SELIGMAN SELECT MUNICIPAL FUND INC, N-30D, 1998-08-24

SELIGMAN SELECT MUNICIPAL FUND INC
N-30D, 1998-08-24

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================================================================================
TO THE STOCKHOLDERS

During Seligman Select Municipal Fund's second quarter, the US economic
expansion continued into its eighth year, and the municipal bond market remained
relatively stable. Long-term municipal yields fluctuated within a narrow range
and ended the period slightly lower than at March 31. This resulted in an
increase in the Fund's net asset value. More specific investment results for the
Fund appear on page 3.

Throughout the second quarter, the low-yield environment benefited many
municipal issuers. In fact, new issue volume year to date was up significantly
from the same period in 1997. However, much of the issuance was due to a large
increase in refunding volume (i.e., when new bonds are issued to retire existing
bonds that have higher interest rates). Because there was a heavy supply of
municipal bonds in the market, municipal yields did not decline as much as US
Treasury yields. Consequently, the municipal market underperformed the Treasury
market during the second quarter, as the prices of municipal bonds did not
appreciate as much as the prices of US Treasury securities. As a result of the
narrowing of the yield spread between long-term municipal bonds and long-term
Treasury bonds, municipal bonds are currently at their most attractive level,
relative to Treasuries, in more than two years.

Looking ahead, recent economic data suggest that growth has begun to slow.
We are cautiously optimistic that the economic slowdown will be sufficient
enough to continue to subdue inflationary pressures, and therefore prevent the
Federal Reserve Board from raising interest rates. Additionally, it is expected
that municipal new issue volume will slow from its current pace in the months
ahead. Therefore, we believe that the performance of the municipal market will
improve relative to that of the Treasury market. Municipal securities offer a
significant yield advantage when compared with the after-tax returns of other
fixed-income investments, and we are confident that Seligman Select Municipal
Fund will continue to play an important role in helping investors attain their
long-term financial goals.

As you may know, companies are modifying their computer systems to
recognize dates of January 1, 2000, and beyond. This is often referred to as the
"Y2K" problem. Unless systems are updated, many applications may interpret the
last two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that there will be no disruption in the
services provided by your Fund.

Seligman Select Municipal Fund's 1998 Annual Meeting took place Thursday,
May 21, 1998, in St. Louis, Missouri. All proposals as set forth in the proxy
you received earlier in the year passed. For the complete results of the vote,
please refer to page 14.

Thank you for your continued interest in Seligman Select Municipal Fund. We
look forward to serving your investment needs in the many years to come. A
discussion with your Portfolio Manager and the Fund's portfolio of investments
follow this letter.

By order of the Board of Directors,

/s/William C. Morris
- --------------------
William C. Morris
Chairman

/s/Thomas G. Moles
------------------
Thomas G. Moles
President

1
July 31, 1998

<PAGE>

INTERVIEW WITH YOUR PORTFOLIO MANAGER, THOMAS G. MOLES

[PHOTO]

SELIGMAN MUNICIPALS TEAM: (FROM LEFT) AUDREY KUCHTYAK, THERESA BARION,
DEBRA MCGUINNESS, (SEATED) EILEEN COMERFORD, THOMAS G. MOLES (PORTFOLIO MANAGER)

WHAT ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN SELECT MUNICIPAL FUND IN
THE SECOND QUARTER OF 1998?

"The municipal bond market enjoyed a period of relative stability during
Seligman Select Municipal Fund's second quarter. Long-term municipal yields
fluctuated within a narrow range and ended the period slightly below March 31
levels.

"Throughout the quarter, municipal issuers continued to take advantage of
attractive long-term municipal yields. Year-to-date, new issue volume was up 51%
from 1997 levels. Much of the supply surge was due to a 118% increase in
refunding volume. Further contributing to the strong supply were several
high-profile deals, in particular the record-setting $3.4 billion Long Island
Power Authority, New York issue.

"The heavy supply prevented municipal yields from declining as much as
Treasury yields and, as a result, the municipal market underperformed the
Treasury market during the second quarter. The narrowing of the yield spread
between long-term municipal bonds and long-term Treasury bonds has left
municipal bonds at their most attractive level, relative to Treasuries, in more
than two years."

WHAT WAS YOUR INVESTMENT STRATEGY?

"Our investment strategy reflects our positive outlook for interest rates
and inflation, and our expectation that the economy will remain healthy in the
months to come. In general, new purchases in the portfolio have been
concentrated in long-term, current coupon bonds with longer call dates. At the
same time, we reduced the portfolio's position in defensive issues, such as
pre-refunded bonds.

"The increase in new-issue activity facilitated the implementation of our
investment strategy. The sheer volume of bonds being underwritten compelled
municipal issuers to price their deals at higher yields to attract investors.
Additionally, new issuance varied widely among different states and sectors,
temporarily disrupting prevailing yield relationships. This provided us with an
opportunity to sell overvalued bonds and replace them with bonds that are
undervalued. As yield spreads normalize going forward, the performance potential
of the Fund should be enhanced. Further, historically low interest rates
increased the risk that callable bonds would be redeemed by the issuer.
Therefore, we continued to focus on improving Seligman Select Municipal Fund's
call exposure in an effort to avoid excessive bond calls that could have a
detrimental impact on the Fund's dividend distributions."

WHAT IS THE OUTLOOK?

"Recent data indicate that economic growth has begun to slow from its robust
pace. We are cautiously optimistic that the slowdown will continue to subdue
inflationary pressures and preclude the Federal Reserve Board from raising
short-term interest rates. Municipal new issue volume is expected to slow from
its current pace in the months ahead. Therefore, we anticipate that municipal
market performance will improve relative to that of the Treasury market.
Municipal securities continue to offer a significant yield advantage when
compared with the after-tax returns of other fixed-income investments. We are
confident that Seligman Select Municipal Fund will continue to play an important
role in helping investors meet their long-term financial goals."

2
<PAGE>

INVESTMENT RESULTS PER COMMON SHARE

TOTAL RETURNS*
FOR PERIODS ENDED JUNE 30, 1998
<TABLE>
<CAPTION>
Average Annual
----------------------------------
Since
Three Six One Five Inception
Months Months Year Years 2/15/90
------ ------ ---- ----- ---------
<S> <C> <C> <C> <C> <C>
Market Price** 3.61% (7.87)% 3.98% 7.04% 8.12%
Net Asset Value** 1.95 3.08 10.23 6.53 8.92

</TABLE>

PRICE PER SHARE
June 30, March 31, December 31,
1998 1998 1997
-------- -------- -----------

Market Price $12.4375 $12.1875 $13.9375
Net Asset Value 12.31 12.26 12.33

DIVIDEND AND CAPITAL GAIN INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1998
Capital Gain
------------------------
Dividends Paid+ Realized Unrealized
--------------- -------- ----------
$0.396 $0.077 $1.190++

ANNUAL DISTRIBUTION RATE

The annual distribution rate based on current market price at June 30, 1998, was
6.17%, which is equivalent to a taxable yield of 10.22% based on the maximum
federal tax rate of 39.6%.

-----------------------------------------------------
The rates of return will vary and the principal value of an investment will
fluctuate. Shares, if sold, may be worth more or less than their original cost.
Past performance is not indicative of future investment results.

* Returns for periods of less than one year are not annualized.

** These rates of return reflect changes in the market price or net asset
value, as applicable, and assume that all distributions within the period
are invested in additional shares.

+ Preferred Stockholders were paid dividends at annual rates ranging from
3.40% to 4.00%. Earnings on the Fund's assets in excess of the Preferred
dividend requirements constituted dividend income for Common Stockholders.

++ Represents the per share amount of unrealized appreciation of portfolio
securities as of June 30, 1998.

3
<PAGE>

PORTFOLIO OF INVESTMENTS

- -----------------------------------------------------------------------------------------------------------------
Face Ratings+
State Amount Municipal Bonds Moody's/S&P Market Value
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Alabama-- 2.1% $ 5,000,000 McIntosh Industrial Development Board,
Environmental Facilities Rev. (CIBASpecialty
Chemicals), 5 3/8% due 6/1/2028 ................ A2/AA- $ 5,006,300
Alaska-- 6.9% 8,175,000 Alaska Housing Finance Corp. (Collateralized
Home Mortgage Rev.), 7.65% due 6/1/2024 ........ Aaa/AAA 8,724,687
7,500,000 Valdez Marine Terminal Rev. (BP Pipelines Inc.
Project), 5.65% due 12/1/2028 .................. Aa2/AA 7,668,150
California-- 11.4% 9,130,000 California Pollution Control Financing Authority
Sewage and Solid Waste Disposal Facilities
Rev. (Anheuser-Busch Project),
5 3/4% due 12/1/2030* .......................... A1/A+ 9,534,368
10,000,000 San Francisco City and County Airports Commission
(San Francisco International Airport Rev.), 6.30%
due 5/1/2025* .................................. Aaa/AAA 10,756,700
6,000,000 San Joaquin Hills Transportation Corridor Agency
Senior Lien Toll Road Rev. (Orange County),
6 3/4% due 1/1/2032 ............................ Aaa/AAA 6,755,580
Delaware-- 2.9% 6,500,000 Delaware Economic Development Authority
Exempt Facilities Rev. (Delmarva Power and
Light Co. Project), 7.60% due 3/1/2020* ........ Aaa/AAA 6,949,410
Florida-- 2.6% 2,145,000 Florida Housing Finance Agency (Home Ownership
Rev.), 7.90% due 3/1/2022* ..................... Aaa/NR 2,265,163
3,735,000 Orange County Housing Finance Authority
(Mortgage Rev.), 7.80% due 10/1/2022* .......... Aaa/NR 3,909,761
Illinois-- 4.3% 5,000,000 Chicago GO's 5 1/4%, 1/1/2028 .................... Aaa/AAA 4,985,100
5,000,000 Chicago O'Hare International Airport International
Terminal Special Rev., 7 5/8% due 1/1/2010* .... Aaa/AAA 5,337,050
Indiana-- 2.2% 5,000,000 Indiana Employment Development Commission
Environmental Rev. (Public Service Company of
Indiana Inc.), 7 1/2% due 3/15/2015* ........... Aaa/AAA 5,341,350
Louisiana-- 4.8% 9,325,000 Louisiana Public Facilities Authority Hospital Rev.
(Southern Baptist Hospitals, Inc. Project), 8%
due 5/15/2012 .................................. NR/AAA 11,399,812
Massachusetts -- 4.3% 5,500,000 Massachusetts Bay Transportation Authority General
Transportation System Rev., 5 5/8% due 3/1/2026 Aaa/AAA 5,988,565
4,175,000 Massachusetts Housing Finance Agency (Multi-
Family Residential Development Rev.), 7.65%
due 2/1/2028* .................................. Aaa/AAA 4,322,586
Michigan-- 0.9% 2,000,000 Kalamazoo Hospital Finance Authority Rev.
(Bronson Methodist Hospital),
5 1/2% due 5/15/2028............................ Aaa/NR 2,052,540
Nebraska-- 1.0% 2,435,000 Nebraska Investment Finance Authority (Single
Family Mortgage Rev.), 8 1/8% due 8/15/2038* ... Aaa/AAA 2,496,873
Nevada-- 3.2% 7,000,000 Clark County Industrial Development Rev. (Nevada
Power Company Project), 7.80% due 6/1/2020* .... Aaa/AAA 7,561,890

</TABLE>

- -----------------------
See footnotes on page 6.

<PAGE>

JUNE 30, 1998

New Jersey-- 8.5% $ 7,000,000 New Jersey Economic Development Authority Water
Facilities Rev. (American Water Company Inc.),
5 3/8% due 5/1/2032* ............................. Aaa/AAA $ 7,109,200
2,000,000 New Jersey Educational Facilities Authority Rev.
(Princeton University), 6% due 7/1/2024 .......... Aaa/AAA 2,185,940
7,140,000 New Jersey Health Care Facilities Financing Authority
Rev. (Riverwood Center), 9.90% due 7/1/2021 ...... Aaa/AAA 8,367,723
2,445,000 New Jersey Housing & Mortgage Finance Agency
(Home Buyer Rev.), 7.70% due 10/1/2029* .......... Aaa/AAA 2,547,054
New York-- 10.2% 2,000,000 New York State DormitoryAuthority Rev.
(Rockefeller University), 7 3/8% due 7/1/2014 .... Aaa/AAA
2,040,200
10,000,000 New York State Energy Research & Development
Authority Electric Facilities Rev. (Consolidated
Edison Co. NY Inc. Project), 6.10% due 8/15/2020 . Aaa/AAA 10,986,100
10,000,000 New York State Thruway Authority General Rev.,
6% due 1/1/2025 .................................. Aaa/AAA 11,155,500
New York and 6,500,000 Port Authority of New York and New Jersey
New Jersey-- 2.9% (JFK International Air Terminal LLC Project Rev.),
5 3/4% due 12/1/2022* ............................ Aaa/AAA 6,885,125
Ohio-- 4.7% 6,000,000 Cleveland Waterworks Improvement First Mortgage
Rev., 5 3/4% due 1/1/2021 ........................ Aaa/AAA 6,346,380
4,585,000 Ohio Housing Finance Agency (Single Family
Mortgage Rev.), 7.65% due 3/1/2029* .............. NR/AA+ 4,799,120
Pennsylvania-- 7.0% 2,500,000 Allegheny County Airport Rev. (Greater Pittsburgh
International Airport), 6.80% due 1/1/2010* ...... Aaa/AAA 2,713,625
3,000,000 Lehigh County Industrial Development Authority
Pollution Control Rev. (Pennsylvania Power &
Light Company Project), 6.15% due 8/1/2029 ....... Aaa/AAA 3,302,640
10,000,000 Philadelphia Airport Rev., 6.10% due 6/15/2025* .... Aaa/AAA
10,775,200
South Carolina-- 2.1% 5,000,000 South Carolina Ports Authority Rev.,
5.30% due 7/1/2026* .............................. Aaa/AAA 4,978,300
Tennessee-- 3.7% 8,000,000 Humphreys County Industrial Development Board
Solid Waste Disposal Rev. (E.I. duPont de
Nemours & Co. Project), 6.70% due 5/1/2024* ...... Aa3/AA- 8,826,000
Texas-- 5.7% 5,000,000 Lower Neches Valley Authority Industrial
Development Corp. Sewer Facilities Rev. (Mobil
Oil Refining Corp. Project), 6.40% due 3/1/2030* . Aa2/AA 5,458,400
7,500,000 Matagorda County Navigation District No. 1
Pollution Control Rev. (Central Power and Light
Co. Project), 6 1/8% due 5/1/2030* ............... Aaa/AAA 8,127,450

5
<PAGE>

PORTFOLIO OF INVESTMENTS (continued) JUNE 30, 1998

- -------------
+ Ratings have not been audited by Deloitte & Touche LLP.
* Interest income earned from this security is subject to the federal
alternative minimum tax.
See Notes to Financial Statements.

<PAGE>

STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 1998

<S> <C> <C>
ASSETS:
Investments at value:
Long-term holdings (cost $229,672,571) ........................................ $245,445,427
Short-term holdings (cost $3,500,000) ........................................ 3,500,000 $248,945,427
................................................................................. ------------
Cash ............................................................................................ 75,045
Interest receivable ............................................................................. 4,198,088
Receivable for securities sold .................................................................. 60,000
Expenses prepaid to stockholder service agent ................................................... 18,561
Other ........................................................................................... 51,754
------------
TOTAL ASSETS .................................................................................... 253,348,875
------------
LIABILITIES:
Payable for securities purchased ................................................................ 14,971,015
Accrued expenses, taxes, and other .............................................................. 260,141
------------
TOTAL LIABILITIES ............................................................................... 15,231,156
------------
NET INVESTMENT ASSETS ........................................................................... 238,117,719
Preferred Stock ................................................................................. 75,000,000
------------
NET ASSETS FOR COMMON STOCK ..................................................................... $163,117,719
============
NET ASSETS PER SHARE OF COMMON STOCK (Market Value $12.4375) .................................... $12.31
======

COMPOSITION OF NET INVESTMENT ASSETS:
Preferred Stock Series A, $.01 par value, liquidation preference and asset
coverage per share--$100,000 and $317,490, respectively; shares authorized,
issued and outstanding--375 .................................................................. $ 37,500,000
Preferred Stock Series B, $.01 par value, liquidation preference and asset coverage
per share--$100,000 and $317,490, respectively; shares authorized, issued and
outstanding--375 ............................................................................. 37,500,000
Common Stock, $.01 par value: shares authorized--49,999,250; issued and
outstanding--13,250,833 ...................................................................... 132,508
Additional paid-in capital ...................................................................... 146,146,364
Undistributed net investment income ............................................................. 39,859
Undistributed net realized gain ................................................................. 1,026,132
Net unrealized appreciation of investments ...................................................... 15,772,856
------------
NET INVESTMENT ASSETS ........................................................................... $238,117,719
============

</TABLE>
- ----------------
See Notes to Financial Statements.

<PAGE>

STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 1998

<S> <C> <C>
INVESTMENT INCOME:
INTEREST ........................................................................................ $7,067,780

EXPENSES:
Management fee ....................................................................... $ 648,175
Stockholder account, transfer, and registrar services ................................ 108,725
Preferred stock remarketing fee ...................................................... 93,750
Auditing and legal fees .............................................................. 35,981
Stockholder reports and communications ............................................... 35,500
Stockholders' meeting ................................................................ 18,576
Custody and related services ......................................................... 18,341
Directors' fees and expenses ......................................................... 17,350
Miscellaneous ........................................................................ 4,624
---------
TOTAL EXPENSES .................................................................................. 981,022
----------
NET INVESTMENT INCOME ........................................................................... 6,086,758*

NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments ..................................................... 1,026,132
Net change in unrealized appreciation of investments ................................. (722,842)
---------
NET GAIN ON INVESTMENTS ......................................................................... 303,290
----------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS ............................................... $6,390,048
==========

</TABLE>

- ------------------
* Net investment income available for Common Stock is $4,722,493, which is net
of Preferred Stock dividends.
See Notes to Financial Statements.

<PAGE>

STATEMENT OF CHANGES IN NET INVESTMENT ASSETS
<TABLE>
<CAPTION>

SIX MONTHS ENDED YEAR ENDED
JUNE 30, 1998 DECEMBER 31, 1997
------------------ ------------------
<S> <C> <C>
OPERATIONS:
Net investment income .................................................. $ 6,086,758 $ 12,563,028
Net realized gain on investments ....................................... 1,026,132 2,042,013
Net change in unrealized appreciation of investments ................... (722,842) 3,727,924
------------ ------------
INCREASE IN NET INVESTMENT ASSETS FROM OPERATIONS ...................... 6,390,048 18,332,965
------------ ------------
DISTRIBUTIONS TO STOCKHOLDERS:
Net investment income:
Preferred Stock, Series A (per share: $2,001.77 and $3,623.18) ...... (750,664) (1,358,693)
Preferred Stock, Series B (per share: $1,636.27 and $3,605.33) ...... (613,601) (1,351,999)
Common Stock (per share: $0.396 and $0.84) .......................... (5,241,093) (11,044,089)
------------ ------------
Total ............................................................... (6,605,358) (13,754,781)
Net realized gain on investments:
Common Stock (per share: $0.181) .................................... -- (2,386,003)
------------ ------------
DECREASE IN NET INVESTMENT ASSETS FROM DISTRIBUTIONS ................... (6,605,358) (16,140,784)
------------ ------------
CAPITAL SHARE TRANSACTIONS:
Value of shares of Common Stock issued for investment plan
(34,549 and 76,238 shares) .......................................... 427,291 940,671
Value of shares of Common Stock issued in payment of gain
distribution (34,506 shares) -- 452,784
Cost of shares purchased for investment Plan (6,500 shares) ............ (78,796) --
------------ ------------
INCREASE IN NET INVESTMENT ASSETS FROM
CAPITAL SHARE TRANSACTIONS .......................................... 348,495 1,393,455
------------ ------------
INCREASE IN NET INVESTMENT ASSETS ...................................... 133,185 3,585,636

NET INVESTMENT ASSETS:
Beginning of period .................................................... 237,984,534 234,398,898
------------ ------------
END OF PERIOD (including undistributed net investment
income of $39,859 and $558,459, respectively) ....................... $238,117,719 $237,984,534
============ ============
</TABLE>

- ---------------------------------
See Notes to Financial Statements.

<PAGE>

NOTES TO FINANCIAL STATEMENTS

1. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:

a. SECURITY VALUATION--All municipal securities and other short-term holdings
maturing in more than 60 days are valued based upon quotations provided by
an independent pricing service or, in their absence, at fair value
determined in accordance with procedures approved by the Board of
Directors. Short-term holdings maturing in 60 days or less are generally
valued at amortized cost.

b. FEDERAL TAXES -- The Fund has elected to be taxed as a regulated investment
company and intends to distribute substantially all taxable net income and
net gain realized.

c. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Interest income is recorded on the accrual basis. The Fund amortizes
original issue discounts and premiums paid on purchases of portfolio
securities. Discounts other than original issue discounts are not
amortized.

d. DISTRIBUTIONS TO STOCKHOLDERS -- Dividends and distributions paid by the
Fund are recorded on the ex-dividend date.

The treatment for financial statement purposes of distributions made
during the year from net investment income or net realized gains may differ
from their ultimate treatment for federal income tax purposes. These
differences primarily are caused by differences in the timing of the
recognition of certain components of income, expense, or realized capital
gain. Where such differences are permanent in nature, they are reclassified
in the components of net assets based on their ultimate characterization
for federal income tax purposes. Any such reclassification will have no
effect on net assets, results of operations, or net asset value per share
of the Fund.

2. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio
securities, excluding short-term investments, for the six months ended June 30,
1998, amounted to $39,438,468 and $25,695,735, respectively.

At June 30, 1998, the cost of investments for federal income tax purposes
was substantially the same as the cost for financial reporting purposes, and the
tax basis gross unrealized appreciation of portfolio securities amounted to
$15,772,856.

3. DIVIDEND INVESTMENT PLAN -- Under the Fund's Charter, dividends or other
distributions on the Common Stock cannot be declared unless the Fund can satisfy
the requirements of two separate asset maintenance tests after giving effect to
such distributions.

The Fund, in connection with its Dividend Investment Plan (the "Plan"),
acquires and issues shares of its own Common Stock, as needed, to satisfy Plan
requirements. For the six months ended June 30, 1998, 6,500 shares purchased in
the open market at a cost of $78,796, which represented a weighted average
discount of 0.25% from the net asset value of those acquired shares. A total of
6,500 shares were issued to Plan participants during the period for proceeds of
$78,685, a premium of 0.07% from the net asset value of those shares.

The Fund may make additional purchases of its Common Stock in the open market
and elsewhere at such prices and in such amounts as the Board of Directors may
deem advisable. No such additional purchases were made during the six months
ended June 30, 1998.

4. CAPITALIZATION -- The Fund is authorized to issue 50,000,000 shares of
Capital Stock, par value $.01 per share, all of which were initially classified
as Common Stock. The Board of Directors is authorized to classify and reclassify
any unissued shares of Capital Stock, and has reclassified 750 shares of
unissued Common Stock as Preferred Stock.

<PAGE>

The Preferred Stock is redeemable at the option of the Fund, in whole or in
part, on any dividend payment date at $100,000 per share plus any accumulated
but unpaid dividends. The Preferred Stock is also subject to mandatory
redemption at $100,000 per share plus any accumulated but unpaid dividends in
April 2020 (Series A) and April 2022 (Series B) or if certain requirements
relating to the composition of the assets and liabilities of the Fund as set
forth in its Charter are not satisfied. Liquidation preference of the Preferred
Stock is $100,000 per share plus accumulated and unpaid dividends.

Dividends on each series of Preferred Stock are cumulative at a rate
established at the initial public offering and typically are reset every 28 days
based on the lowest rate which would permit the shares to be remarketed at
$100,000 per share.

The holders of Preferred Stock have voting rights equal to the holders of
Common Stock (one vote per share) and generally will vote together with holders
of shares of Common Stock as a single class. Voting as a separate class, holders
of Preferred Stock are entitled to elect two of the Fund's directors.

5. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. & W.
Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund and
provides the necessary personnel and facilities. Compensation of all officers of
the Fund, all directors of the Fund who are employees or consultants of the
Manager, and all personnel of the Fund and the Manager, is paid by the Manager.
The Manager's fee, calculated daily and payable monthly, is equal to 0.55% per
annum of the Fund's average daily net assets.

Seligman Data Corp., which is owned by certain associated investment
companies, charged at cost $83,902 for stockholder account services.

Certain officers and directors of the Fund are officers or directors of the
Manager and/or Seligman Data Corp.

The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at June 30, 1998, of $54,136 is
included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.

<PAGE>

FINANCIAL HIGHLIGHTS

The Fund's financial highlights are presented below. "Per share operating
performance" data is designed to allow investors to trace the operating
performance, on a per Common share basis, from the beginning net asset value to
the ending net asset value, so that investors can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item, as disclosed in the financial statements,
to their equivalent per Common share amount, based on average shares
outstanding.

"Total investment return for period" measures the Fund's performance assuming
that investors purchased Fund shares at market value or net asset value as of
the beginning of the period, invested dividends and capital gains paid, as
provided for in the Fund's dividend investment plan, and then sold their shares
at the closing market value or net asset value on the last day of the period.
The computations do not reflect any sales commissions investors may incur in
purchasing or selling Fund shares. The total investment return for periods of
less than one year is not annualized.

The ratios of expenses and net investment income to average net assets and to
average net assets for Common Stock, for all periods presented, do not reflect
the effect of dividends paid to Preferred Stockholders.

SIX MONTHS YEAR ENDED DECEMBER 31,
ENDED ----------------------------------------------------
6/30/98 1997 1996 1995 1994 1993
--------- ----------------------------------------------------
PER SHARE OPERATING PERFORMANCE:

<S> <C> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD ............ $12.33 $12.16 $12.51 $11.54 $13.14 $12.45
------ ------ ------ ------ ------ ------
Net investment income ........................... 0.46 0.96 1.02 1.03 1.05 1.05

Net realized and unrealized investment gain
(loss) .......................................... 0.02 0.44 (0.29) 1.11 (1.61) 0.85
------ ------ ------ ------ ------ ------
INCREASE (DECREASE) FROM INVESTMENT
OPERATIONS ................................... 0.48 1.40 0.73 2.14 (0.56) 1.90
Dividends paid on Preferred Stock ............... (0.10) (0.21) (0.20) (0.23) (0.17) (0.15)
Dividends paid on Common Stock .................. (0.40) (0.84) (0.84) (0.84) (0.84) (0.84)
Distribution from net realized gain ............. -- (0.18) (0.04) (0.10) (0.03) (0.22)
------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET
VALUE ........................................ (0.02) 0.17 (0.35) 0.97 (1.60) 0.69
------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD .................. $12.31 $12.33 $12.16 $12.51 $11.54 $13.14
====== ====== ====== ====== ====== ======
MARKET VALUE, END OF PERIOD ..................... $12.4375 $13.9375 $12.50 $12.50 $10.50 $13.00
======== ======== ====== ====== ====== ======
TOTAL INVESTMENT RETURN FOR PERIOD:
Based upon market value ......................... (7.87)% 20.97% 7.49% 28.58% (13.05)% 10.55%
Based upon net asset value ...................... 3.08% 10.01% 4.48% 17.09% (5.46)% 14.44%
RATIOS/SUPPLEMENTAL DATA:

Expenses to average net investment assets ....... 0.83%+ 0.90% 0.86% 0.91% 0.90% 0.92%
Expenses to average net assets for Common
Stock ........................................ 1.22%+ 1.32% 1.27% 1.34% 1.32% 1.33%
Net investment income to average net
investment assets ............................ 5.16%+ 5.35% 5.70% 5.74% 5.84% 5.58%
Net investment income to average net assets for
Common Stock ................................. 7.55%+ 7.87% 8.40% 8.45% 8.60% 8.06%
Portfolio turnover .............................. 10.95% 27.83% 21.74% 13.37% 10.74% 15.83%
NET INVESTMENT ASSETS, END OF PERIOD
(000s omitted):
FOR COMMON STOCK ................................ $163,118 $162,985 $159,399 $162,953 $150,100 $170,645
FOR PREFERRED STOCK ............................. 75,000 75,000 75,000 75,000 75,000 75,000
--------- -------- -------- -------- -------- --------
TOTAL NET INVESTMENT ASSETS ..................... $238,118 $237,985 $234,399 $237,953 $225,100 $245,645
========= ======== ======== ======== ======== ========

</TABLE>

- ----------
+ Annualized.
See Notes to Financial Statements.

<PAGE>

REPORT OF INDEPENDENT AUDITORS

THE BOARD OF DIRECTORS AND STOCKHOLDERS,
SELIGMAN SELECT MUNICIPAL FUND, INC.:

We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Select Municipal Fund, Inc. as of June
30, 1998, the related statements of operations for the six months then ended and
of changes in net investment assets for the six months then ended and for the
year ended December 31, 1997, and the financial highlights for each of the
periods presented. These financial statements and financial highlights are the
responsibility of the Fund's management. Our responsibility is to express an
opinion on these financial statements and the financial highlights based on our
audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and the financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned at June 30,
1998, by correspondence with the Fund's custodian and brokers; where replies
were not received from brokers we performed other auditing procedures. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Select
Municipal Fund, Inc. as of June 30, 1998, the results of its operations, the
changes in its net investment assets, and the financial highlights for the
respective stated periods in conformity with generally accepted accounting
principles.

/s/ DELOITTE & TOUCHE LLP

DELOITTE & TOUCHE LLP
New York, New York
July 31, 1998

<PAGE>

EXECUTIVE OFFICERS

WILLIAM C. MORRIS
CHAIRMAN

THOMAS G. MOLES
PRESIDENT

EILEEN A. COMERFORD
VICE PRESIDENT

AUDREY G. KUCHTYAK
VICE PRESIDENT

LAWRENCE P. VOGEL
VICE PRESIDENT

THOMAS G. ROSE
TREASURER

FRANK J. NASTA
SECRETARY

MANAGER
J.& W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017

GENERAL COUNSEL
Sullivan & Cromwell

INDEPENDENT AUDITORS
Deloitte & Touche LLP

STOCKHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017

IMPORTANT TELEPHONE NUMBERS
(800) 874-1092 Stockholder Services
(212) 682-7600 Outside the United States
(800) 622-4597 24-Hour Automated
Telephone Access Service

PROXY RESULTS

Stockholders of Seligman Select Municipal Fund, Inc. voted on the following
proposals at the Annual Meeting of Stockholders on May 21, 1998, in St. Louis,
MO. The description of each proposal and number of shares voted are as follows:

ELECTION OF DIRECTORS:
FOR WITHHELD
---------- ----------
Alice S. Ilchman 11,737,973 288,348
Frank A. McPherson 11,738,073 288,248
Richard R. Schmaltz 11,740,139 286,182
Brian T. Zino 11,740,139 286,182

RATIFICATION OF DELOITTE & TOUCHE LLP AS INDEPENDENT AUDITORS FOR 1998:

FOR AGAINST ABSTAIN
--------- --------- ---------
11,690,556 224,623 111,142

<PAGE>

BOARD OF DIRECTORS

JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company

ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation

FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center

JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
TRUSTEE, The New York and Presbyterian Hospital

BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES,
St. George's School

WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD,
J. & W. Seligman & Co. Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation

JAMES C. PITNEY 3, 4
RETIRED PARTNER,
Pitney, Hardin, Kipp & Szuch, Law Firm

JAMES Q. RIORDAN 3, 4
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service

RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College

ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.

JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT,
Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.

BRIAN T. ZINO 1
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.

DIRECTOR EMERITUS
FRED E. BROWN
DIRECTOR AND CONSULTANT, J. & W. Seligman & Co.
Incorporated

Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee

15
<PAGE>

SELIGMAN
=========
SELECT
======
MUNICIPAL
FUND, INC.

[GRAPHIC OMITTED]
MID-YEAR REPORT
JUNE 30, 1998

Seligman Select Municipal Fund, Inc.
Managed by
[GRAPHIC OMITTED]

J.& W. SELIGMAN & CO.
Incorporated
Investment Manager and Advisors
Established 1864
100 PARK AVENUE, NEW YORK, NY 10017

PHOTO: COURTESY MICHIGAN TRAVEL BUREAU

CESEL3b 6/98