectric Rev.), 7.80% due 9/1/2018* ......... A/AA- 892,551
5,000,000 King County Sewer GOs, 6.125% due 1/1/2033 ............... Aaa/AAA 5,008,950
WISCONSIN--4.3% 4,000,000 Wisconsin Housing & Economic Development
Authority Housing Rev., 6.85% due 11/1/2012 ............. Aaa/AAA 4,210,160
-----------
TOTAL MUNICIPAL BONDS (Cost $95,311,319)-- 97.4% ................................................................ 95,041,743
VARIABLE RATE DEMAND NOTES (Cost $400,000)-- 0.4% ............................................................... 400,000
OTHER ASSETS LESS LIABILITIES-- 2.2% ............................................................................ 2,130,106
-----------
NET INVESTMENT ASSETS-- 100.0% .................................................................................. $97,571,849
===========
</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.
0 Pre-refunded security.
See Notes to Financial Statements.
6
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES OCTOBER 31, 1999
<TABLE>
<CAPTION>
ASSETS:
<S> <C> <C>
Investments at value:
Long-term holdings (cost $95,311,319)................................ $95,041,743
Short-term holdings (cost $400,000).................................. 400,000 $ 95,441,743
-----------
Cash.................................................................................. 180,110
Interest receivable................................................................... 2,167,857
Expenses prepaid to stockholder service agent......................................... 10,405
Other................................................................................. 8,394
------------
TOTAL ASSETS.......................................................................... 97,808,509
------------
LIABILITIES:
Accrued expenses, taxes, and other.................................................... 236,660
------------
NET INVESTMENT ASSETS................................................................. 97,571,849
Preferred Stock....................................................................... 33,600,000
------------
NET ASSETS FOR COMMON STOCK .......................................................... $63,971,849
============
NET ASSETS PER SHARE OF COMMON STOCK (Market value $11.4375).......................... $13.55
======
COMPOSITION OF NET INVESTMENT ASSETS:
Preferred Stock Series TH, $.01 par value, liquidation preference and asset
coverage per share -- $50,000 and $145,196, 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-- 4,720,813........................................................ 47,208
Additional paid-in capital............................................................ 62,860,703
Dividends in excess of net investment income.......................................... (20,178)
Undistributed net realized gain....................................................... 1,353,692
Net unrealized depreciation of investments............................................ (269,576)
------------
NET INVESTMENT ASSETS................................................................. $97,571,849
============
</TABLE>
- -----------------------
See Notes to Financial Statements.
7
<PAGE>
- --------------------------------------------------------------------------------
STATEMENT OF OPERATIONS For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
INTEREST.............................................................................. $5,893,033
EXPENSES:
Management fee............................................................ $ 668,021
Stockholder account and registrar services................................ 101,341
Auction agent fee......................................................... 83,852
Auditing and legal fees................................................... 83,611
Stockholder reports and communications.................................... 47,600
Custody and related services.............................................. 22,379
Stockholders' meeting..................................................... 16,565
Directors' fees and expenses.............................................. 13,572
Miscellaneous............................................................. 117,412
---------
TOTAL EXPENSES........................................................................ 1,154,353
-----------
NET INVESTMENT INCOME................................................................. 4,738,680*
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments.......................................... 1,355,230
Net change in unrealized appreciation of investments...................... (8,724,862)
---------
NET LOSS ON INVESTMENTS............................................................... (7,369,632)
-----------
DECREASE IN NET INVESTMENT ASSETS FROM OPERATIONS $(2,630,952)
===========
</TABLE>
- ----------------------
* Net investment income available for Common Stock is $3,556,135, which is net
of Preferred Stock dividends.
See Notes to Financial Statements.
8
<PAGE>
STATEMENTS OF CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
------------------------------
1999 1998
-------------- --------------
OPERATIONS:
<S> <C> <C>
Net investment income........................................................ $ 4,738,680 $ 4,915,353
Net realized gain on investments............................................. 1,355,230 1,473,840
Net change in unrealized appreciation of investments......................... (8,724,862) 918,601
----------- ------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS FROM OPERATIONS................. (2,630,952) 7,307,794
----------- ------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series TH (per share: $1,759.74 and $1,865.64)........... (1,182,545) (1,253,710)
Common Stock (per share: $.7544 and $.7823)............................... (3,556,135) (3,661,643)
----------- ------------
Total..................................................................... (4,738,680) (4,915,353)
Dividends in excess of net investment income:
Common Stock (per share: $.0406 and $.1241)............................... (191,568) (580,696)
Net realized gain on investments:
Common Stock (per share: $.314 and $.269)................................. (1,475,588) (1,252,536)
----------- ------------
DECREASE IN NET INVESTMENT ASSETS FROM DISTRIBUTIONS......................... (6,405,836) (6,748,585)
----------- ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued for investment plan
(57,575 and 62,307 shares)................................................ 770,279 945,639
Value of shares of Common Stock issued in payment of gain
distribution (16,342 and 17,439 shares)................................... 245,457 266,817
Cost of shares purchased for investment plan
(47,400 and 37,700 shares)................................................ (625,882) (569,193)
----------- ------------
INCREASE IN NET INVESTMENT ASSETS FROM
CAPITAL SHARE TRANSACTIONS................................................. 389,854 643,263
----------- ------------
INCREASE (DECREASE) IN NET INVESTMENT ASSETS................................. (8,646,934) 1,202,472
NET INVESTMENT ASSETS:
Beginning of year............................................................ 106,218,783 105,016,311
----------- ------------
END OF YEAR (including dividends in excess of net investment
income of $20,178 and $16,669, respectively).............................. $97,571,849 $106,218,783
=========== ============
</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 generally accepted accounting principles, which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
A. SECURITY VALUATION -- All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by an
independent pricing service or, in their absence, at fair value determined in
accordance with procedures approved by the Board of Directors. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost.
B. FEDERAL TAXES -- The Fund has elected to be taxed as a regulated investment
company and intends to distribute substantially all 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,
1999, amounted to $17,683,050 and $18,678,875, respectively.
At October 31, 1999, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation and depreciation of portfolio securities
amounted to $2,859,929 and $3,129,505, respectively.
3. DIVIDEND INVESTMENT PLAN -- Under the Fund's Charter, dividends or other
distributions on the Common Stock cannot be declared unless the Fund can satisfy
the requirements of two separate asset maintenance tests after giving effect to
such distributions.
The Fund, in connection with its Dividend Investment Plan (the "Plan"),
acquires and issues shares of its own Common Stock, as needed, to satisfy Plan
requirements. For the year ended October 31, 1999, 47,400 shares were purchased
in the open market at a cost of $625,882, which represented a weighted average
discount of 9.29% from the net asset value of those acquired shares. A total of
47,373 shares were issued to Plan participants during this period for proceeds
of $615,273, a weighted average discount of 10.20% 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 $.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-
10
<PAGE>
- --------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
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. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager, is paid by the Manager.
The Manager's fee, calculated daily and payable monthly, is equal to 0.65% per
annum of the Fund's average daily net assets.
Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $62,917 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, 1999, of $20,178 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 periods presented, do
not reflect the effect of dividends paid to Preferred Stockholders.
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
-------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE: 1999 1998 1997 1996 1995
----- ----- ----- ----- -----
NET ASSET VALUE, BEGINNING
OF YEAR ................................. $15.47 $15.35 $15.18 $15.31 $13.76
------ ------ ------ ------ ------
Net investment income ..................... 1.01 1.05 1.09 1.12 1.13
Net realized and unrealized
investment gain (loss) .................. (1.57) 0.51 0.43 0.06 1.72
------ ------ ------ ------ ------
INCREASE (DECREASE) FROM
INVESTMENT OPERATIONS ................... (0.56) 1.56 1.52 1.18 2.85
Dividends paid from net investment
income on Preferred Stock ............... (0.25) (0.27) (0.26) (0.27) (0.29)
Dividends paid from net investment
income on Common Stock .................. (0.76) (0.78) (0.83) (0.90) (0.94)
Dividends in excess of net investment
income paid on Common Stock ............. (0.04) (0.12) (0.11) (0.04) --
Distribution from net realized gain ....... (0.31) (0.27) (0.15) (0.10) (0.07)
----- ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET
ASSET VALUE ............................. (1.92) 0.12 0.17 (0.13) 1.55
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR .............. $13.55 $15.47 $15.35 $15.18 $15.31
====== ====== ====== ====== ======
MARKET VALUE, END OF YEAR ................. $11.4375 $15.5625 $15.00 $14.25 $13.625
======== ======== ====== ====== =======
</TABLE>
12
<PAGE>
- --------------------------------------------------------------------------------
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
YEAR ENDED OCTOBER 31,
--------------------------------------------------------------------
TOTAL INVESTMENT RETURN: 1999 1998 1997 1996 1995
------- ------ ------ ------ -------
<S> <C> <C> <C> <C> <C>
Based upon market value (20.38)% 12.04% 13.42% 12.62% 27.87%
Based upon net asset value (5.11)% 8.84% 8.95% 6.77% 20.09%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net
investment assets 1.12% 1.11% 1.11% 1.11% 1.08%
Expenses to average net assets for
Common Stock 1.67% 1.63% 1.65% 1.65% 1.62%
Net investment income to average
net investment assets 4.61% 4.67% 4.88% 4.98% 5.19%
Net investment income to average net
assets for Common Stock 6.85% 6.85% 7.21% 7.36% 7.76%
Portfolio turnover rate 17.66% 14.17% 16.74% 14.05% 8.63%
NET INVESTMENT ASSETS, END OF
YEAR (000s omitted):
For Common Stock $63,972 $ 72,619 $ 71,416 $ 70,468 $ 71,084
For Preferred Stock 33,600 33,600 33,600 33,600 33,600
------- -------- -------- -------- --------
TOTAL NET INVESTMENT ASSETS $97,572 $106,219 $105,016 $104,068 $104,684
======= ======== ======== ======== ========
</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, 1999, the related statements of operations for the year then ended
and of changes in net investment assets for each of the years in the two-year
period then ended, and the financial highlights for each of the years in the
five-year period then ended. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at October
31, 1999, by correspondence with the Fund's custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Seligman Quality Municipal Fund, Inc. as of October 31, 1999, the results of its
operations, the changes in its net investment assets, and the financial
highlights for the respective stated periods in conformity with generally
accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
December 3, 1999
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, RI02940-9759.
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, 1999, the Fund purchased 47,400 shares in the open
market for dividend 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
15
<PAGE>
- --------------------------------------------------------------------------------
DIVIDEND INVESTMENT PLAN (continued)
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 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, 1999.
16
<PAGE>
- --------------------------------------------------------------------------------
YEAR 2000
Seligman Quality Municipal Fund's (the Fund's) manager, J. & W. Seligman &
Co. Incorporated (Seligman) and Seligman Data Corp. (Seligman Data) have
completed preparations for potential Year 2000 (Y2K)-related computer problems.
During the spring of 1999, Seligman and Seligman Data participated in Y2K
testing conducted by the Securities Industry Association. These tests were
completed without any Y2K-related problems on the part of Seligman or Seligman
Data. Tests with key service providers were also conducted, all of which were
successfully completed in a Y2K environment. As of June 30, 1999, all internal
mission-critical systems, software, and interfaces had been tested for Y2K
compliance with successful results. Seligman and Seligman Data believe that the
Fund's stockholders will not experience any disruptions or inconveniences as a
result of Y2K issues at Seligman or Seligman Data.
The Fund holds securities issued by governmental or quasi-governmental
issuers which, like other organizations, may be susceptible to Y2K concerns. Y2K
issues may affect an issuer's operations, creditworthiness, and ability to make
timely payment on any indebtedness and could have an adverse impact on the value
of its securities. If the Fund holds these securities, its performance could be
negatively affected. The Manager seeks to identify an issuer's state of Y2K
readiness as part of the research it employs. However, the perception of an
issuer's Y2K preparedness is only one of the many factors considered in
determining whether to buy, sell, or continue to hold a security. Information
provided by issuers concerning their state of readiness may or may not be
accurate or readily available.
Seligman Data has informed the Fund that it does not expect the cost of its
services to increase as a result of Y2K. The Fund will not pay to remediate the
systems of the Manager or bear directly the cost to remediate the systems of any
other service providers or vendors, other than Seligman Data.
17
<PAGE>
- --------------------------------------------------------------------------------
BOARD OF DIRECTORS
JOHN R. GALVIN 2,4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3,4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2,4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
DIRECTOR, Conoco Inc.
JOHN E. MEROW 2,4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
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
JAMES Q. RIORDAN 3,4
TRUSTEE, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R.SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. &W. Seligman &Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3,4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2,4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT, J. &W. Seligman &Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICIMutual Insurance Company
MEMBER OF THE BOARD OF GOVERNORS,
Investment Company Institute
DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT,
J. &W. Seligman &Co. Incorporated
- ---------------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
18
<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) 874-1092 Stockholder Services
(212) 682-7600 Outside the
United States
(800) 622-4597 24-Hour Automated
Telephone Access
Service
19
<PAGE>
SELIGMAN
[GRAPHIC OMITTED]
QUALITY
[GRAPHIC OMITTED]
MUNICIPAL
FUND, INC.
Seligman Quality Municipal Fund, Inc.
MANAGED BY [GRAPHIC OMITTED]
[LOGO OMITTED]
J. & W. SELIGMAN & CO.
INCORPORATED
Investment Managers and Advisors [LOGO OMITTED]
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017 ANNUAL REPORT
OCTOBER 31, 1999
CESQF2 10/99
