- Certified annual shareholder report for management investment companies (N-CSR)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT

INVESTMENT COMPANIES

Investment Company Act file number 811-5976

Seligman Select Municipal Fund, Inc.

(Exact name of Registrant as specified in charter)

734 Ameriprise Financial Center

Minneapolis, Minnesota 55474

(Address of principal executive offices) (Zip code)

Lawrence P. Vogel

100 Park Avenue

New York, New York 10017

(Name and address of agent for service)

Registrant’s telephone number, including area code: (212) 850-1864

Date of fiscal year end: 12/31

Date of reporting period: 12/31/08

FORM N-CSR

ITEM 1.

REPORTS TO STOCKHOLDERS.

To The Stockholders

Dear Fellow Stockholders,

We are very pleased to announce that, with the completion of the acquisition of J. & W. Seligman & Co. Incorporated by RiverSource Investments, LLC on November 7, 2008, your Fund joined the RiverSource family of funds. Seligman’s long heritage of investing and exceptional wealth of experience is a valuable addition to RiverSource Funds. Seligman joins RiverSource and Threadneedle in the comprehensive family of mutual funds we offer investors.

We also welcome John Maher and Leroy Richie, who have each served on your Fund’s Board since 2006 and 2000, respectively, to the RiverSource Funds’ Board of Directors. The acquisition of Seligman by RiverSource Investments creates several new opportunities for us all, including access to talented portfolio managers and competitive mutual fund solutions to help you reach your investment goals.

On February 5, 2009, at a Special Meeting of Stockholders of the Fund, a proposal was approved that will result in the acquisition of the Fund’s assets by Seligman National Municipal Fund. This acquisition is expected to be completed on or about March 27, 2009. Holders of Seligman Select Municipal Fund’s common stock will receive, as consideration for their shares, Class A shares of Seligman National Municipal Fund with a value equal to the net asset value of their shares of Seligman Select Municipal Fund on the closing date of the acquisition. Redemptions and exchanges of Class A Shares of Seligman National Municipal Fund, issued pursuant to the acquisition, will be subject to a redemption fee of 2% for a period of one year following the closing of the acquisition. The outstanding shares of preferred stock of Seligman Select Municipal Fund will be redeemed prior to the consummation of the acquisition. Shares of Seligman Select Municipal Fund’s common stock will cease to be traded on the New York Stock Exchange prior to the opening of trading on or about March 23, 2009.

We thank you for your support and look forward to helping you reach your investment goals.

Stephen R. Lewis, Jr.
Chairman of the Boards

Patrick T. Bannigan
President, RiverSource Funds

Table of Contents

Interview With Your Portfolio Managers					1
Performance and Portfolio Overview					5
Portfolio of Investments					7
Statement of Assets and Liabilities					12
Statement of Operations					13
Statements of Changes in Net Assets					14
Statement of Cash Flows					15
Notes to Financial Statements					16
Financial Highlights					22
Report of Independent Registered Public Accounting Firm					24
Matters Relating to the Directors’ Consideration of the Approval of the Investment Management Services Agreement					25
Proxy Results					31
Frequently Asked Questions Regarding the Acquisition of Seligman Select Municipal Fund					33
Dividend Investment Plan					34
Directors and Officers					36
Additional Fund Information					40

Interview With Your Portfolio Managers
Thomas G. Moles and Eileen A. Comerford

What market conditions and economic events materially impacted Seligman Select Municipal Fund, Inc.’s investment results during the year?

The year 2008 was the most eventful period in the Fund’s eighteen-year history as the ongoing credit crisis presented significant challenges to investment professionals and individual investors alike. The municipal market was one of the last sectors of the financial industry to become swept up the credit crisis. The catalyst was the downgrade of Financial Guarantee Insurance Co. (FGIC) in January 2008. FGIC, one of the top four municipal bond insurers — lost its coveted triple-A rating due to its exposure to mortgage-backed securities. It was at this point that the municipal market began to experience the extraordinary volatility and dislocation that was occurring in most other sectors of the financial market.

The municipal market had hardly begun to deal with the negative implications of the FGIC downgrade when it was forced to contend with the collapse of the auction rate securities (ARS) market. Investors, concerned about liquidity, were increasingly avoiding any money market product that lacked a liquidity back-stop — an assurance the vehicles’ obligations will be repaid when they are tendered even if they cannot be resold — including ARS. Remarketing agents were reluctant, due to their own capital constraints, to provide the degree of support needed to prevent auction failures. Investors who owned ARS were unable to tender the securities, a risk which many had never considered. The states and municipalities that had issued ARS were forced to pay a penalty rate — a condition of the auction failures. Through the combined efforts of the financial industry, government officials and regulatory authorities, significant progress was made in 2008 in redeeming investors’ ARS holdings.

In June, MBIA and AMBAC, two monoline insurance companies, lost their triple-A ratings, which was also due to exposure to mortgage-backed securities. The sudden loss of high-quality investments made it extremely difficult for money market funds, which are prohibited from purchasing securities rated below double-A, to locate a sufficient supply of securities to meet their needs. This led to a spike in yields on money market securities rated single-A and lower.

Throughout the summer, the continuing deterioration in the housing market led to a high degree of anxiety about the financial health of government sponsored mortgage corporations Fannie Mae (Federal National Mortgage Association, or FNMA) and Freddie Mac (Federal Home Loan Mortgage Association, or FHLMC). The fear of a complete collapse of the financial markets prompted the US government to provide a guarantee to holders of FNMA and FHLMC debt.

As the third quarter of 2008 progressed, conditions worsened. The economy was showing signs of rapid deceleration, which affected stock market performance. State and local finances were weakening, prompting further risk aversion in the market. The stunning collapse of Lehman Brothers in mid-September created severe repercussions across all financial markets. The Reserve Primary Fund, a large money market fund, had exposure to Lehman Brothers at the time of its failure, which caused the fund’s share price to fall below $1.00 — a rare occurrence. A run on the fund ensued, which was soon followed by an exodus from other money market funds

Interview With Your Portfolio Managers
Thomas G. Moles and Eileen A. Comerford

— even those with no exposure to Lehman Brothers. In an effort to ease the panic, the US government agreed to guarantee certain money market deposits.

The Lehman Brothers debacle contributed to an extreme degree of volatility and illiquidity in longer-dated municipal bonds, pushing yields sharply higher. Many leveraged players were forced to unwind, placing further downward pressure on bond prices. A number of municipal bond funds experienced heavy redemptions due to plummeting net asset values, forcing additional selling by the funds. As rising long-term yields approached eight-year highs, buyers began to return to the market to take advantage of attractive levels. As year-end approached, much of the imbalance between supply and demand had dissipated and yields began to retreat.

Throughout the past year, the Federal Reserve and US Treasury have been creating a series of new facilities aimed at easing the liquidity crisis and encouraging lending. The programs have had varying degrees of success but the ultimate goal of restoring investor confidence has, to date, eluded them. Subsequent to year-end, the new administration has proposed a massive stimulus package, in addition to several new programs. It will be some time before we can determine the efficacy of the latest efforts to stabilize the credit markets and reverse the economic decline.

Turmoil in the credit markets led to widespread failures of preferred share auctions and remarketings at the start of the year. The Fund, which had never had a remarketing failure since its preferred shares were issued in 1990, experienced its first failure in February 2008. Although the failures continued throughout the rest of the year, preferred shareholders continued to receive scheduled dividends at a penalty rate. As a result of a settlement with the New York State Attorney General’s office in August 2008, Citigroup, the Fund’s preferred share remarketing agent, offered to purchase at par auction rate securities, including the Fund’s preferred shares, from all Citigroup individual investors, small institutions, and charities by November 2008.

During 2008, the Federal Reserve Board (the Fed) lowered the federal funds rate, in a series of policy actions, from 4.25% at the start of the year to 0.25% by year-end. The Fund’s preferred share dividend rates are reset as a percentage of financial commercial paper rates, which remained elevated throughout most of last year despite the efforts of the Fed to stabilize the credit markets. It wasn’t until November that preferred rates began to more closely align with federal funds’ levels and the Fund’s Common Stockholders benefited from the widening of spreads between the Fund’s preferred dividend rates and investment income.

What investment strategies or techniques materially impacted the Fund’s performance during the year?

In 2008, we focused on positioning the Fund for a reversal of several prevailing trends in the municipal market that we believed could not be sustained, specifically: falling long-term yields, narrowing yield curve slope, tight credit quality spreads and declining relative value versus US Treasuries. During 2008, long-term yields rose to the highest level in eight years, credit spreads widened dramatically, the municipal yield curve steepened by

Interview With Your Portfolio Managers
Thomas G. Moles and Eileen A. Comerford

over 275 basis points, and the relative value of municipal bonds rose to the highest level on record.

To protect the Fund from an anticipated increase in interest rates, we set a higher target level for cash balances. Further, we elected to retain our pre-refunded and escrowed-to-maturity holdings. Refunded bonds are typically escrowed with US government securities, making them relatively safe and highly liquid investments. For the 12-months ended December 31, 2008, the prerefunded bond sector of the Barclay’s Capital Municipal Bond Index (formerly the Lehman Brothers Municipal Bond Index) (the “Index”) was the best performing sector.

In a rising interest rate environment, longer-maturity bonds are more sensitive to yield changes than shorter-maturity bonds. Given our expectation for interest rates to trend higher, we concentrated new purchases in the intermediate maturity sector — considerably shorter than in years past. For the year ended December 31, 2008, the worst performing maturity sector was for maturities of 22 years and longer. The best performing maturity sector was for maturities of 1–8 years. Our avoidance of the longest maturity bonds contributed to our competitive investment returns; however, the Fund would have had stronger results had a greater percentage of holdings been invested at the shorter end of the yield curve.

Portfolio acquisitions were comprised of premium coupon bonds (i.e., bonds trading above par), which are inherently more defensive than discount coupon bonds (i.e., bonds trading below par). Additionally, the Fund has maintained an overweight in premium coupon bonds. The premium bond sector of the Index substantially outperformed the current coupon, discount bond, and zero coupon sectors.

The Fund’s portfolio is diversified among 22 states and is concentrated in essential service sectors, including water and sewer bonds, electric utilities and transportation projects. Generally, these sectors tend to have stable revenue streams and the vital nature of the projects and services they provide can help to insulate the bonds during periods of economic weakness.

The credit crisis has had a significant impact on credit quality yield spreads. For many years, steadily declining interest rates led investors to seek out lower quality bonds given their relatively higher yields. Eventually, the increased demand for the sector, as well as strong credit trends, caused the yield spread between high-quality and low quality to narrow to historical lows. Since the credit turmoil began, investors have become more quality conscious, which has contributed to a dramatic widening of credit spreads, particularly within the high-yield sector. Another reason for the increase in quality yield spread has been the downgrades of the municipal monoline insurers. During 2008, the top four insurers lost at least one, if not all, of their triple-A ratings. As a result, high quality bonds are now in short supply and are trading at a premium. The non-investment grade sector was the worst performing sector of the Index in 2008.

The Fund is permitted to purchase only investment-grade bonds (i.e., bonds rated within the four highest rating categories). We have always viewed insurance as an enhancement and will not purchase a bond unless we approve the underlying credit. Therefore, while we were disappointed

Interview With Your Portfolio Managers
Thomas G. Moles and Eileen A. Comerford

with the monoline insurer downgrades, we were not compelled to sell any bonds as a result.

In keeping with our emphasis on quality, we endeavor not to participate in sectors of the market that historically have been more prone to credit deterioration, such as tobacco bonds, airline debt, automotive industry bonds, nursing homes, convention centers and stadium facilities. The high-yield sector has had a difficult year, declining by 27.01%. Additionally, the Fund was underweight in hospital, housing, pollution control bonds, areas that underperformed in the revenue bond sector of the Index.

The views and opinions expressed are those of the Portfolio Manager(s), are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of market forecasts. Opinions, estimates, and forecasts may be changed without notice.

A Team Approach

Seligman Select Municipal Fund, Inc. is managed by the Seligman Municipal Team, headed by Thomas G. Moles. Mr. Moles and Co-Portfolio Manager Eileen A. Comerford are assisted in the management of the Fund by a group of seasoned professionals who are responsible for research and trading consistent with the Fund’s investment objective. Team members include Senior Credit Analyst Audrey Kuchtyak and Steven Hallac.

							Average Annual
	Three Months*			Six Months*			One Year			Five Years			Ten Years
Market Price		0.45	%		(1.00	)%		(2.69	)%		1.45	%		2.75	%
Net Asset Value		(0.28	)		(5.93	)		(7.64	)		1.40			3.89
Benchmarks**
Barclays Capital Municipal Bond Index		0.74			(2.49	)		(2.47	)		2.71			4.26
Lipper Insured Municipal Debt Funds (Leveraged) Average		(4.52	)		(13.10	)		(15.92	)		(0.26	)		2.93

	Market Price		Net Asset Value
December 31, 2008	$	9.15	$	10.00
September 30, 2008		9.22		10.15
June 30, 2008		9.46		10.88
March 31, 2008		9.58		11.01
December 31, 2007		9.84		11.33

AAA	19	%
AA	36
A	30
BBB	12
NR	3

State #	Face Amount		Municipal Bonds	Ratings†	Value
Alaska — 5.6%	$	4,145,000	Alaska Energy Authority Power Rev. (Bradley Lake Hydroelectric Project), 6% due 7/1/2020	Aa3	$	4,692,472
		2,395,000	Alaska Energy Authority Power Rev. (Bradley Lake Hydroelectric Project), 6% due 7/1/2021	Aa3		2,686,807
Arizona — 1.2%		1,500,000	Arizona Water Infrastructure Finance Authority Rev. (Water Quality), 5% due 10/1/2022	Aaa		1,571,595
California — 10.1%		1,725,000	California State University Systemwide Rev., 5% due 11/1/2025	Aa3		1,625,537
		4,100,000	Foothill/Eastern Transportation Corridor Agency, CA Toll Road Rev., 5.75% due 1/15/2040	Baa3		2,982,996
		4,000,000	San Diego, CA Public Facilities Financing Authority Sewer Rev. Series 1999-A, 5% due 5/15/2029	A3		3,629,000
		5,700,000	San Diego, CA Public Facilities Financing Authority Sewer Rev. Series 1999-B, 5% due 5/15/2029	A3		5,171,325
Colorado — 4.8%		5,590,000	Colorado Regional Transportation District, Sales Tax Rev., 5% due 11/1/2024 ^Ø	AAA‡		6,336,712
Florida — 8.2%		2,000,000	Florida State Board of Education Lottery Rev., 5% due 7/1/2018	A2		2,088,400
		1,985,000	Ocala, FL Utility Systems Rev., 5% due 10/1/2024	A1		1,891,209
		2,440,000	Orange County, FL School Board (Certificates of Participation), 5% due 8/1/2025	A1		2,231,307
		5,000,000	Reedy Creek, FL Improvement District GOs, 5% due 6/1/2025	A3		4,716,250
Illinois — 7.3%		2,800,000	Chicago GOs, 5.5% due 1/1/2040	Aa3		2,750,944
		4,700,000	Chicago GOs, 5.5% due 1/1/2040 ^Ø	AAA‡		5,041,314
		2,000,000	Illinois Sales Tax Rev. (Build Illinois Bonds), 5% due 6/15/2028*	Aa3		1,953,760
Indiana — 1.4%		1,850,000	Ball State University Board of Trustees, IN Student Fee Rev. Series N, 5% due 7/1/2023	Aa3		1,822,823
Louisiana — 5.0%		3,680,000	Louisiana Public Facilities Authority Hospital Rev. (Southern Baptist Hospitals, Inc. Project), 8% due 5/15/2012††	AAA‡		4,071,221
		2,500,000	Shreveport, LA GOs, 5% due 5/1/2018	Baa1		2,565,850
Maryland — 2.6%		3,000,000	Maryland State GOs (Capital Improvements), 5.25% due 3/1/2027	Aaa		3,461,850
Massachusetts — 13.9%		2,500,000	Commonwealth of Massachusetts GOs, 5% due 3/1/2024 ^Ø	Aaa		2,876,625

State #	Face Amount		Municipal Bonds	Ratings†	Value
Massachusetts (continued)	$	4,000,000	Massachusetts Development Finance Agency Rev. (WGBH Educational Foundation), 5.75% due 1/1/2042	Baa1	$	3,862,600
		860,000	Massachusetts Health & Educational Facilities Authority Rev. (Partners Health System), 5% due 7/1/2022	Aa2		812,356
		1,750,000	Massachusetts State Port Authority Rev., 5% due 7/1/2025	Aa3		1,750,962
		6,000,000	Massachusetts State School Building Authority Dedicated Sales Tax Rev., 5% due 8/15/2023	Aa2		6,077,220
		3,000,000	Massachusetts State Water Resources Authority Rev., 5.25% due 8/1/2024	Aa2		3,070,200
Michigan — 3.7%		2,295,000	Detroit, MI Sewage Disposal System Rev., 5% due 7/1/2030 ^Ø	A3		2,613,615
		2,705,000	Detroit, MI Sewage Disposal System Rev., 5% due 7/1/2030	A3		2,357,083
Minnesota — 1.9%		1,330,000	Minnesota Agriculture & Economic Development Board Rev. (The Evangelical Lutheran Good Samaritan Society Project), 6.625% due 8/1/2025	A3		1,300,514
		1,170,000	Minnesota Agriculture & Economic Development Board Rev. (The Evangelical Lutheran Good Samaritan Society Project), 6.625% due 8/1/2025 ^Ø	A3		1,284,414
Missouri — 1.9%		1,550,000	Metropolitan St. Louis, MO Sewer District Wastewater System Rev., 5% due 5/1/2024	Aa2		1,554,417
		1,040,000	Missouri State Housing Development Commission Single Family Mortgage Rev. (Homeownership Loan Program), 5.5% due 3/1/2033*	AAA‡		932,474
New Jersey — 5.4%		8,000,000	New Jersey Economic Development Authority Water Facilities Rev. (New Jersey American Water Co., Inc.), 5.375% due 5/1/2032*	NR		5,274,160
		2,385,000	New Jersey Health Care Facilities Financing Authority Rev. (Atlanticare Regional Medical Center), 5% due 7/1/2024	A2		1,943,990
New York — 18.0%		5,000,000	Long Island, NY Power Authority Electric System General Revenue, 5.25% due 12/1/2020	A3		5,046,850
		5,000,000	Metropolitan Transportation Authority (Transportation Rev.), 5% due 11/15/2027	A2		4,523,150
		6,000,000	New York City, NY GOs, 5% due 8/1/2017	Aa3		6,502,800
		8,000,000	New York City, NY Municipal Water Finance Authority, Water & Sewer System Rev., 5% due 6/15/2027	Aa2		7,783,680

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Revenue Bonds	73	%
General Obligation Bonds	14
Pre-refunded/Escrowed-to-Maturity Bonds	13

State #	Face Amount		Municipal Bonds	Ratings†	Value
New York and New Jersey — 3.9%	$	6,500,000	Port Authority of New York and New Jersey Rev. (JFK International Air Terminal LLC Project), 5.75% due 12/1/2022*	Baa1	$	5,137,405
North Carolina — 2.7%		4,000,000	North Carolina Eastern Municipal Power Agency Power System Rev., 5.25% due 1/1/2020	Baa1		3,611,360
Ohio — 3.3%		105,000	Cleveland, OH Waterworks Improvement First Mortgage Rev., 5.75% due 1/1/2021	Aa2		105,230
		3,890,000	Ohio Water Development Authority (Drinking Water Assistance Fund), 5.25% due 12/1/2021	Aaa		4,251,965
Pennsylvania — 5.5%		3,000,000	Delaware County PA Industrial Development Authority Water Facilities Rev. (Philadelphia Suburban Water), 5.35% due 10/1/2031*	Baa1		2,316,840
		3,435,000	Pennsylvania Higher Educational Facilities Authority Rev. (Thomas Jefferson University), 5.25% due 9/1/2019	A1		3,726,013
		1,250,000	Pennsylvania State University Rev., 5% due 9/1/2024	Aa2		1,268,812
South Carolina — 9.6%		2,500,000	Columbia, SC Waterworks and Sewer System Rev., 5% due 2/1/2026	Aa2		2,524,700
		1,000,000	South Carolina Public Service Authority Rev., 5% due 1/1/2018	Aa2		1,084,990
		5,000,000	South Carolina State Ports Authority Rev., 5.3% due 7/1/2026*	Aa3		4,093,300
		5,000,000	South Carolina State Public Service Authority, 5.25% due 1/1/2021	Aa2		5,064,250
Texas — 8.0%		2,940,000	Austin, TX Electric Utility Rev., 5% due 11/15/2020	A1		2,949,496
		5,000,000	Dallas - Fort Worth, TX International Airports Rev., 5.75% due 11/1/2030*	A1		4,126,700
		3,000,000	Houston, TX Airport System Rev., 5.625% due 7/1/2030*	Aa3		2,490,000
		1,000,000	University Texas Permanent University Fund, 5.25% due 7/1/2023	Aaa		1,061,150
Virginia — 1.7%		2,000,000	Virginia GOs, 5% due 6/1/2016	Aaa		2,270,000
Total Municipal Bonds — (Cost $179,884,698) — 125.7%						166,940,693

State #	Face Amount		Short-Term Holdings	Ratings†	Value
Alabama — 7.6%	$	10,000,000	Jefferson County, AL Sewer Rev. (Capital Improvement Warrants), 5.125% due 2/1/2039 ^Ø	Aaa	$	10,135,300
California — 6.3%		3,550,000	California Educational Facilities Authority Rev. Series S-4 (Stanford University), VRDN, due 11/1/2050	VMIG 1		3,550,000
		3,700,000	California Infrastructure & Economic Development Bank Rev. Series B (J Paul Getty Trust), VRDN, due 4/1/2033	VMIG 1		3,700,000
		1,125,000	California Infrastructure & Economic Development Bank Rev. Series D (J Paul Getty Trust), VRDN, due 4/1/2033	VMIG 1		1,125,000
Connecticut — 3.6%		900,000	Connecticut State Health & Educational Facilities Authority Rev. (Yale University), VRDN, due 7/1/2036	VMIG 1		900,000
		2,875,000	Connecticut State Health & Educational Facilities Authority Rev. Series V-2 (Yale University), VRDN, due 7/1/2036	VMIG 1		2,875,000
		950,000	Connecticut State Health & Education Rev. (Yale University), VRDN, due 7/1/2035	VMIG 1		950,000
Massachusetts — 2.3%		200,000	Massachusetts Health & Educational Facilities Authority Rev. (Wellesley College), VRDN, due 7/1/2039	VMIG 1		200,000
		1,600,000	Massachusetts Health & Educational Facilities Rev. (Howard University), VRDN, due 11/1/2049	VMIG 1		1,600,000
		1,235,000	Massachusetts State Development Finance Agency Rev. (Harvard University), VRDN, due 7/15/2036	VMIG 1		1,235,000
Missouri — 0.5%		700,000	Missouri State Health & Educational Facilities Authority Health Facility Rev. (Washington University), VRDN, due 2/15/2033	VMIG 1		700,000
New York — 5.1%		600,000	New York City, NY GOs, VRDN, due 8/1/2010	VMIG 1		600,000
		400,000	New York City, NY GOs, VRDN, due 8/1/2017	VMIG 1		400,000
		200,000	New York City, NY GOs, VRDN, due 8/15/2018	VMIG 1		200,000
		300,000	New York City, NY GOs, VRDN, due 10/1/2023	VMIG 1		300,000
		405,000	New York City, NY Transitional Finance Authority, VRDN, due 11/1/2022	VMIG 1		405,000
		1,400,000	Tompkins County, NY Industrial Development Agency Rev. Series A-2 (Civic Facility – Cornell University), VRDN, due 7/1/2037	VMIG 1		1,400,000
		3,500,000	Triborough Bridge and Tunnel Authority New York Rev. (MTA Bridges and Tunnels), VRDN, due 1/1/2019	VMIG 1		3,500,000

State #	Face Amount		Short-Term Holdings	Ratings†	Value
Texas — 3.2%	$	4,000,000	Houston, TX Higher Education Finance Corporation Rev. (Rice University Project), 5.375% due 11/15/2029 ^Ø	Aaa	$	4,198,600
Total Short-Term Holdings — (Cost $37,255,530) — 28.6%						37,973,900
Total Investments (Cost $217,140,228) — 154.3%						204,914,593
Other Assets Less Liabilities — 2.2%						2,895,058
Preferred Shares Subject to Mandatory Redemption — (56.5)%						(75,000,000	)
Net Assets — 100.0%					$	132,809,651

Assets:
Investments, at value:
Long-term holdings (cost $179,884,698)	$	166,940,693
Short-term holdings (cost $37,255,530)		37,973,900
Total investments (cost $217,140,228)		204,914,593
Cash		211
Restricted cash		21,500
Interest receivable		3,048,310
Expenses prepaid to stockholder service agent		5,016
Other		24,385
Total Assets		208,014,015

Liabilities:
Management fees payable		94,867
Accrued expenses and other		109,497
Preferred shares subject to mandatory redemption		75,000,000
Total Liabilities		75,204,364
Net Assets	$	132,809,651

Composition of Net Assets:
Common Stock, $0.01 par value: Shares authorized — 49,999,250; issued and outstanding — 13,286,119	$	132,861
Additional paid-in capital		144,052,839
Undistributed net investment income (Note 8)		1,287,830
Accumulated net realized loss (Note 8)		(438,244	)
Net unrealized depreciation on investments		(12,225,635	)
Net Assets	$	132,809,651

Net Asset Value Per Share (Market Value $9.15)	$	10.00

Investment Income:
Interest	$	9,997,268

Expenses:
Dividends on Preferred shares subject to mandatory redemption		2,612,534
Management fees		1,197,764
Preferred stock remarketing and rating agent fees		225,086
Stockholder account services		205,278
Auditing and legal fees		193,635
Custody and related services		56,911
Stockholder reports and communications		47,718
Stockholders’ meeting		35,904
Exchange listing fees		23,750
Directors’ fees and expenses		17,987
Miscellaneous		28,705
Total Expenses		4,645,272
Net Investment Income		5,351,996

Net Realized and Unrealized Loss on Investments:
Net realized loss on investments		(111,188	)
Net change in unrealized appreciation of investments		(17,235,103	)
Net Loss on Investments		(17,346,291	)
Decrease in Net Assets from Operations	$	(11,994,295	)

	Year Ended December 31,
	2008			2007
Operations:
Net investment income	$	5,351,996		$	5,853,035
Net realized gain (loss) on investments		(111,188	)		228,083
Net change in unrealized appreciation of investments		(17,235,103	)		(2,495,819	)
Increase (decrease) in Net Assets from Operations		(11,994,295	)		3,585,299

Distributions to Common Stockholders:
Net investment income (per share: $0.432 and $0.454)		(5,736,208	)		(6,027,273	)

Capital Share Transactions:
Value of shares of Common Stock issued in payment of dividends (21,204 and 23,350 shares)		201,636			234,627
Cost of shares purchased for dividend investment plan (13,100 and 23,700 shares)		(128,749	)		(240,297	)
Increase (decrease) in Net Assets from Capital Share Transactions		72,887			(5,670	)
Decrease in Net Assets		(17,657,616	)		(2,447,644	)

Net Assets:
Beginning of year		150,467,267			152,914,911
End of Year (including undistributed net investment income of $1,287,830 and $958,714, respectively)	$	132,809,651		$	150,467,267

Cash Flows from Operating Activities:
Net decrease in Net Assets from Operations	$	(11,994,295	)
Adjustments to reconcile net decrease in net assets from operations to net cash provided by operating activities:
Cost of long-term investment securities purchased		(5,234,549	)
Proceeds from sales of long-term investment securities		8,355,391
Net purchase of short-term investment securities		(4,171,486	)
Increase in interest receivable		(87,699	)
Decrease in other assets		659
Increase in management fees payable, accrued expenses and other		29,477
Net change in unrealized appreciation of investments		17,235,103
Net realized loss on investments		111,188
Net amortization of premiums and discounts on investments		405,981
Net Cash Provided by Operating Activities		4,649,770
Cash Flows from Financing Activities:
Dividends paid to Common Stockholders		(5,534,572	)
Payment for shares of Common Stock purchased		(128,749	)
Net Cash Used in Financing Activities		(5,663,321	)
Net decrease in cash		(1,013,551	)
Cash balance at beginning of year		1,013,762
Cash Balance at End of Year	$	211

Supplemental Disclosure of Cash Flow Information:
Non-cash financing activities not included above consist of shares issued in payment of dividend distributions of $201,636.

Valuation Inputs	Value
Level 1 — Quoted Prices in Active Markets for Identical Investments	$	—
Level 2 — Other Significant Observable Inputs		204,914,593
Level 3 — Significant Unobservable Inputs		—
Total	$	204,914,593

Gross unrealized appreciation of portfolio securities	$	3,773,317
Gross unrealized depreciation of portfolio securities		(14,711,122	)
Net unrealized depreciation		(10,937,805	)
Capital loss carryforwards		(438,244	)
Total accumulated losses	$	(11,376,049	)

	Year Ended December 31,
	2008		2007
Tax-exempt income	$	7,618,928	$	8,510,869
Ordinary income		729,814		469,150
Total	$	8,348,742	$	8,980,019

	Year Ended December 31,
	2008			2007			2006			2005			2004
Per Share Operating Performance:
Net Asset Value, Beginning of Year	$	11.33		$	11.52		$	11.55		$	11.80		$	12.13
Income (Loss) from Investment Operations:
Net investment income		0.40			0.44			0.48			0.55			0.66
Net realized and unrealized loss on investments		(1.30	)		(0.18	)		(0.03	)		(0.19	)		(0.30	)
Total from Investment Operations		(0.90	)		0.26			0.45			0.36			0.36
Less Distributions to Common Stockholders:
Dividends paid from net investment income		(0.43	)		(0.45	)		(0.48	)		(0.61	)		(0.69	)
Total Distributions to Common Stockholders		(0.43	)		(0.45	)		(0.48	)		(0.61	)		(0.69	)
Net Asset Value, End of Year	$	10.00		$	11.33		$	11.52		$	11.55		$	11.80
Market Value, End of Year	$	9.15		$	9.84		$	10.14		$	9.99		$	10.35


Maureen Fonseca	11,186,592	866,795
Betsy S. Michel	743	2
James N. Whitson†	743	2
Brian T. Zino	11,212,162	841,226


Kathleen Blatz	11,767,675	433,407
Pamela G. Carlton	11,769,650	431,432
Alison Taunton-Rigby	11,764,471	436,611
William F. Truscott	11,759,075	442,007


Arne H. Carlson	11,766,269	434,813
Anne P. Jones	11,752,769	448,313


Patricia M. Flynn	11,766,615	434,467
Jeffrey Laikind	11,750,965	450,117
Stephen R. Lewis, Jr.*	744	0
Catherine James Paglia*	744	0

Name, (Age), Position(s) held with Fund				Principal Occupation(s) During Past Five Years, Directorships and Other Information
Kathleen Blatz (54) ^1,2,6,7 • Director: From December 18, 2008				Attorney. Formerly, Chief Justice, Minnesota Supreme Court, 1998–2006.
Arne H. Carlson (74) ^1,2,3,5,6 • Director: From December 18, 2008				Formerly, Chairman, RiverSource Funds, 1999–2006; Governor of Minnesota.
Pamela G. Carlton (54) ^4,6,7 • Director: From December 18, 2008				President, Springboard — Partners in Cross Cultural Leadership (consulting company).
Patricia M. Flynn (58) ^1,3,6 • Director: From December 18, 2008				Trustee Professor of Economics and Management, Bentley College. Formerly, Dean, McCallum Graduate School of Business, Bentley College.
Anne P. Jones (73) ^1,2,6,7 • Director: From December 18, 2008				Attorney and Consultant.
Jeffrey Laikind, CFA (73) ^4,6,7 • Director: From December 18, 2008				Director, American Progressive Insurance. Formerly, Managing Director, Shikiar Asset Management.
Stephen R. Lewis, Jr. (69) ^1,2,3,4,6 • Director and Chairman of the Board: From December 18, 2008				President Emeritus and Professor of Economics, Carleton College; Director, Valmont Industries, Inc. (manufactures irrigation systems).
John F. Maher (64) ^4,6,7 • Director: December 2006 to Date				Retired President and Chief Executive Officer, and former Director, Great Western Financial Corporation (bank holding company) and its principal subsidiary, Great Western Bank (a federal savings bank).

Name, (Age), Position(s) held with Fund				Principal Occupation(s) During Past Five Years, Directorships and Other Information
Catherine James Paglia (56) ^2,3,4,5,6 • Director: From December 18, 2008				Director, Enterprise Asset Management, Inc. (private real estate and asset management company).
Leroy C. Richie (66) ^3,4,6 • Director: 2000 to Date				Counsel, Lewis & Munday, P.C. (law firm); Director, Vibration Control Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally Inc. (digital imaging) and Infinity, Inc. (oil and gas exploration and production); Director and Chairman, Highland Park Michigan Economic Development Corp.; and Chairman, Detroit Public Schools Foundation; Director, OGE Energy Corp. (energy and energy services provider). Formerly, Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director, Kerr-McGee Corporation (diversified energy and chemical company); Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp.
Alison Taunton-Rigby (64) ^3,4,5,6 • Director: From December 18, 2008				Chief Executive Officer and Director, RiboNovix, Inc. since 2003 (biotechnology); Director, Idera Pharmaceutical, Inc. (biotechnology); Healthways, Inc. (health management programs). Formerly, President, Forester Biotech.
Interested Director*
William F. Truscott (48)* ⁶ • Director and Vice President: From December 18, 2008				President — US Asset Management and Chief Investment Officer, Ameriprise Financial, Inc. and President, Chairman of the Board, and Chief Investment Officer, RiverSource Investments, LLC; Director, President and Chief Executive Officer, Ameriprise Certificate Company; and Chairman of the Board, Chief Executive Officer, and President, RiverSource Distributors, Inc. Formerly, Senior Vice President — Chief Investment Officer, Ameriprise Financial, Inc.; and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001–2005.

Name, (Age), Position(s) held with Fund, Address				Principal Occupation(s) During Past Five Years
Patrick T. Bannigan (43) • President: From November 7, 2008 • 172 Ameriprise Financial Center Minneapolis, MN 55474				Director and Senior Vice President — Asset Management, Products and Marketing, RiverSource Investments, LLC; Director and Vice President — Asset Management, Products and Marketing, RiverSource Distributors, Inc. Formerly, Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004–2006; President, Touchstone Investments, 2002–2004.
Michelle M. Keeley (44) • Vice President: From November 7, 2008 • 172 Ameriprise Financial Center Minneapolis, MN 55474				Executive Vice President — Equity and Fixed Income, Ameriprise Financial, Inc. and RiverSource Investments, LLC; Vice President — Investments, Ameriprise Certificate Company. Formerly, Senior Vice President — Fixed Income, Ameriprise Financial, Inc., 2002–2006 and RiverSource Investments, LLC, 2004–2006.
Amy K. Johnson (43) • Vice President: From November 7, 2008 • 5228 Ameriprise Financial Center Minneapolis, MN 55474				Vice President — Asset Management and Trust Company Services, RiverSource Investments, LLC. Formerly, Vice President — Operations and Compliance, RiverSource Investments, LLC, 2004–2006; Director of Product Development — Mutual Funds, Ameriprise Financial, Inc., 2001–2004.
Scott R. Plummer (49) • Vice President, General Counsel and Secretary: From November 7, 2008 • 5228 Ameriprise Financial Center Minneapolis, MN 55474				Vice President and Chief Counsel — Asset Management, Ameriprise Financial, Inc.; Chief Counsel, RiverSource Distributors, Inc. and Chief Legal Officer and Assistant Secretary, RiverSource Investments, LLC; Vice President, General Counsel, and Secretary, Ameriprise Certificate Company. Formerly, Vice President — Asset Management Compliance, Ameriprise Financial, Inc., 2004–2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002–2004.
Lawrence P. Vogel (52) • Treasurer: 2000 to Date • 100 Park Avenue New York, NY 10017				Treasurer of each of the investment companies of the Seligman Group of Funds since 2000; and Treasurer, Seligman Data Corp. since 2000. Formerly, Senior Vice President, J. & W. Seligman & Co. Incorporated and Vice President of each of the investment companies of the Seligman Group of Funds, 1992–2008.


Manager From November 7, 2008 RiverSource Investments, LLC 200 Ameriprise Financial Center Minneapolis, MN 55474 Until November 6, 2008 J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017				Stockholder Service Agent Seligman Data Corp. 100 Park Avenue New York, NY 10017 Mail inquiries to: P.O. Box 9759 Providence, RI 02940-9759				Important Telephone Numbers (800) 874-1092 Stockholder Services (800) 445-1777 Retirement Plan Services (212) 682-7600 Outside the United States (800) 622-4597 24-Hour Automated Telephone Access Service Independent Registered Public Accounting Firm Deloitte & Touche LLP

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	2008	2007
Audit Fees	$35,800	$30,283
Audit-Related Fees	37,570	7,465
Tax Fees	2,750	2,650
All Other Fees	–	–

Period	Total Number of Shares (or Units) Purchased	Average Price Paid per Share (or Unit)	Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (1)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that May Yet Be Purchased Under the Plans or Programs (1)
7-01-08 to 7-31-08	2,400	$9.60	2,400	N/A
8-01-08 to 8-31-08	-	-	-	N/A
9-01-08 to 9-30-08	-	-	-	N/A
10-01-08 to 10-31-08	-	-	-	N/A
11-01-08 to 11-30-08	-	-	-	N/A
12-01-08 to 12-31-08	-	-	-	N/A