DEF 14A 1 ddef14a.txt SELIGMAN QUALITY MUNICIPAL FUND, INC. SCHEDULE 14A Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ) Filed by the Registrant [X] Filed by a Party other than the Registrant [_] Check the appropriate box: [_] Preliminary Proxy Statement [_] CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY (AS PERMITTED BY RULE 14A-6(E)(2)) [X] Definitive Proxy Statement [_] Definitive Additional Materials [_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12 SELIGMAN QUALITY MUNICIPAL FUND, INC. -------------------------------------------------------------------------------- (Name of Registrant as Specified In Its Charter) [INSERT NAME] -------------------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] No fee required. [_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11. (1) Title of each class of securities to which transaction applies: ------------------------------------------------------------------------- (2) Aggregate number of securities to which transaction applies: ------------------------------------------------------------------------- (3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): ------------------------------------------------------------------------- (4) Proposed maximum aggregate value of transaction: ------------------------------------------------------------------------- (5) Total fee paid: ------------------------------------------------------------------------- [_] Fee paid previously with preliminary materials. [_] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. (1) Amount Previously Paid: ------------------------------------------------------------------------- (2) Form, Schedule or Registration Statement No.: ------------------------------------------------------------------------- (3) Filing Party: ------------------------------------------------------------------------- (4) Date Filed: ------------------------------------------------------------------------- Seligman Quality Municipal Fund, Inc. 100 Park Avenue, New York, New York 10017 New York City Telephone (212) 850-1864 Toll-Free Telephone (800) 221-2450 Notice of Annual Meeting of Stockholders to be held on October 19, 2006 To the Stockholders: The fourteenth Annual Meeting of Stockholders (the "Meeting") of Seligman Quality Municipal Fund, Inc., a Maryland corporation (the "Fund"), will be held at 9:30 a.m., on October 19, 2006 at the offices of Sullivan & Cromwell LLP, 375 Park Avenue, 8th Floor, New York, New York 10152, for the following purposes: (1) To elect three Directors, each to hold office until the 2009 Annual Meeting of Stockholders and until their successors are elected and qualify; (2) To act on a proposal to ratify the selection of Deloitte & Touche LLP as auditors of the Fund for 2006; (3) To act upon, if properly presented at the Meeting, a stockholder proposal; and (4) To transact such other business as may properly come before the Meeting or any adjournment or postponement thereof, including proposing and/or voting on adjournment or postponement of the Meeting, including, without limitation, in the event that sufficient votes in favor of any proposal or nominee for election as a Director of the Board of Directors are not received, in the discretion of the proxy holder; all as more particularly set forth in the Proxy Statement accompanying this Notice. The close of business on August 18, 2006 has been fixed as the record date for the determination of Stockholders entitled to notice of, and to vote at, the Meeting or any adjournment or postponement thereof. Only directors, officers, employees and agents of the Fund and holders of the Fund's stock as of the record date for the Meeting and their duly authorized proxies are entitled to attend the Meeting. You will need to provide proof of ownership of the Fund's stock or, if your shares are held in street name, a proxy from the street name holder to enter the Meeting. This Meeting is extremely important in light of the announcement by a group of dissident Stockholders of their intention to solicit proxies against the nominees of your Board of Directors (the "Board"). These dissident Stockholders have also announced their intent to support the stockholder proposal that is strongly opposed by your Board (Proposal 3). YOUR VOTE IS VERY IMPORTANT. Whether or not you plan to attend the Meeting, and regardless of the number of shares you own, we urge you to vote for your Board's nominees and against the stockholder proposal by promptly completing, signing, dating and returning the enclosed White Proxy Card, or by authorizing your proxy by telephone or the Internet as described in the enclosed White Proxy Card. We strongly urge you not to sign any proxy card that may be sent to you by dissident Stockholders. If you have previously returned any proxy card sent to you by a dissident Stockholder or any person other than the Fund, or if you previously gave your proxy to a dissident Stockholder by Internet or telephone, you may change any vote you may have indicated by completing, signing, dating and returning the enclosed White Proxy Card in the accompanying envelope, or by authorizing your proxy by telephone or Internet as described in the enclosed White Proxy Card. In addition, you may be able to authorize your proxy by telephone through the Fund's proxy solicitor. If you hold your shares in a brokerage or bank account (in "street name"), your broker or bank might not be able to vote your shares this year (as it has in past routine annual meetings) unless you complete, sign, date and return promptly the voting instructions form it will send you. A New York Stock Exchange ("NYSE") rule prohibits its members (including most brokers) from voting your shares without voting instructions from you in certain circumstances. The NYSE will advise its members of how it believes its rule should apply to the proposals to come before the Meeting, and it is possible that brokers will be able to vote without instructions only in respect of Proposal 2. If you hold your shares in a brokerage or bank account, your broker or bank may allow you to provide your voting instructions by telephone or Internet. Please consult the materials you receive from your broker or bank prior to authorizing a proxy by telephone or Internet. We strongly urge you to support the Board's nominees. If you have any questions or need additional information, please contact Georgeson Shareholder Communications Inc., the Fund's proxy solicitors, at 17 State Street, New York, New York 10004, or by telephone at 1-866-482-5164. By order of the Board of Directors, /s/ Frank J. Nasta Frank J. Nasta Secretary Dated: New York, New York, September 11, 2006 ----------------- YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN You may authorize your proxy by telephone or Internet, or by completing, dating and signing the enclosed White Proxy Card, and returning it in the envelope provided, which is addressed for your convenience and needs no postage if mailed in the United States. In order to avoid the additional expense of further solicitation, we ask your cooperation in authorizing your proxy promptly by telephone or Internet, or by mailing the enclosed White Proxy Card promptly. 2 September 11, 2006 Seligman Quality Municipal Fund, Inc. 100 Park Avenue, New York, New York 10017 PROXY STATEMENT for the Annual Meeting of Stockholders to be held on October 19, 2006 This Proxy Statement is furnished to you in connection with the solicitation of Proxies by the Board of Directors of Seligman Quality Municipal Fund, Inc., a Maryland corporation (the "Fund"), to be used at the fourteenth Annual Meeting of Stockholders (the "Meeting") to be held in New York, New York on October 19, 2006. It is expected that the Notice of Annual Meeting, this Proxy Statement and the form of Proxy will first be mailed to Stockholders on or about September 11, 2006. THIS IS A VERY IMPORTANT ANNUAL MEETING OF STOCKHOLDERS OF THE FUND. The Fund has received three communications indicating that certain dissident Stockholders intend to solicit proxies against the nominees of your Board of Directors (the "Board") and in favor of their own nominees for election to the Board. However, because such communications did not comply with the requirements of the Fund's Bylaws, any such purported nominations will be ruled out of order in the event they are made at the Meeting, as will certain purported proposals by the same persons that likewise failed to comply with the requirements of the Fund's Bylaws. Since no notice of the nomination by any stockholder of candidates for election as directors in accordance with the Fund's Bylaws was received by the Fund, the election of directors at the Meeting will not be contested. However, it is possible that the dissident Stockholders may solicit proxies that "withhold authority to vote" for the Board's nominees. The dissident Stockholders have also indicated their support of the proposal described below (Proposal 3), which is strongly opposed by your Board. Your Board strongly urges you to support the Board's experienced nominees for reelection and not to respond to any solicitations from the dissident Stockholders. If you properly authorize your proxy by telephone or Internet or by executing and returning the enclosed White Proxy Card, and your proxy is not subsequently revoked, your votes will be cast at the Meeting, and any postponement or adjournment thereof, in accordance with your instructions. If you return your signed White Proxy Card without instructions, your votes will be cast (i) FOR the 1 election of the three Directors named in Proposal 1, (ii) FOR Proposal 2, the ratification of the selection of auditors, and (iii) AGAINST Proposal 3. Your votes will be cast in the discretion of the Proxy holders on any other matter that may properly have come before the Meeting or any adjournment or postponement thereof, including proposing and/or voting on adjournment or postponement of the Meeting, including, without limitation, in the event that sufficient votes in favor of any proposal or nominee for election as a Director are not received, in the discretion of the proxy holder. If you execute, date and submit a proxy card, you may revoke your proxy or change it by written notice to the Fund (Attention: Secretary) by submitting a subsequently executed and dated proxy or by attending the Meeting and casting your vote in person. If you submit your proxy by telephone or through the Internet, you may revoke it by authorizing a subsequent proxy by telephone or Internet, or by completing, signing and returning a proxy card dated as of a date that is later than your last telephone or Internet proxy submission or by attending the Meeting and casting your votes in person. Attending the Meeting will not by itself automatically revoke any previously delivered proxy. The close of business on August 18, 2006 has been fixed as the record date for the determination of Stockholders entitled to notice of, and to vote at, the Meeting or any adjournment or postponement thereof. On that date, the Fund had outstanding 672 shares of municipal auction rate cumulative preferred stock, series TH (the "Preferred Shares"), and 4,731,706 shares of common stock, par value $0.01 per share (the "Common Shares"), with each such Preferred Share and Common Share outstanding on the record date being entitled to one vote. For all matters to be voted upon, an abstention or broker non-vote will not be considered a vote cast. Abstentions and broker non-votes, if any, will be considered present for the purpose of determining the presence of a quorum. For purposes of the vote on the election of each nominee for Director, abstentions and broker non-votes, if any, with respect to a nominee for Director will have the same effect as instructions to withhold votes in respect of the nominee. This is because the majority voting requirement for Directors has the effect that votes not cast in favor of the nominee are effectively votes against such nominee. Furthermore, any purported vote for a person other than a nominee of the Board will be treated as a vote to withhold votes for one of the Board's nominees and have the same effect as an abstention (i.e. a vote against the Board nominees). For purposes of the vote on Proposal 2 and Proposal 3, abstentions and broker non-votes, if any, will have no effect on the result of the vote. The presence in person or by proxy of Stockholders entitled to cast a majority of all the votes entitled to be cast at the Meeting will constitute a quorum. In the event that a quorum is not present at the Meeting or, even if a quorum is present, in the event that sufficient votes in favor of any Board proposal (or the election of each of the Board's nominees for Director) are not received and 2 tabulated prior to the time the Meeting is called to order, the persons named as proxies may propose and vote for one or more adjournments or postponements of the Meeting, with no notice other than an announcement at the Meeting, if a quorum is not present or, if a quorum is present, before calling for a vote on such Board proposal or nominee, and further solicitation may be made. The proxies given by Stockholders indicating a vote against or inconsistent with a Board proposal will be voted against adjournment of the Meeting in respect of that proposal. The Fund's manager is J. & W. Seligman & Co. Incorporated (the "Manager"). The Fund's stockholder service agent is Seligman Data Corp. ("SDC"). The address of each of these entities is 100 Park Avenue, New York, NY 10017. The Fund will furnish, without charge, a copy of its most recent annual report and most recent semi-annual report to any Stockholder upon request to SDC at 1-800-221-2450. If you have elected to receive one Proxy Statement for all accounts maintained by members of your household, the Fund will deliver promptly upon written or oral request a separate copy of the Proxy Statement for a separate account. A. Election of Directors (Proposal 1) The Board of Directors is presently composed of eight Directors. The Board is divided into three classes, two of which consists of three Directors and one of which consists of two Directors. Members of each class hold office for a term of three years and until their successors are elected and qualify, unless elected in the interim. The term of one class expires in each year. At the Meeting this year, three Directors are to be elected. General John R. Galvin and Ambassador Robert L. Shafer and Mr. William C. Morris, each of whose term will expire at the 2006 Annual Meeting of Stockholders and when their successors are elected and qualify, have been unanimously recommended by the Director Nominating Committee of the Board of Directors for election to the class of Directors whose term will expire at the 2009 Annual Meeting of Stockholders and when their successors are elected and qualify. General Galvin, Ambassador Shafer and Mr. Morris have been nominated by the Board for election by the holders of the Common Shares and Preferred Shares, voting together as a single class, and as such are designated as both Common and Preferred Directors. Although General Galvin has reached the retirement age set by Board policy, the Board has waived this policy in his case at the unanimous recommendation of the Director Nominating Committee. 3 It is the intention of the persons named in the accompanying form of proxy, if so authorized, to cast your votes for the election of General Galvin, Ambassador Shafer and Mr. Morris. General Galvin has been a Director of the Fund since 1995, Ambassador Shafer has been a Director of the Fund since 1991 and Mr. Morris has been a Director and Chairman of the Fund since 1990. All were last elected by Stockholders at the 2003 Annual Meeting of Stockholders. Each nominee has agreed to serve if elected. There is no reason to believe that any of the nominees will become unavailable for election as a Director of the Fund, but if that should occur before the Meeting, the persons named as proxies will vote at the Meeting or any adjournment or postponement thereof for the persons the Director Nominating Committees and the Board of Directors recommend. As discussed above, a group of dissident Stockholders has announced its intention to solicit proxies against the nominees of your Board. The agenda of the dissidents is to open-end or liquidate the Fund. Your Board strongly believes that open-ending is NOT in the best interests of the Fund, for the reasons discussed at Proposal 3 below. 4 Your Board Unanimously Recommends a Vote "FOR" Each of General Galvin, Ambassador Shafer and Mr. Morris. Background information regarding General Galvin, Ambassador Shafer and Mr. Morris, as well as the other Directors of the Fund, follows.
Term of Number of Office if Portfolios in Elected and Principal Occupation(s) During Fund Complex Name (Age) and Length of Past 5 Years, to be Overseen Position With Fund* Time Served Directorships and Other Information by Nominee ------------------- ------------ ------------------------------------------------------------------- -------------- Independent Director Nominees John R. Galvin (77) 2006-2009; Dean Emeritus, Fletcher School of Law and Diplomacy at Tufts 58 Director 1995 to Date University; Director or Trustee of each of the investment companies [PHOTO] John R. Galvin of the Seligman Group of Funds+; and Chairman Emeritus, American Council on Germany. Formerly, Director, Raytheon Co. (defense and commercial electronics), Governor of the Center for Creative Leadership, and Trustee, Institute for Defense Analyses. From February 1995 until June 1997, he was a Director of USLIFE Corporation (life insurance). From June 1987 to June 1992, he was the Supreme Allied Commander, NATO, and the Commander-in- Chief, United States European Command. Robert L. Shafer (74) 2006-2009; Ambassador and Permanent Observer of the Sovereign Military 58 Director 1991 to Date Order of Malta to the United Nations; and Director or Trustee of [PHOTO] Robert L. Shafer each of the investment companies of the Seligman Group of Funds+. From May 1987 until June 1997, Director, USLIFE Corporation (life insurance) and from December 1973 until January 1996, Vice President, Pfizer Inc. (pharmaceuticals).
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Term of Number of Office if Portfolios in Elected and Principal Occupation(s) During Fund Complex Name (Age) and Length of Past 5 Years, to be Overseen Position With Fund* Time Served Directorships and Other Information by Nominee ------------------- ------------ ------------------------------------------------------------------ -------------- Interested Director Nominee William C. Morris** (68) 2006-2009; Chairman, J. & W. Seligman & Co. Incorporated; Chairman of 58 Director and Chairman 1990 to Date the Board and Director or Trustee of each of the investment of the Board companies of the Seligman Group of Funds+; Chairman, Seligman [PHOTO] William C. Morris Advisors, Inc., Seligman Services, Inc. and Carbo Ceramics Inc. (manufacturer of ceramic proppants for oil and gas industry); Director, Seligman Data Corp.; and President and Chief Executive Officer of The Metropolitan Opera Association. Formerly, Director, Kerr-McGee Fund (diversified energy and chemical company) and Chief Executive Officer of each of the investment companies of the Seligman Group of Funds.
Other Directors The other Directors of the Fund who are not standing for election in 2006 are:
Term of Number of Office Portfolios in and Length Principal Occupation(s) During Fund Complex Name (Age) and of Time Past 5 Years, Overseen by Position With Fund* Served Directorships and Other Information Director ------------------- ------------ ---------------------------------------------------------------------- ------------- Independent Directors Betsy S. Michel (64) 2005-2008; Attorney; Director or Trustee of each of the investment companies of 58 Director 1991 to Date the Seligman Group of Funds+; and Trustee, The Geraldine R. Dodge Foundation (charitable foundation). Formerly, Chairman of the Board of Trustees of St. George's School (Newport, RI); and Trustee, World Learning, Inc. (international educational training) and Council of New Jersey Grantmakers. James N. Whitson (71) 2005-2008; Retired Executive Vice President and Chief Operating Officer, 58 Director 1993 to Date Sammons Enterprises, Inc. (a diversified holding company); Director or Trustee of each of the investment companies of the Seligman Group of Funds+; and Director, CommScope, Inc. (manufacturer of coaxial cable). Formerly, Director and Consultant, Sammons Enterprises, Inc. and a Director of C-SPAN (cable television networks).
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Term of Number of Office Portfolios in and Length Principal Occupation(s) During Fund Complex Name (Age) and of Time Past 5 Years, Overseen by Position With Fund* Served Directorships and Other Information Director ------------------- ------------ ---------------------------------------------------------------------- ------------- Frank A. McPherson (73) 2004-2007; Retired Chairman of the Board and Chief Executive Officer of 58 Director 1995 to Date Kerr-McGee Corporation (diversified energy and chemical company); Director or Trustee of each of the investment companies of the Seligman Group of Funds+; and Director, DCP Midstream GP, LLP (natural gas processing), Integris Health (owner of various hospitals), Oklahoma Chapter of the Nature Conservancy, Oklahoma Medical Research Foundation, Boys and Girls Clubs of Oklahoma, Oklahoma City Public Schools Foundation and Oklahoma Foundation for Excellence in Education. Formerly, Director, ConocoPhillips (integrated international oil corporation), Kimberly-Clark Fund (consumer products) and BOK Financial (bank holding company). From 1990 until 1994, Director, the Federal Reserve System's Kansas City Reserve Bank. Leroy C. Richie (64) 2004-2007; Counsel, Lewis & Munday, P.C. (law firm); Chairman and Chief 57 Director 2000 to Date Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director or Trustee of each of the investment companies of the Seligman Group of Funds+ (with the exception of Seligman Cash Management Fund, Inc.); Director, Kerr-McGee Fund (diversified energy and chemical company), Infinity, Inc. (oil and gas services and exploration) and Vibration Control Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally Inc. (digital imaging); Director and Chairman, Highland Park Michigan Economic Development Corp.; and Chairman, Detroit Public Schools Foundation. Formerly, Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. From 1990 until 1997, Vice President and General Counsel, Automotive Legal Affairs, Chrysler Fund. Interested Director Brian T. Zino** (53) 2005-2008; Director and President, J. & W. Seligman & Co. Incorporated; 57 Director, President and Dir.: 1993 President, Chief Executive Officer and, with the exception of Chief Executive Officer to Date Seligman Cash Management Fund, Inc., Director or Trustee of each of Pres.: 1995 the investment companies of the Seligman Group of Funds+; Director, to Date Seligman Advisors, Inc. and Seligman Services, Inc.; Chairman, CEO: 2002 Seligman Data Corp.; Member of the Board of Governors of the to Date Investment Company Institute; and Director (formerly Chairman), ICI Mutual Insurance Company.
----------------- + The Seligman Group of Funds currently consists of 24 registered investment companies (comprising 58 separate portfolios), including the Fund. * The address for each Director or Nominee is 100 Park Avenue, New York, New York 10017. ** Messrs. Morris and Zino are considered "interested persons" of the Fund, as defined in the Investment Company Act of 1940, as amended ("1940 Act"), by virtue of their positions with the Manager and its affiliates. 7 Beneficial Ownership of Shares of the Fund and Funds of Complex As of July 31, 2006 each Director (and Nominee) beneficially owned shares of the Fund and the investment companies of the Seligman Group of Funds as follows:
Aggregate Dollar Range of Shares Owned by Director or Nominee of All Funds Overseen or to Dollar Range of Common be Overseen by Director Shares Owned by Director or Nominee of Seligman Name of Director/Nominee or Nominee of the Fund Group of Funds ------------------------ ------------------------- ------------------------- Independent Directors/Nominees John R. Galvin $1-$10,000 $50,001-$100,000 Frank A. McPherson $1-$10,000 Over $100,000 Betsy S. Michel $1-$10,000 Over $100,000 Leroy C. Richie $1-$10,000 $10,001-$50,000 Robert L. Shafer $1-$10,000 Over $100,000 James N. Whitson $10,001-$50,000 Over $100,000 Interested Directors/Nominee William C. Morris Over $100,000 Over $100,000 Brian T. Zino $10,001-$50,000 Over $100,000
As of July 31, 2006, all Directors and officers of the Fund as a group owned beneficially less than 1% of the Fund's Common Shares and less than 1% of the Fund's Preferred Shares. As of August 18, 2006, the record date in respect of the Meeting or any adjournment or postponement thereof, no person was known by the Fund to beneficially own more than 5% of the Fund's Common Shares except as follows:
Number of Common Shares Name of Owner Beneficially Owned Percent of Class ------------- ----------------------- ---------------- Bulldog Investors-Karpus Group* 1,417,956 30.0%
----------------- * Information regarding Group membership and shareholdings was obtained from the Schedule 13D/A filed jointly as a group on July 28, 2006. According to the joint Schedule 13D/A, the members of the Group are: Bulldog Investors and Phillip Goldstein (each at 60 Heritage Drive, Pleasantville, New York 10570); Andrew Dakos (43 Waterford Drive, Montville, New Jersey 07045); and Karpus Investment Management, Jo Ann Van Degriff, George W. Karpus, Karpus Management, Inc., and Urbana Partners L.P. (each at 183 Sullys Trail, Pittsford, New York 14534). Section 16(a) Beneficial Ownership Reporting Compliance During the year ended December 31, 2005, no late filings were made by reporting persons in respect of the Fund. 8 Board Committees The Board of Directors met 9 times during the fiscal year ended October 31, 2005. The standing committees of the Board include the Board Operations Committee, Audit Committee, and Director Nominating Committee. These Committees are comprised solely of Directors who are not "interested persons" of the Fund as that term is defined in the 1940 Act. The duties of these Committees are described below. Board Operations Committee. This Committee has authority generally to direct the operations of the Board, including the nomination of members of other Board Committees and the selection of legal counsel for the Fund. The Committee met 8 times during the fiscal year ended October 31, 2005. The members of the Committee, Messrs. McPherson (Chairman), Richie and Whitson, Ambassador Shafer, General Galvin and Ms. Michel, are the independent Directors of the Fund. In his capacity as Chairman of the Board Operations Committee, Mr. McPherson performs duties similar to those of a "lead independent director," as he chairs meetings of the independent Directors, and acts as a point of contact between the independent Directors and the Manager between Board meetings in respect of general matters. Audit Committee. This Committee assists the Board in its oversight of the Fund's financial reporting process and operates pursuant to a written charter most recently amended on March 17, 2005. The Committee met three times during the fiscal year ended October 31, 2005. Members of this Committee are Messrs. Whitson (Chairman) and Richie, General Galvin and Ms. Michel. The members of this Committee are "independent" as required by applicable listing standards of the New York Stock Exchange. The report of the Audit Committee, as approved on February 1, 2006, is attached to this Proxy Statement as Appendix 1. Director Nominating Committee. Members of the Director Nominating Committee are Ambassador Shafer (Chairman) and Mr. McPherson. The Director Nominating Committee met once during the fiscal year ended October 31, 2005. On March 18, 2004, the Board of Directors adopted a written charter for the Director Nominating Committee. Pursuant to the charter, the Director Nominating Committee identifies, evaluates, selects and nominates, or recommends for nomination, candidates for the Board. It also may set standards or qualifications for Directors. The Director Nominating Committee may consider candidates for the Board submitted by current Directors, the Manager, the Stockholders and other appropriate sources. 9 The Director Nominating Committee will consider candidates submitted by a Stockholder or group of Stockholders who have owned at least $10,000 of the Fund's outstanding Common Shares for at least one year at the time of submission and who timely provide specified information about the candidates and the nominating Stockholder or group. To be timely for consideration by the Director Nominating Committee, the submission, including all required information, must be submitted in writing to the attention of the Secretary at 100 Park Avenue, New York, NY 10017, (i) for an annual meeting, not less than 120 days before the date of the proxy statement for the previous year's annual meeting of Stockholders and (ii) for a special meeting, not earlier than 150 days prior to such meeting nor later than the later of 120 days prior to such meeting or the tenth day following the first public announcement of such meeting. The Director Nominating Committee will consider only one candidate submitted by such a Stockholder or group for nomination for election at an annual or special meeting of Stockholders. The Director Nominating Committee will not consider self-nominated candidates or candidates nominated by members of a candidate's family, including such candidate's spouse, children, parents, uncles, aunts, grandparents, nieces and nephews. The Director Nominating Committee will consider and evaluate candidates submitted by the nominating Stockholder or group on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. These criteria may include the candidate's relevant knowledge, experience and expertise, the candidate's ability to carry out his or her duties in the best interests of the Fund and the candidate's ability to qualify as a disinterested Director. The charter for the Director Nominating Committee, which provides a detailed description of the criteria used by the Director Nominating Committee as well as information required to be provided by Stockholders submitting candidates for consideration by the Director Nominating Committee, was included in the proxy statement for the 2004 Annual Meeting of Stockholders. Procedures for Communications to the Board of Directors The Board of Directors has adopted a process for Stockholders to send communications to the Board. To communicate with the Board of Directors or an individual Director, a Stockholder must send written communications to 100 Park Avenue, New York, NY 10017, addressed to the Board of Directors of Seligman Quality Municipal Fund, Inc. or the individual Director. All stockholder communications received in accordance with this process will be forwarded to the Board of Directors or the individual Director. Each member of the Board of Directors is invited to the Fund's annual meeting of Stockholders. There were nine members of the Board of Directors of the Fund in attendance at the Fund's 2005 Annual Meeting of Stockholders. 10 Executive Officers of the Fund Information with respect to Executive Officers, other than Messrs. Morris and Zino, is as follows:
Name (Age) and Position Term of Office and With the Fund Length of Time Served* Principal Occupation During Past Five Years ------------------------------------------------------------------------------------------------------ Thomas G. Moles (63) EVP: 2002 to Date In addition to his position with the Fund, Mr. Moles Executive Vice President Portfolio Mgr.: is a Director and Managing Director of the and Co-Portfolio Manager 1991-2003 Manager. He is also Executive Vice President and Co-Portfolio Mgr.: Co-Portfolio Manager of Seligman Select 2003 to Date Municipal Fund, Inc., and Vice President and Co- Portfolio Manager of four of the open-end investment companies of the Seligman Group of Funds. He was formerly President of the Fund and Seligman Select Municipal Fund Inc. and a Director of Seligman Advisors, Inc. and Seligman Services, Inc. Eileen A. Comerford (48) VP: 1991 to Date In addition to her position with the Fund, Ms. Vice President and Co-Portfolio Mgr.: Comerford is a Senior Vice President, Investment Co-Portfolio Manager 2003 to Date Officer of the Manager. She is also Vice President and Co-Portfolio Manager of Seligman Select Municipal Fund, Inc., and Vice President and Co- Portfolio Manager of four of the open-end investment companies of the Seligman Group of Funds. Audrey G. Kuchtyak (46) 1991 to Date In addition to her position with the Fund, Ms. Vice President Kuchtyak is a Senior Vice President, Investment Officer of the Manager. She is also Vice President of Seligman Select Municipal Fund, Inc. Eleanor T.M. Hoagland (55) 2004 to Date Ms. Hoagland is a Managing Director of the Vice President and Chief Manager and Vice President and Chief Compliance Compliance Officer Officer for each of the investment companies of the Seligman Group of Funds. Lawrence P. Vogel (50) VP: 1992 to Date; Mr. Vogel is Senior Vice President and Treasurer, Vice President and Treas: 2000 to Investment Companies, of the Manager, Vice Treasurer Date President and Treasurer of each of the investment companies of the Seligman Group of Funds, and Treasurer of SDC.
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Name (Age) and Position Term of Office and With the Fund Length of Time Served* Principal Occupation During Past Five Years -------------------------------------------------------------------------------------------------- Thomas G. Rose (48) 2000 to Date Mr. Rose is Managing Director, Chief Financial Vice President Officer, Senior Vice President, Finance, and Treasurer of the Manager, and Senior Vice President, Finance, of Seligman Advisors, Inc. and SDC. He is a Vice President of each of the investment companies of the Seligman Group of Funds, Seligman International, Inc. and Seligman Services, Inc. Frank J. Nasta (41) 1994 to Date Mr. Nasta is a Director, Managing Director, General Secretary Counsel and Corporate Secretary of the Manager. He is Secretary of each of the investment companies of the Seligman Group of Funds. He is also Corporate Secretary of Seligman Advisors, Inc., Seligman Services, Inc., Seligman International, Inc. and SDC.
----------------- * All officers are elected annually by the Board of Directors and serve until their successors are elected and qualify or their earlier death, resignation or removal. The address of each of the foregoing officers is 100 Park Avenue, New York, New York 10017. Remuneration of Directors and Officers Directors of the Fund who are not employees of the Manager or its affiliates each receive an annual retainer fee of $60,000, the amount of which is shared by the Fund and the other investment companies in the Seligman Group of Funds. For the fiscal year ended October 31, 2005, the Fund paid each Director a portion of an aggregate retainer fee in the amount (for each Director that served for a full year) of $696. In addition, such Directors are currently paid a total of $3,000 for each day on which they attend Board and/or Committee meetings ($1,500 for telephonic attendance at certain meetings), the amount of which is shared by the Fund and the other investment companies of the Seligman Group of Funds meeting on the same day. The Directors are also reimbursed for the expenses of attending meetings. Total Directors' fees paid by the Fund to the Directors listed below for the fiscal year ended October 31, 2005 were as follows:
Number of Directors Aggregate Direct in Group Capacity in which Remuneration was Received Remuneration -------------------------------------------------------------------------------- 9 Directors and Members of Committees $12,554
12 Director's attendance, retainer and/or committee fees paid to each Director during the fiscal year ended October 31, 2005 were as follows:
Aggregate Pension or Retirement Total Compensation Compensation Benefits Accrued as From Fund and Name From Fund Part of Fund Expenses Fund Complex* ---- ------------ --------------------- ------------------ Robert B. Catell** $ 1,299 -0- $ 91,500 John R. Galvin 1,457 -0- 102,000 Alice S. Ilchman*** 1,405 -0- 99,000 Frank A. McPherson 1,405 -0- 99,000 John E. Merow**** 983 -0- 66,578 Betsy S. Michel 1,585 -0- 108,000 Leroy C. Richie 1,558 -0- 108,000 Robert L. Shafer 1,405 -0- 99,000 James N. Whitson+ 1,457 -0- 102,000
----------------- * For the fiscal year ended October 31, 2005, there were 24 registered investment companies in the Seligman Group of Funds, including the Fund. ** Mr. Catell resigned as Director on November 28, 2005. *** Dr. Ilchman passed away on August 11, 2006. **** Mr. Merow retired pursuant to Board policy at the 2005 Annual Meeting. Mr. Merow had previously deferred compensation pursuant to the deferred compensation plan; however, he had stopped deferring his current compensation prior to his retirement. The accrued balance of Mr. Merow's deferred compensation (including earnings/losses) in respect of the Fund as of December 31, 2004 was $1,483, all of which was paid to him in January 2005. + Mr. Whitson, who deferred receiving his fees from the Fund and other investment companies of the Seligman Group of Funds from 1993 to 2002, had a balance as of October 31, 2005 of $12,228 in respect of the Fund in his deferred plan account, net of earnings/losses. The accrued balance at December 31, 2005 was $12,301, all of which was paid to Mr. Whitson in January 2006. No compensation is paid by the Fund to Directors or officers of the Fund who are employees or officers of the Manager. The Fund's Bylaws require each Director to be elected by the affirmative vote of the holders of a majority of the votes entitled to be cast in the election of a Director. Each individual who has been nominated by the Board of Directors of the Fund for election at this Meeting was previously elected by the Stockholders of the Fund and is currently serving as a Director. Generally, under Maryland law, if directors are not elected at the designated time, incumbent directors hold over and continue to perform the duties of directors until their successors are elected and qualify. If no nominee receives the required vote at the Fund's annual meeting, the in- 13 cumbent Directors (or other individuals) will be nominated for election at the Fund's next meeting of Stockholders at which Directors are elected. Maryland law provides that any Stockholder entitled to vote in the election of directors of a corporation may petition a court of equity to dissolve the corporation on grounds that the Stockholders are so divided that they have failed, for a period which includes at least two consecutive annual meeting dates, to elect successors to directors whose terms would have expired on the election and qualification of their successors. The court may or may not grant such a petition and the Fund is not aware of this provision being invoked in the case of a public company. Your Board of Directors Unanimously Recommends that the Stockholders Vote FOR the Election of Each of the Nominees to Serve as Director of the Fund. B. Ratification of Selection of Auditors (Proposal 2) The Audit Committee of the Board of Directors has appointed, and the Board of Directors, including a majority of those members who are not "interested persons" of the Fund (as defined in the 1940 Act) has selected, Deloitte & Touche LLP as auditors of the Fund for 2006. Deloitte & Touche LLP has extensive experience in investment company accounting and auditing. It is expected that a representative of Deloitte & Touche LLP will be present at the Meeting and will have the opportunity to make a statement and respond to questions. Neither the Fund's Charter nor the Fund's Bylaws require that the Stockholders ratify the selection of Deloitte & Touche LLP as the Fund's independent auditors. The Board of Directors is submitting this matter to the Stockholders as a matter of good corporate practice. If the Stockholders do not ratify the selection, the Audit Committee of the Board of Directors will reconsider whether to retain Deloitte & Touche LLP, but may retain such independent auditors. Even if the selection is ratified, the Audit Committee and the Board of Directors in their discretion may change the selection at any time during the year if they determine that such change would be in the best interests of the Fund and its Stockholders. It is intended that the persons named in the accompanying form of proxy will vote for Deloitte & Touche LLP. Deloitte & Touche LLP, in accordance with Independence Standards Board Standard No. 1, has confirmed to the Audit Committee that they are independent auditors with respect to the Fund. Deloitte & Touche LLP has audited the annual financial statements of the Fund and provided tax 14 and other non-audit services to the Fund. Deloitte & Touche LLP has also rendered non-audit services to the Manager, Seligman Advisors, Inc. (an affiliate of the Manager) and SDC, which is partially owned by the Fund (together, the "Affiliated Service Providers"). In making its recommendation, the Audit Committee considered whether the provision by the independent auditors to the Fund of non-audit services to the Fund or of professional services to the Affiliated Service Providers is compatible with maintaining the auditors' independence and has discussed the auditors' independence with them. Principal Accountant Fees and Services Aggregate fees billed to the Fund for the last two fiscal years ended October 31 for professional services rendered by Deloitte & Touche LLP were as follows: 2005 2004 --------- ------- AUDIT FEES........ $ 27,420 $26,177 AUDIT-RELATED FEES 6,765 42,805 TAX FEES.......... 2,350 2,200 ALL OTHER FEES.... 1,931 -- Audit fees include amounts related to the audit of the Fund's annual financial statements and services normally provided by Deloitte & Touche LLP in connection with statutory and regulatory filings. Audit-related fees include the performance of certain attestation services with respect to the Fund's Preferred Shares. Tax fees include amounts related to tax compliance, tax planning, and tax advice. All other fees include the Fund's pro-rata share of amounts for services related to the assessment of procedures for compliance with anti-money laundering regulations by the Fund and certain other investment companies advised by the Manager. Aggregate fees billed by Deloitte & Touche LLP for the last two fiscal years ended October 31 for non-audit services provided to the Affiliated Service Providers that provide ongoing services to the Fund, where the engagement related directly to the operations and financial reporting of the Fund, were as follows: 2005 2004 --------- ------- AUDIT-RELATED FEES $ 76,630 $72,980 TAX FEES.......... 13,903 7,800 ALL OTHER FEES.... -- 43,000 15 Audit-related fees include amounts for attestation services for SDC. Tax fees include amounts related to tax compliance, tax planning, and tax advice for, and an evaluation of, certain tax reporting procedures of SDC. All other fees relates to electronic communication processing services performed on behalf of outside counsel of the Manager. The Audit Committee is required to preapprove audit and non-audit services performed for the Fund by Deloitte & Touche. The Audit Committee also is required to preapprove certain non-audit services performed for the Affiliated Service Providers that provide services directly related to the operations and financial reporting of the Fund. The Audit Committee has delegated preapproval authority to Mr. James N. Whitson, the Audit Committee's Chairman. Mr. Whitson will report any preapproval decisions to the Audit Committee at its next scheduled meeting. Notwithstanding the foregoing, under certain circumstances, preapproval of non-audit services of a de minimis amount is not required. The aggregate fees billed for the most recent fiscal year and the preceding fiscal year by Deloitte & Touche LLP for non-audit services rendered to the Fund and the Affiliated Service Providers that provided ongoing services to the Fund were $101,579 and $168,785, respectively. All non-audit services discussed above were preapproved by the Audit Committee. The affirmative vote of a majority of the votes cast on the proposal at the Meeting is required to ratify the selection of auditors. Your Board of Directors Unanimously Recommends that the Stockholders Vote FOR the Ratification of the Selection of Deloitte & Touche LLP as Auditors of the Fund. C. Stockholder Proposal (Proposal 3) The Fund has received one proposal (the "Proposal"), which is set forth below, for inclusion in this year's proxy materials from one of the dissident Stockholders that have indicated they will solicit proxies against the nominees for Board of Directors. The Fund will provide the name and address of such Stockholder and the number of Common Shares owned by such Stockholder upon oral or written request. 16 YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS VOTE AGAINST THE STOCKHOLDER PROPOSAL. The Board's reasoning is set forth following the proposal in a statement of opposition. Stockholders are urged to read carefully the Proposal, the supporting statement and the statement of opposition. The Proposal is as follows: RESOLVED: The shareholders request that the Board of Directors promptly take the steps necessary to open-end the Fund. The Stockholder has submitted the following statement in support of his proposal: The Fund has traded at a double-digit discount to its net asset value ("NAV") for a long time. As of November 17, 2005 the discount stood at 10.66%. That means that a shareholder wishing to sell his or her shares of the Fund at the close of business on November 17, 2005 would have to accept $12.41, or $1.48 per share less than the NAV of $13.89. Open-ending the Fund means a higher stock price for every shareholder. If you would like to see the Fund's discount eliminated, please vote in favor of this proposal. YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE AGAINST THIS STOCKHOLDER PROPOSAL FOR THE REASONS SET FORTH BELOW. The Proposal seeks to terminate the Fund's closed-end structure in favor of an open-end structure. The Proposal is clear in this regard, but is much less clear as to the consequences of that change and offers no discussion of the reasons - in your Board's view, very compelling reasons - why open-ending is not desirable for the Fund. The effect of such a change might be to provide some Stockholders with a quick, one-time profit, but it would be at the expense of other Stockholders who have for the longer-term and wish to remain invested in a closed-end fund. The difference between closed- and open-end funds Shares of closed-end funds, such as the Fund, trade on a securities exchange (in the case of the Fund, on the New York Stock Exchange) like those of any other listed company. Market forces and 17 perceptions of the Fund's prospects drive price movements. As is the case for many other closed-end funds, the market price of the Fund's shares is frequently lower than the value of the Fund's portfolio plus cash and other assets less liabilities, which is called its net asset value ("NAV"), just as the market value of an industrial company's stock could be below the book value of its assets. In contrast, traditional open-end mutual funds do not trade on a stock exchange. Instead, stockholder liquidity is achieved by the fund's standing ready to buy back shares each day at NAV, called redemptions. Because daily NAV redemptions are required by law for open-end funds, they must maintain liquidity reserves. This is usually accomplished by limiting their primary investments to securities with an active trading market, which constrains investment flexibility. Also, open-end funds generally need to hold higher cash reserves in order to meet their requirement to redeem shares. As the demand for redemption by stockholders is often unpredictable, this uninvested cash may be a drag on investment returns. Leverage and the closed-end structure An important advantage for many closed-end funds, including your Fund, is that they can take advantage of leverage - essentially, investing "borrowed" money in order to increase investment returns. A large number of closed-end funds that invest in municipal bonds use leverage. Open-end funds, by contrast, are much more restricted by the 1940 Act in their ability to use leverage, and most do not use it at all. The Fund obtains leverage through its preferred stock. Open-end funds are not permitted to issue preferred stock. Preferred stockholders invest in the Fund and preferred dividends are paid by the Fund on their shares, while the Fund invests capital from the sale of preferred shares in municipal bonds. When the rate of return from the Fund's investments exceeds the dividend payable on the preferred stock, dividends to the Fund's common stockholders are greater than they would otherwise be. The benefit of leverage is determined by a number of factors, including the prevailing interest rate environment. When short-term interest rates are low and longer-term interest rates are high, leverage can significantly improve returns to holders of the Fund's Common Shares, because the Fund pays a lower, shorter-term rate on preferred shares while making investments that produce higher return. However, when short-term interest rates are close to long-term interest rates, leverage may provide relatively less benefit and if short-term interest rates are higher than long-term interest rates, leverage will actually hurt performance. In periods of declining interest rates, the increase in the Fund's net asset value will be enhanced by the effect of leverage and in periods of rising interest rates the Fund's net asset value would decline more than otherwise due to the effect of leverage. 18 Leverage has provided a significant, quantifiable benefit to the Fund. Leverage has provided approximately 34% of the Fund's total investment assets, and has permitted the Fund to pay dividends to Common stockholders that were 6.6% higher than otherwise could have been paid in the one-year period ended June 30, 2006. If the Fund were an open-end fund, this benefit would not have been available. If the Fund were to convert to open-end status, not only would the Fund lose the benefits provided by its Preferred Shares, the Fund would be required to redeem the outstanding Preferred Shares, resulting in a significant outflow of capital to pay for the redemptions and requiring the Fund to liquidate a significant part of its investment portfolio. What it means to trade at a discount Your Board of Directors recognizes that the Fund's Common Shares generally have traded at a discount to NAV. The Proposal characterizes this situation as presenting a chance to realize "a higher stock price for every shareholder" through open-ending. Your Board believes that this explanation is an oversimplification of what it means for the Fund's shares to trade at a discount to NAV. While it may be in the interests of some of the Fund's short-term Stockholders to eliminate the discount by open-ending the Fund (in particular, the dissident Stockholders advocating in favor of the Proposal), it is in the interests of all of the Fund's Stockholders that your Board clarify the implications of the Fund's shares trading at a discount in order that all of the Fund's Stockholders may understand the consequences of open-ending the Fund at this time. The discount is a function of the NAV and market price, each of which may be influenced by different factors. There is debate whether a closed-end fund discount is the cause of market price movements or is merely the effect. The discount is considered by many to be the result of market supply and demand factors for shares, although it is uncertain whether the dominant factors are fund-specific, such as performance, or external, such as market sentiment towards fixed-income investments like those of the Fund. If, as your Board believes to be the case, the discount is the effect and not the cause of external market price movements, there is no action that will have a long-term effect on the discount other than liquidation or open-ending. Open-ending, however, would have the negative effect of eliminating leverage. Moreover, in the absence of a distribution system and robust buying interest, open-ending is equivalent to slow-motion liquidation and would result in progressively higher expenses as a percentage of NAV. In any event, stockholders experience gain or loss based only on market price changes in the Fund's shares and dividends on Fund shares. In fact, many investors prefer to purchase closed-end 19 fund shares that trade at a discount, because it grants them a form of "leverage" of their own assets. For example, if a fund's shares trade at a 10% discount to net asset value, every $1.00 invested by a stockholder in that fund's shares purchases the benefit of $1.11 worth of assets. Finally, investors who remain concerned about the discount may wish to note that the Fund's discount has decreased significantly in recent periods - to about 7.2% as of August 31, 2006, representing a decrease of over 36% from the Fund's five-year average discount. Increased Expenses and Cost Considerations It has been the experience of other closed-end funds that conversion to open-end status may result in the short term in significant redemptions, including by short-term investors such as hedge funds, which may force liquidation of portfolio investments, and the realization of capital gains or losses, resulting in an increased expense ratio to the disadvantage of continuing Stockholders. Significant redemptions could adversely affect the Fund in several ways if the Fund were to convert into an open-end fund: . Redemptions might force the sale of portfolio securities in amounts and at times that result in unfavorable prices. . Redemptions could force the Fund to sell portfolio securities and therefore realize gains for tax purposes that would not otherwise have been realized at or about the time of the redemption by the Fund, with unfavorable tax consequences to continuing Stockholders. . The Fund would likely have in place a "Rule 12b-1 plan" in order to discourage redemption and encourage sales. A Rule 12b-1 plan would involve material expenses not currently incurred by the Fund's Stockholders and result in a materially higher expense ratio. Rule 12b-1 plans are typical features of open-end funds. Any such Rule 12b-1 plan would require approval of the Fund's stockholders. . Because a portion of the Fund's operating expenses would remain relatively constant as its assets expand or contract, the open-end mutual fund's expense ratio (the ratio of operating expenses to average net assets) would increase as redemptions took place unless the decrease in the Fund's assets due to redemptions was offset at such time by an increase in the Fund's assets due to purchases of its shares by investors. . Continuous sales and redemptions of the Fund's shares could result in shareholder service costs not currently faced by the Fund and result in an increase in the expense ratio. Any increase in the expense ratio would have a direct adverse effect on yield and total return. 20 In addition to the capital outlay to redeem its Preferred Shares noted above, the Fund would incur costs in the process of conversion to an open-end fund, including legal, accounting and printing costs, which would be significant. These costs would be borne by the holders of the Common Shares. The affirmative vote of a majority of the votes cast on the proposal at the Meeting is required to approve Proposal 3. For purposes of Proposal 3, abstentions will have no effect on the result of the vote. Proposal 3 is only a recommendation and, if it is approved by the required vote, will have no binding effect on the Fund or the Board of Directors. In considering whether or not to take action in response to the proposal, the Board of Directors will give the request set forth in the proposal such weight as it believes appropriate based on the voting of Stockholders for the proposal and other relevant factors. Your Board of Directors Unanimously Recommends that you Vote AGAINST this Stockholder Proposal. D. Other Matters The Fund knows of no other matters which may properly, in accordance with its Bylaws, be brought before the Meeting. However, if any other matters come before the Meeting, it is intended that the proxyholders will vote in accordance with their discretion on such matters. As noted above, although the Fund has received notice that certain dissident Stockholders intend to attempt to bring certain other matters before the Meeting, such matters will be ruled out of order as not being made in accordance with the Fund's Bylaws in the event of any such attempt. Under the Securities Exchange Act's stockholder proposal rule (Rule 14a-8), any stockholder proposal that may properly be included in the Fund's Proxy solicitation material for the 2007 Annual Meeting of Stockholders must be received by the Fund no later than May 14, 2007; provided, however, that if the Fund's 2007 Annual Meeting is held more than 30 days from the anniversary of the 2006 Annual Meeting (i.e., more than 30 days before or after October 19, 2007), then stockholder proposals submitted pursuant to Rule 14a-8 must be submitted a reasonable time before the Fund begins to print and mail its proxy materials. Timely notice of Stockholder proposals submitted outside of the Rule 14a-8 process must be received by the Fund no earlier than April 14, 2007 and no later than May 14, 2007, to be eligible for presentation at the 2007 Annual Meeting; provided, however, that if the Fund's 2007 Annual Meeting is held more than 30 days from the anniversary of the 2006 Annual 21 Meeting (i.e., more than 30 days from October 19, 2007), then such stockholder proposals must be received by the Fund no earlier than the 150/th/ day prior to the date of such meeting and not later than 5:00 p.m. eastern time, on the later of the 120/th/ day prior to the date of such meeting or no later than the tenth day following the day on which public announcement of the date of such meeting is first made. E. Expenses The Fund will bear the cost of soliciting proxies. In addition to the use of the mails, proxies may be solicited personally or via facsimile, telephone or the Internet by Directors, officers and employees of the Fund, the Manager, Seligman Advisors, Inc., Seligman Services, Inc. and SDC, and the Fund may reimburse persons holding shares in their names or names of their nominees for their expenses in sending solicitation material to their beneficial owners. The Fund has engaged Georgeson Shareholder Communications, Inc., 17 State St., New York, NY 10004, to assist in soliciting proxies for a fee of up to $75,000 plus expenses. By order of the Board of Directors, /s/ Frank J. Nasta Frank J. Nasta Secretary It is important that your shares be voted promptly. All Stockholders, including those who expect to attend the Meeting, are urged to authorize a proxy as soon as possible by accessing the Internet site listed on the enclosed White Proxy Card, by calling the toll- free number listed on the enclosed White Proxy Card, or by completing, signing and dating and mailing the enclosed White Proxy Card in the enclosed return envelope, which requires no postage if mailed in the United States. Only Directors, officers, employees and agents of the Fund and stockholders and their duly authorized proxies are entitled to attend the Meeting. To be admitted to the Meeting you will need to present proof of ownership of Seligman Quality Municipal Fund, Inc. stock, or if your shares are held in "street name," a proxy from the street name holder. 22 APPENDIX 1 SELIGMAN QUALITY MUNICIPAL FUND, INC. (the "Fund") AUDIT COMMITTEE REPORT The Audit Committee operates pursuant to a written charter that was last amended by the Fund's Board of Directors on March 17, 2005. The purposes of the Audit Committee are to 1) assist the Board of Directors in its oversight of (i) the integrity of the Fund's financial statements; (ii) the Fund's compliance with legal and regulatory requirements; and (iii) the independent auditors' independence, qualifications and performance; and 2) to prepare this report. Management of the Fund is responsible for the preparation, presentation and integrity of the Fund's financial statements, the Fund's accounting and financial reporting principles and internal controls and procedures designed to assure compliance with accounting standards and applicable laws and regulations. The independent auditors are responsible for auditing the Fund's financial statements and expressing an opinion as to their conformity with generally accepted accounting principles. In the performance of its oversight function, the Audit Committee has considered and discussed the audited financial statements with management and the independent auditors of the Fund. The Audit Committee has also discussed with the independent auditors the matters required to be discussed by Statement on Auditing Standards No. 61, Communication with Audit Committees, as currently in effect. The Audit Committee has also considered whether the provision of any non-audit services not pre-approved by the Audit Committee provided by the Fund's independent auditors to the Adviser or Manager and to any entity controlling, controlled by or under common control with the Adviser or Manager that provides ongoing services to the Fund is compatible with maintaining the auditors' independence. Finally, the Audit Committee has received the written disclosures and the letter from the independent auditors required by Independence Standards Board Standard No. 1, Independence Discussions with Audit Committees, as currently in effect, and has discussed with the auditors the auditors' independence. The members of the Audit Committee are not full-time employees of the Fund and are not performing the functions of auditors or accountants. As such, it is not the duty or responsibility of the Audit Committee or its members to conduct "field work" or other types of auditing or accounting reviews or procedures or to set auditor independence standards. Members of the Audit Committee necessarily rely on the information provided to them by management and the independent auditors. Accordingly, the Audit Committee's considerations and discussions referred to above do not assure 1-i that the audit of the Fund's financial statements has been carried out in accordance with generally accepted auditing standards, that the financial statements are presented in accordance with generally accepted accounting principles or that the Fund's auditors are in fact "independent." Based upon the reports and discussions described in this report, and subject to the limitations on the role and responsibilities of the Audit Committee referred to above, the Audit Committee recommended to the Board of Directors of the Fund that the audited financial statements of the Fund be included in the Fund's annual report to stockholders for the most recent fiscal period. SUBMITTED BY THE AUDIT COMMITTEE OF THE BOARD OF DIRECTORS John R. Galvin Betsy S. Michel Leroy C. Richie James N. Whitson As approved on February 1, 2006. 1-ii Seligman Quality Municipal Fund, Inc. Managed by J. & W. SELIGMAN & CO. INCORPORATED INVESTMENT MANAGERS AND ADVISORS ESTABLISHED 1864 100 Park Avenue, New York, NY 10017 SELIGMAN QUALITY MUNICIPAL FUND, INC. Notice of Annual Meeting of Stockholders and Proxy Statement Time:October 19, 2006 9:30 A.M. Place:Offices of Sullivan & Cromwell LLP 375 Park Avenue, 8th Floor New York, New York 10152 Please authorize your proxy by telephone, by the Internet, or by mailing the enclosed White Proxy Card in the enclosed return envelope which requires no postage if mailed in the United States. [LOGO] J&WS YOUR VOTE IS IMPORTANT Please complete, date, sign and mail your proxy card in the envelope provided as soon as possible. TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE PROXY SELIGMAN QUALITY MUNICIPAL FUND, INC. PREFERRED STOCK 100 Park Avenue, New York, NY 10017 The undersigned Stockholder of Seligman Quality Municipal Fund, Inc., a Maryland corporation, acknowledges receipt of the Notice of Meeting and Proxy Statement for the Annual Meeting of Stockholders of SELIGMAN QUALITY MUNICIPAL FUND, INC., to be held at 9:30 A.M. on October 19, 2006, at the offices of Sullivan & Cromwell LLP, 375 Park Avenue, 8th Floor, New York, New York 10152 (the "Meeting"), and hereby appoints WILLIAM C. MORRIS, FRANK J. NASTA and PAUL B. GOUCHER (or any of them) as proxies for the undersigned, with full power of substitution in each of them, to attend the Meeting (and any adjournments or postponements thereof) and to cast on behalf of the undersigned all the votes the undersigned is entitled to cast at the Meeting and otherwise to represent the undersigned at the Meeting with all the powers possessed by the undersigned if personally present at the Meeting. The undersigned hereby revokes any proxy previously given with respect to the Meeting. The votes entitled to be cast by the undersigned will be cast as instructed below. If this Proxy is executed but no instruction is given, the votes entitled to be cast by the undersigned will be cast FOR each of the nominees of the Board of Directors for election as director, FOR Proposal 2 and AGAINST Proposal 3. The votes entitled to be cast by the undersigned will be cast in the discretion of the proxy holder on any other matter that may properly come before the Meeting (and any adjournment or postponement thereof) including, but not limited to, proposing and/or voting on adjournment or postponement of the Meeting, including, but not limited to, in the event that sufficient votes in favor of any Board proposal or nominee for election as a Director are not received. THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF DIRECTORS. YOUR VOTE IS IMPORTANT. Complete, date and sign on reverse side and return this card as soon as possible. Mark each vote with an X in the box. (Continued and to be signed on the reverse side) THERE ARE THREE WAYS TO AUTHORIZE THE PROXIES TO CAST YOUR VOTES
TELEPHONE INTERNET MAIL --------------------------------------------- --------------------------------------- ----------------------------------------- This method is available for residents of the Visit the Internet website at http:// Simply complete, sign and date your U.S. and Canada. On a touch tone telephone, proxy.georgeson.com. Enter the proxy card and return it in the postage- call TOLL FREE 1-800-932-9931, 24 hours COMPANY NUMBER and CONTROL paid envelope. If you are using telephone a day, 7 days a week. You will be asked to NUMBER shown below and follow the or the Internet, please do not mail your enter ONLY the CONTROL NUMBER instructions on your screen. You will proxy card. shown below. Have your instruction card incur only your usual Internet charges. ready, then follow the prerecorded Available until 12:00 midnight New York instructions. Your instructions will be City time on October 18, 2006. confirmed and votes cast as you direct. Available until 12:00 midnight New York City time on October 18, 2006. This method may also be available by telephone through the Fund's proxy solicitor.
COMPANY NUMBER CONTROL NUMBER THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The Board of Directors recommends that you vote FOR all nominees and FOR Proposal 2, as more fully described in the accompanying Proxy Statement. 1. The election of three Directors, each to FOR WITHHOLD hold office until the 2009 Annual Meeting of Stockholders and until their successors are elected and qualify. NOMINEES: John R. Galvin, Robert L. all nominees all nominees Shafer and William C. Morris. [ ] [ ] Instruction: To withhold authority to vote for one or more individual nominees, write the name(s) of such nominee(s) below: 2.Ratification of the selection of FOR AGAINST ABSTAIN Deloitte & Touche LLP as Auditors. [ ] [ ] [ ] The Board of Directors recommends that you vote AGAINST Proposal 3, as more fully described in the accompanying Proxy Statement. 3.Stockholder proposal requesting that the Board of Directors promptly take FOR AGAINST ABSTAIN steps to open-end the Fund. [ ] [ ] [ ] 4. To vote and otherwise represent the undersigned on any other matter that may properly come before the meeting or any adjournment or postponement thereof, including but not limited to, proposing and/or voting on adjournment or postponement of the Meeting, including, but not limited to, in the event that sufficient votes in favor of any Board proposal or nominee for election as director are not received, in the discretion of the proxy holder. PLEASE SIGN AND RETURN IMMEDIATELY Please sign exactly as your name(s) appear(s) on this Proxy. When shares are held jointly, each holder should sign. When signing in a representative capacity, please give title. DATED: __________, 2006 -------------------------------------- Signature -------------------------------------- Additional Signature (if held jointly) YOUR VOTE IS IMPORTANT Please complete, date, sign and mail your proxy card in the envelope provided as soon as possible. TO VOTE BY MAIL, PLEASE DETACH PROXY CARD HERE PROXY SELIGMAN QUALITY MUNICIPAL FUND, INC. COMMON STOCK 100 Park Avenue, New York, NY 10017 The undersigned Stockholder of Seligman Quality Municipal Fund, Inc., a Maryland corporation, acknowledges receipt of the Notice of Meeting and Proxy Statement for the Annual Meeting of Stockholders of SELIGMAN QUALITY MUNICIPAL FUND, INC., to be held at 9:30 A.M. on October 19, 2006, at the offices of Sullivan & Cromwell LLP, 375 Park Avenue, 8th Floor, New York, New York 10152 (the "Meeting"), and hereby appoints WILLIAM C. MORRIS, FRANK J. NASTA and PAUL B. GOUCHER (or any of them) as proxies for the undersigned, with full power of substitution in each of them, to attend the Meeting (and any adjournments or postponements thereof) and to cast on behalf of the undersigned all the votes the undersigned is entitled to cast at the Meeting and otherwise to represent the undersigned at the Meeting with all the powers possessed by the undersigned if personally present at the Meeting. The undersigned hereby revokes any proxy previously given with respect to the Meeting. The votes entitled to be cast by the undersigned will be cast as instructed below. If this Proxy is executed but no instruction is given, the votes entitled to be cast by the undersigned will be cast FOR each of the nominees of the Board of Directors for election as director, FOR Proposal 2 and AGAINST Proposal 3. The votes entitled to be cast by the undersigned will be cast in the discretion of the proxy holder on any other matter that may properly come before the Meeting (and any adjournment or postponement thereof) including, but not limited to, proposing and/or voting on adjournment or postponement of the Meeting, including, but not limited to, in the event that sufficient votes in favor of any Board proposal or nominee for election as a Director are not received. THE SOLICITATION OF THIS PROXY IS MADE ON BEHALF OF THE BOARD OF DIRECTORS. YOUR VOTE IS IMPORTANT. Complete, date and sign on reverse side and return this card as soon as possible. Mark each vote with an X in the box. (Continued and to be signed on the reverse side) THERE ARE THREE WAYS TO AUTHORIZE THE PROXIES TO CAST YOUR VOTES
TELEPHONE INTERNET MAIL --------------------------------------------- --------------------------------------- ----------------------------------------- This method is available for residents of the Visit the Internet website at http:// Simply complete, sign and date your U.S. and Canada. On a touch tone telephone, proxy.georgeson.com. Enter the proxy card and return it in the postage- call TOLL FREE 1-800-932-9931, 24 hours COMPANY NUMBER and CONTROL paid envelope. If you are using telephone a day, 7 days a week. You will be asked to NUMBER shown below and follow the or the Internet, please do not mail your enter ONLY the CONTROL NUMBER instructions on your screen. You will proxy card. shown below. Have your instruction card incur only your usual Internet charges. ready, then follow the prerecorded Available until 12:00 midnight New York instructions. Your instructions will be City time on October 18, 2006. confirmed and votes cast as you direct. Available until 12:00 midnight New York City time on October 18, 2006. This method may also be available by telephone through the Fund's proxy solicitor.
COMPANY NUMBER CONTROL NUMBER THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS The Board of Directors recommends that you vote FOR all nominees and FOR Proposal 2, as more fully described in the accompanying Proxy Statement. 1. The election of three Directors, each to FOR WITHHOLD hold office until the 2009 Annual Meeting of Stockholders and until their successors are elected and qualify. NOMINEES: John R. Galvin, Robert L. all nominees all nominees Shafer and William C. Morris. [ ] [ ] Instruction: To withhold authority to vote for one or more individual nominees, write the name(s) of such nominee(s) below: 2.Ratification of the selection of FOR AGAINST ABSTAIN Deloitte & Touche LLP as Auditors. [ ] [ ] [ ] The Board of Directors recommends that you vote AGAINST Proposal 3, as more fully described in the accompanying Proxy Statement. 3.Stockholder proposal requesting that the Board of Directors promptly take FOR AGAINST ABSTAIN steps to open-end the Fund. [ ] [ ] [ ] 4. To vote and otherwise represent the undersigned on any other matter that may properly come before the meeting or any adjournment or postponement thereof, including but not limited to, proposing and/or voting on adjournment or postponement of the Meeting, including, but not limited to, in the event that sufficient votes in favor of any Board proposal or nominee for election as director are not received, in the discretion of the proxy holder. PLEASE SIGN AND RETURN IMMEDIATELY Please sign exactly as your name(s) appear(s) on this Proxy. When shares are held jointly, each holder should sign. When signing in a representative capacity, please give title. DATED: __________, 2006 -------------------------------------- Signature -------------------------------------- Additional Signature (if held jointly)