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<PAGE> PAGE 2
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<PAGE> PAGE 4
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SIGNATURE THOMAS G. ROSE
TITLE TREASURER
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 1
<NAME> SELIGMAN PENNSYLVANIA TAX EXEMPT FUND-CL A
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 32605
<INVESTMENTS-AT-VALUE> 33288
<RECEIVABLES> 679
<ASSETS-OTHER> 82
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34049
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 202
<TOTAL-LIABILITIES> 202
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33208
<SHARES-COMMON-STOCK> 4401<F1>
<SHARES-COMMON-PRIOR> 4631<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (45)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 684
<NET-ASSETS> 33847
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1084<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> 210<F1>
<NET-INVESTMENT-INCOME> 874<F1>
<REALIZED-GAINS-CURRENT> (41)
<APPREC-INCREASE-CURRENT> 1115
<NET-CHANGE-FROM-OPS> 1949
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 874<F1>
<DISTRIBUTIONS-OF-GAINS> 600<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 62<F1>
<NUMBER-OF-SHARES-REDEEMED> 415<F1>
<SHARES-REINVESTED> 123<F1>
<NET-CHANGE-IN-ASSETS> (1139)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 597
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 84<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 210<F1>
<AVERAGE-NET-ASSETS> 33315<F1>
<PER-SHARE-NAV-BEGIN> 7.55<F1>
<PER-SHARE-NII> .19<F1>
<PER-SHARE-GAIN-APPREC> .24<F1>
<PER-SHARE-DIVIDEND> .19<F1>
<PER-SHARE-DISTRIBUTIONS> .13<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.66<F1>
<EXPENSE-RATIO> 1.25<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class A only. All other data fund level.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 3
<NAME> SELIGMAN PENNSYLVANIA TAX EXEMPT FUND CLASS D
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> MAR-31-1995
<INVESTMENTS-AT-COST> 32605
<INVESTMENTS-AT-VALUE> 33288
<RECEIVABLES> 679
<ASSETS-OTHER> 82
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 34049
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 202
<TOTAL-LIABILITIES> 202
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 33208
<SHARES-COMMON-STOCK> 17<F1>
<SHARES-COMMON-PRIOR> 6<F1>
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (45)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 684
<NET-ASSETS> 33847
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1<F1>
<OTHER-INCOME> 0
<EXPENSES-NET> 0<F1>
<NET-INVESTMENT-INCOME> 1<F1>
<REALIZED-GAINS-CURRENT> (41)
<APPREC-INCREASE-CURRENT> 1115
<NET-CHANGE-FROM-OPS> 1949
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1<F1>
<DISTRIBUTIONS-OF-GAINS> 1<F1>
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 11<F1>
<NUMBER-OF-SHARES-REDEEMED> 0<F1>
<SHARES-REINVESTED> 0<F1>
<NET-CHANGE-IN-ASSETS> (1139)
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 597
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 0<F1>
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 0<F1>
<AVERAGE-NET-ASSETS> 58<F1>
<PER-SHARE-NAV-BEGIN> 7.54<F1>
<PER-SHARE-NII> .16<F1>
<PER-SHARE-GAIN-APPREC> .25<F1>
<PER-SHARE-DIVIDEND> .16<F1>
<PER-SHARE-DISTRIBUTIONS> .13<F1>
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 7.66<F1>
<EXPENSE-RATIO> 2.08<F1>
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
<FN>
<F1>Class D only. All other data fund level.
</FN>
</TABLE>
The Boards of Directors/Trustees of
Seligman Capital Fund, Inc.
Seligman Cash Management Fund, Inc.
Seligman Common Stock Fund, Inc.
Seligman Communications and Information Fund, Inc.
Seligman Frontier Fund, Inc.
Seligman Growth Fund, Inc.
Seligman Henderson Global Fund Series, Inc.
Seligman High Income Fund Series
Seligman Income Fund, Inc.
Seligman New Jersey Tax-Exempt Fund, Inc.
Seligman Pennsylvania Tax-Exempt Fund
Seligman Tax-Exempt Fund Series, Inc.
Seligman Tax-Exempt Series Trust:
We have examined the accompanying description of the Seligman Capital Fund,
Inc., Seligman Cash Management Fund, Inc., Seligman Common Stock Fund, Inc.,
Seligman Communications and Information Fund, Inc., Seligman Frontier Fund,
Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc., Seligman New
Jersey Tax-Exempt Fund, Inc., Seligman Pennsylvania Tax-Exempt Fund, Seligman
Tax-Exempt Fund Series, Inc., Seligman Tax-Exempt Series Trust, ("Funds")
Alternative Distribution Accounting System functioning at Investors Fiduciary
Trust Company ("IFTC"), Kansas City, Missouri. Our examination included
procedures to obtain reasonable assurance about whether (1) the accompanying
description (Appendix I) presents fairly, in all material respects, the aspects
of the policies and procedures that may be relevant to the Funds' internal
control structure, (2) the control structure policies and procedures included in
the description were suitably designed to achieve the control objectives
specified in the description, if those policies and procedures were complied
with satisfactorily, and (3) such policies and procedures has been placed in
operation as of March 31, 1995. The control objectives were specified by the
management of J. & W. Seligman & Co. Incorporated. Our examination was performed
in accordance with standards established by the American Institute of Certified
Public Accountants and included those procedures we considered necessary in the
circumstances to obtain a reasonable basis for rendering our opinion.
In our opinion, the accompanying description of the aforementioned Alternative
Distribution Accounting System presents fairly, in all material respects, the
relevant aspects of policies and procedures that had been placed in operation as
of March 31, 1995. Also, in our opinion, the policies and procedures, as
described, are suitably designed to provide reasonable assurance that the
specified control objectives would be achieved if the described policies and
procedures were complied with satisfactorily.
<PAGE>
In addition to the procedures we considered necessary to render our opinion as
expressed in the previous paragraph, we applied tests to specific policies and
procedures, listed in Appendix II, to obtain evidence about their effectiveness
in meeting the control objectives, as described in Appendix II, during the
period from April 1, 1994 to March 31, 1995. The specific policies and
procedures and the nature, timing, extent, and results of the tests are listed
in Appendix II. In our opinion, such policies and procedures were operating with
sufficient effectiveness to provide reasonable, but not absolute, assurance that
the control objectives specified in Appendix II were achieved during the period
from April 1, 1994 to March 31, 1995.
The relative effectiveness and significance of specific policies and procedures
at IFTC and their effect on assessments of control risk at the Funds are
dependent on their interaction with the policies, procedures, and other factors
present at the Funds. We have performed no procedures to evaluate the
effectiveness of policies and procedures at the Funds with respect to this
report.
The description of policies and procedures at IFTC is as of March 31, 1995, and
information about tests of the operating effectiveness of specified policies and
procedures covers the period from April 1, 1994 to March 31, 1995. Any
projection of such information to the future is subject to the risk that,
because of change, the description may no longer portray the system in
existence. The potential effectiveness of specified policies and procedures at
IFTC is subject to inherent limitations and, accordingly, errors or
irregularities may occur and not be detected. Furthermore, the projection of any
conclusions, based on our findings, to future periods is subject to the risk
that changes may alter the validity of such conclusions.
This report is intended solely for use by the management and Boards of
Directors/Trustees of the Funds, J. & W. Seligman & Co. Incorporated and the
Securities and Exchange Commission.
/s/ Deloitte & Touche LLP
- --------------------------
May 11, 1995
<PAGE>
Appendix I
Description of the "Alternative Distribution Accounting System" (the "System")
The Funds' capital structure contains two classes of shares, each with a
different expense composition. The following is a summary of the class
structure:
Class A shares refer to shares sold under the "Initial Sales Load
Option" and are subject to a front-end sales load and an annual service
fee of up to .25% of average daily net asset value.
Class D shares refer to shares sold under the "No Initial Sales Load
Option" and are not subject to an initial sales load but incur an annual
service fee of up to .25% of average daily net asset value and an annual
distribution fee of up to .75% of average daily net asset value.
Class D has replaced the Class C noted in the Amended Exemptive Application
Filing of March 29, 1993. As of March 31, 1995, Class C shares and the Class B
shares noted in the Amended Exemption Application Filing of March 29, 1993 have
not been established.
Investors Fiduciary Trust Company ("IFTC") serves as the primary recordkeeper
for all transactions authorized by the Funds' management. In its portfolio
administrator role, IFTC is responsible for preparing daily net asset value
computations, updating the general ledger and investment portfolio, and
maintaining other subsidiary information as required by the Investment Company
Act of 1940 and the Securities and Exchange Commission.
DAILY PROCEDURES FOLLOWED BY INVESTORS FIDUCIARY TRUST COMPANY IN APPLICATION OF
THE SYSTEM
In order to facilitate the appropriate recordkeeping for each class of shares,
IFTC utilizes an accounting structure consisting of a principal general ledger
and class-specific ledgers.
The principal general ledger is used to record all transactions occurring at the
fund level.
The class-specific ledger is used to record fund share activity, class-specific
expenses and allocated income and expenses for each class.
A daily checklist has been developed for IFTC to ensure all daily entries and
reviews are completed in order to report properly the net asset values
calculated in accordance with the System (Attachment I).
IFTC utilizes an automated Multiple Class Pricing System ("MCPS") to calculate
net asset value ("NAV") for each class. An illustration of the allocation
methodology used to calculate each class' NAV is included at Attachment II. The
MCPS derives NAV from a capital statement, rather than balance sheet,
perspective by tracking all daily activity occurring in the Fund and in each
class. The allocation ratios are automatically calculated by IFTC's Portfolio
Accounting System ("PAS") based on each class' respective portion of total fund
net assets. The output from the MCPS is maintained on the Daily Price Make-Up by
Class report. An example of this report is included at Attachment III. A
supervisory review of the calculations is performed by IFTC.
Policies and procedures governing the posting allocations were specified by the
management of J. & W. Seligman & Co. Incorporated ("Seligman"), the Funds'
manager.
<PAGE>
Appendix I
(Continued)
The following represents a description of the major segments and control points
to be employed by the System.
Investment Transactions and Accrual of Income
Investment transactions are posted to the principal general ledger of PAS.
Interest and dividend income are also accrued in the principal general ledger.
The total amount payable and/or receivable for security transactions are
recorded on the daily batch sheet and are sent to Seligman for review.
The accuracy of investment transaction information processed through PAS is
based upon controls functioning separately from the controls in place for the
Alternative Distribution Accounting System. Such controls have not been tested
in connection with the issuance of this report.
Share Activity
Fund share subscriptions and redemptions are recorded in class-specific ledgers
for each class. The ending share balances from the class-specific ledgers are
agreed on a daily basis to the shares outstanding on the shareholder service
agent's reports for each class.
The value of settled shares (i.e., dividend shares) outstanding is calculated
daily for use in the multiple class allocations for the daily dividend Funds.
The value of settled shares for each class equals the ending dividend shares
times the previous day's NAV per share.
The value of shares outstanding (i.e., adjusted net assets) is calculated daily
for all Funds for each class as the prior day's net assets plus the current
day's capital activity.
The accuracy of shareholder transaction information processed through PAS is
based upon controls functioning separately from the controls in place for the
Alternative Distribution Accounting System. Such controls have not been tested
in connection with the issuance of this report.
Allocation of Revenue and Expense
The system allocates revenue and common expenses ratably to each class. Revenue
and expense allocations are based either on the value of settled shares or on
the value of shares outstanding depending on the distribution methodology of the
fund. Each class allocation is posted via the automated allocation facility to
the memorandum accounts of the class-specific ledger. The sum of the daily
allocated revenue and expenses of the memorandum accounts of the class-specific
ledger is agreed to the principal general ledger.
The accuracy of the revenue and expense accruals processed through PAS is based
upon controls functioning separately from the controls in place for the
Alternative Distribution Accounting System. Such controls have not been tested
in connection with the issuance of this report.
Class-Specific Expenses
Class-specific expenses are accrued in each class-specific ledger based upon
amounts authorized by Seligman.
Unrealized Appreciation/Depreciation and Realized Gains and Losses
The change in the unrealized appreciation/depreciation and realized gains and
losses are recorded in the principal general ledger and allocated to the classes
based on the value of shares outstanding.
<PAGE>
Calculation of NAV Per Class
The current day's net assets are calculated by adding the daily increase or
decrease in undistributed net investment income, capital share activity,
realized gains and losses, distributions of net realized gains and unrealized
appreciation/depreciation to the prior day's net assets. Net asset value per
share for each class is calculated by dividing the class' current day net assets
by its ending shares balance.
The NAV calculation for each class is reviewed by Seligman on a daily basis.
Dividend Rate Calculation
For periodic dividend Funds, the annual dividend rate per share for investment
income for each class will be calculated using the "record share" method. Total
investment income less common expenses from the principal general ledger is
divided by record date shares for all classes to arrive at an annual gross
dividend rate per share. Per share class-specific expenses, accrued in each
class-specific ledger, are deducted on a per share basis from the annual gross
dividend rate per share to arrive at the class-specific dividend rate per share.
The periodic dividends are authorized by the Funds' Board of Directors based
upon Seligman's estimate of the annual class specific dividend rate per share.
For daily dividend Funds, the dividend rate for investment income for each class
will be calculated using the "actual income" method. Under the "actual income"
method, the dividend rate is based on daily allocated income less allocated
common expenses and class-specific expenses divided by ending dividend shares.
Net realized gains for the Fund are divided by total ending shares to derive the
net realized gain distribution per share, which is paid to both class A and D
shareholders.
<PAGE>
Attachment I
IFTC'S ALTERNATIVE DISTRIBUTION ACCOUNTING SYSTEM
DAILY CHECKLIST
Prepare cash available
Record the settlement of the following:
o Long term security trades
o Long term interest payment received
o Short-term maturities
o Dividends received
Review for cash dividends, stock splits and stock dividends:
A. Review security listing for stock splits, stock dividends
B. Trace current security position to dividend accrual record
C. For securities going "ex-dividend," trace current position to
Wall Street Journal for dividends and stock splits.
D. Screen print current day dividends accruals
E. Trace cash dividend to Bloomberg and ascertain dividend declaration
F. View security listing to ascertain stock splits and dividends
Compare general ledger and subsidiary ledger and report/resolve any
discrepancies.
Trace adjusted net assets and shares to daily general ledger; report/resolve
differences, if any. Tie class level net assets to fund level general ledger.
Review income and expense entries for reasonableness by 9:30 A.M. Post manual
expense entries if required for Fund.
Review Failed Security Trades Report in conjunction with custody area;
investigate failed items.
Batch long-term and short-term trade tickets.
Review current daily trades for dividend activity. Determine if security was
owned as of "ex-date". If dividend detected, review/adjust accrual record.
Post "Record Share Balances" in the appropriate class portfolio. Trace "Record
Share Balances" and "Fund Share," Receivable and Payable" to Seligman Fund Share
Sheet. If the fund pays dividend daily, update "Dividend Share Balance" and
trace to Seligman Fund Share Sheet. Resolve any discrepancies.
<PAGE>
Attachment I
(Continued)
IFTC'S ALTERNATIVE DISTRIBUTION ACCOUNTING SYSTEM
DAILY CHECKLIST
Provide trade information to custody.
Provide cash available to custody by 2:00 P.M.
Complete bank reconciliation by 2:30 P.M., research/resolve reconciling items.
Post manual entries by 3:00 P.M.
Close out daily income by class and calculate each class dividend factor by 2:30
P.M.
Enter manual prices by 3:30 P.M.
Review "Daily Price Make-Up by Class" for reasonableness of allocated income,
expenses, gain/loss, and unrealized gain/loss:
A. Trace fund level net assets from rollforward "Daily Price Make-Up by
Class" to "Daily NAV Calculation Report."
B. Review on line pricing stratification; verify prices received with
Bloomberg or pricing source.
C. Review "Daily Security Pricing Listing," resolve any unusual fluctuations.
D. Review "Daily Security Pricing Listing" for ex-dividend items.
E. Perform detail review of "Pricing Stratification Report" for
unusual fluctuations in market value.
Communicate pricing information to NASDAQ by 4:30 P.M., outside transfer agent
by 5 P.M.
<PAGE>
Attachment II
ALTERNATIVE DISTRIBUTION ACCOUNTING SYSTEM
ILLUSTRATION OF MULTIPLE CLASS PRICING SYSTEM'S CALCULATIONS
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
Total Class Class
(T) (A) (D)
1. Net Assets Beginning of Day C __ I __ I __
Capital Activity
2. Subscriptions C __ I __ I __
3. Redemptions C __ I __ I __
4. Reinvestments C __ I __ I __
5. Adjusted Net Assets (1 + 2 - 3 + 4) C __ C __ C __
6. % Value of Adjusted Net Assets by Class (5(A-D)/5(T)) C __ C __
Operating Activity
7. Revenue (7(T) x 6(A-D) or 32(A-D)) I __ C __ C __
8. Management Fee (8(T) x 6(A-D) or 32(A-D)) I __ C __ C __
9. Other Common Expenses (9(T) x 6(A-D) or 32(A-D)) I __ C __ C __
10. Total Common Expenses (8 + 9) C __ C __ C __
11. 12B-1 Fees C __ I __ I __
12. Other Specific Expenses C __ I __ I __
13. Total Specific Expenses (11 + 12) C __ C __ C __
14. Daily Net Income (7 - 10 - 13) C __ C __ C __
15. Net Realized Gain/Losses (15(T) x 6(A-D)) I __ C __ C __
16. Dividends Declared - Net Investment Income C __ I __ I __
17. Daily Dividend Rate - For Daily Dividends Only (14(A-D)/35(A-D)) C __ C __
18. Dividends Declared - Net Realized Gains C __ I __ I __
19. Net Assets before Pricing (5 + 14 + 15 - 16 - 18) C __ C __ C __
20. Yesterday's Cumulative/Appreciation Depreciation (20(T) x 6(A-D)) I __ C __ C __
21. Today's Cumulative/Appreciation Depreciation (21(T) x 6(A-D)) I __ C __ C __
22. Change in Market Value (21 - 20) C __ C __ C __
23. Net Assets Adjusted for Pricing (19 + 22) C __ C __ C __
NAV Calculation
24. Today's NAV (23/30) C __ C __
25. Previous NAV I __ I __
26. Sales Load as a % of Offering Price I __
27. Offering Price (24/(100%-26)) C __
Share Activity
28. Beginning Share Balance C __ I __ I __
29. Share Activity - Prior Day C __ I __ I __
30. Ending Share Balance (28 + 29) C __ C __ C __
31. Value of Dividend Shares Outstanding (35 x 25) C __ C __ C __
32. % Value of Dividend Shares Outstanding by Class (31(A-D)/31(T)) C __ C __
33. Beginning Dividend Share Balance C __ I __ I __
34. Dividend Share Activity - Prior Day C __ I __ I __
35. Ending Dividend Share Balance (33 + 34) C __ C __ C __
C - Calculate
I - Input
Note: For allocation of revenue and expenses, line 6 applies to periodic
dividend funds and line 32 applies to daily dividend funds.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Attachment III
October 17, 1994
SELIGMAN CASH & TAXABLE BONDS
DAILY PRICE MAKE-UP BY CLASS - DOLLAR AMOUNTS
PRINCIPAL ACCOUNT AND NAME: 001-607 SCB/SCB U.S. GOV'T SEC
US GOVT A US GOVT D
Description 001 607 001 607 02 001 607 05
- ----------- ------- ---------- ----------
<S> <C> <C> <C>
Net Assets Beginning of Day 64,948,636.79 57,792,333.58 7,156,303.21
Fund Share Activity:
Subscriptions 746.23 462.54 283.69
Redemptions 68,421.27- 68,421.27-
Reinvestments
Adjusted Net Assets 64,880,961.75 57,724,374.85 7,156,586.90
Revenue 14,084.88 12,539.20 1,545.68
Expenses:
Common 1,339.71- 1,192.69- 147.02-
Specific 703.06- 430.00- 273.06-
Net Realized Gain/Loss
Other Credits
Other Debits
Dividends Declared:
Net Investment Income 12,042.11- 10,916.51- 1,125.60-
Net Realized Gains
Net Assets Before Pricing 64,880,961.75 57,724,374.85 7,156,586.90
Change in Market Value 50,934.00- 45,315.81- 5,618.19-
Net Assets Adjusted for Pricing 64,830,027.75 57,679,059.04 7,150,968.71
Yesterday's Cumulative AP/DP 1,455,103.12-
Today's Cumulative AP/DP 1,506,037.12-
Today's NAV 6.59 6.61
Today's Offering 6.92 6.61
Change in NAV .01-
Previous NAV 6.60 6.61
Beginning Share Balance 9,838,233.023 8,756,352.917 1,081,880.106
Ending Share Balance 9,827,979.174 8,746,056.149 1,081,923.025
Daily Change 10,253.849- 10,296.768- 42.919
Value of Dividend Shares O/S 64,996,421.08 57,863,696.41 7,132,724.67
Beginning Divd Share Balance 9,848,435.505 8,770,162.890 1,078,272.615
Ending Divd Share Balance 9,845,480.926 8,767,165.392 1,078,315.534
Daily Change 2,954.579- 2,997.498- 42.919
Undistributed Income 0.00 0.00 0.00
</TABLE>
<PAGE>
Appendix II
Control Objectives, Policies and Procedures
of the Alternative Distribution Accounting System
This report on policies and procedures placed in operation and tests of
operating effectiveness is intended to provide the Securities and Exchange
Commission, the Boards of Directors/Trustees and management with information
sufficient to obtain an understanding of those aspects of control structure
policies and procedures of the Alternative Distribution Accounting System that
may be relevant to a user organization's internal control structure, and reduce
the assessed level of control risk below the maximum for certain financial
statement assertions. This report, when coupled with an understanding of the
internal control structure policies and procedures in place at user
organizations, is intended to assist in the assessment of the total internal
control structure surrounding transactions processed through the application.
Our examination was restricted to the allocation methodology of the Alternative
Distribution Accounting System and accordingly did not extend to procedures in
effect at user organizations or other supporting applications at Investors
Fiduciary Trust Company. The examination was conducted in accordance with the
Statement on Auditing Standards (SAS) No. 70, "Reports on the Processing of
Transactions by Service Organizations," of the American Institute of Certified
Public Accountants. It is each interested party's responsibility to evaluate
this information in relation to internal control structure policies and
procedures in place at user organizations to obtain an understanding of the
internal control structure policy and procedures and assess control risk.
Our examination included inquiry of appropriate management, supervisory and
staff personnel; inspection of documents and records; observation of activities
and operations; and tests of controls surrounding the Alternative Distribution
Accounting System. Our tests of controls were performed from April 1, 1994 to
March 31, 1995, and were applied to those control structure policies and
procedures relating to control objectives specified in Appendix II.
The description of policies and procedures and control objectives are the
responsibility of the Funds' management. Our responsibility is to express an
opinion that the policies and procedures are operating with sufficient
effectiveness to provide reasonable, but not absolute, assurance that the
control objectives were achieved during the period covered by our report.
<PAGE>
Control Objectives, Policies and Procedures
of the Alternative Distribution Accounting System (the "System")
The System functions in a principal general ledger and class-specific ledger
account structure on the Investors Fiduciary Trust Company Portfolio Accounting
System. This System includes the detail of transactions in accordance with the
Investment Company Act of 1940.
The following represents the internal accounting control objectives and policies
and procedures for the allocation of income and expenses and the computation of
the net asset value and, if applicable, the dividend/distribution for each class
of shares utilizing the Daily Price Make-Up by Class report from the MCPS. It
does not cover the internal accounting control policies and procedures
surrounding the processing of information into the Funds' primary accounting
system.
The Daily Price Make-Ups by Class which were selected for testing during the
period April 1, 1994 to March 31, 1995 were subject to the procedures set forth
in the testing column.
<TABLE>
<CAPTION>
Control Objectives Control Policies and Procedures
- ------------------ -------------------------------
<S> <C> <C> <C>
A. Capital share activity as A. Daily, the shareholder service agent forwards reports
reported is forwarded by the of capital share activity for each class to
Fund's shareholder service the Fund.
agent and is recorded for
each class in an accurate
and timely manner by the
Fund.
</TABLE>
<TABLE>
<CAPTION>
Testing Expected Results of Testing Results of Testing
- -------- --------------------------- ------------------
<S> <C> <C> <C> <C>
A. Agreed activity reported by the shareholder service agent A. Amount of share activity As expected
to the activity reported in Daily Price Make-Up by Class. per shareholder service agent
agrees to amount recorded in
system for each class.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control Objectives Control Policies and Procedures
- ------------------ -------------------------------
<S> <C> <C> <C> <C>
B. Net assets, NAV and B. The following represents certain primary control
dividend/distribution, if procedures used to verify the net assets, NAV and
applicable, for each class dividends/distribution, if applicable for each class
are accurately computed on a on the system:
daily basis.
1. The "Net Assets Beginning of Day," for each
class "Previous NAV" for each class,
"Yesterday's Cumulative
Appreciation/Depreciation," "Beginning Share
Balance" for each class and "Beginning Dividend
Share Balance" for each class are roll forward
from the prior day's Daily Price Make-Up by
Class.
2. The daily net capital stock activity for each
class for the current day is agreed from the
Daily Price Make-Up by Class to the shareholder
service agent report as described in Control
Procedure A.
</TABLE>
<TABLE>
<CAPTION>
Testing Expected Results of Testing Results of Testing
- -------- --------------------------- ------------------
<S> <C> <C> <C> <C>
B. The noted control procedures were
subject to the following procedures:
1. Agreed "Net Assets Beginning of Day," for each 1. "Net Assets Beginning of Day" for each class, As expected
class, "Previous NAV" for each class, "Yesterday's "Previous NAV" for each class, "Yesterday's
Cumulative Appreciation/Depreciation," "Beginning Cumulative Appreciation/Depreciation,"
Share Balance" for each class and "Beginning "Beginning Share Balance" for each class and
Dividend Share Balance" for each class to the "Beginning Dividend Share Balance" for each
previous day's Daily Price Make-Up by Class. class are equal to prior day Daily Price
Make-Up by Class.
2. Agreed Fund Share Activity - "Subscriptions," 2. Fund Share Activity - "Subscriptions," As expected
"Redemptions" and "Reinvestments" to the reports "Redemptions" and "Reinvestments" are equal to
from the shareholder service agent for each class. share activity report from shareholder service
agent for each class.
Recalculated "Adjusted Net Assets" by adding "Net "Adjusted Net Assets" is arithmetically correct As expected
Assets Beginning of Day" and Fund Share Activity - for each class.
"Subscriptions", "Redemptions" and "Reinvestments"
for each class.
<PAGE>
Recalculated for each class "Ending Share "Ending Share Balance" is arithmetically As expected
Balance" by adding "Beginning Share correct for each class.
Balance" for each class to the Share Activity -
Prior Day for each class. Obtained the Share
Activity - Prior Day for each class from
reports of the shareholder service agent.
For the daily dividend Funds, recalculated for "Ending dividend Share Balance" is As expected
each class "Ending Dividend Share Balance" by arithmetically correct for each class.
adding "Beginning Dividend Share Balance" for
each class to the Dividend Share Activity - prior
day for each class. Obtained the Dividend Share
activity - Prior Day for each class from reports
of the shareholder service agent.
For the daily dividend Funds recalculated for "Value of Dividend Shares O/S" is As expected
each class the "Value of Dividend Shares O/S" by arithmetically correct for each class.
multiplying the "Ending Dividend Share Balance"
for each class by the "Previous NAV" for each
class.
Control Policies and Procedures Testing
- ------------------------------- --------
3. Allocate investment income between classes 3. Recalculated for each class the "Revenue" by:
based on the appropriate asset allocation
percentage for each class. - Calculating the Percent Value of
Adjusted Net Assets by Class by dividing the
"Adjusted Net Assets" for each class by the
"Adjusted Net Assets" total for the periodic
dividend funds.
- Calculating the Percent Value of Dividend
Shares O/S by Class by dividing the "Value of
Dividend Shares O/S" for each class by the
"Value of Dividend Shares O/S" total for the
daily dividend funds.
- Multiplying the amount of "Revenue" in the
principal general ledger by the appropriate
allocation percentage, calculated above, for
each class.
4. Agree the total "Revenue," "Expenses," "Net 4. Agreed total "Revenue," "Expenses," "Net Realized
Realized Gains and Losses," and "Today's "Gain and Loss" and "Today's Cumulative Appreciation/Depreciation"
primary accounting system of the Fund. to the primary accounting system.
Expected Results of Testing Results of Testing
- --------------------------- ------------------
3. Allocation of "Revenue" to each class is As expected
arithmetically correct, based upon the
appropriate allocation percentage.
4. Total for each item is equal to the balance As expected
in the primary accounting system.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control Objectives Control Policies and Procedures
- ------------------ -------------------------------
<S> <C> <C> <C> <C>
B. Net assets, NAV and 5. Allocate expenses between classes
dividend/distribution, if as follows:
applicable, for each class
are accurately computed on a
daily basis. (Continued)
a. Specific expenses are recorded to each
class based on authorization from
Seligman.
b. Common expenses are allocated in
accordance with the appropriate asset
allocation percentage for each class.
</TABLE>
<TABLE>
<CAPTION>
Testing Expected Results of Testing Results of Testing
- ------- --------------------------- ------------------
<S> <C> <C> <C> <C>
5a. Agree specific expenses to Seligman's 5a. Specific expenses are equal to the As expected
authorization reports. Seligman authorization reports.
b. Recalculated for each class the "Common" b. "Common" expenses are arithmetically As expected
expenses by: correct for each class.
- Calculating the Percent Value of
Adjusted Net Assets by Class for the
periodic dividend Funds as noted in 3
above.
- Calculating the percent value of
Dividend shares O/S by Class for daily
dividend Funds as noted in 3 above.
- Multiplying the "Common" expenses
by the appropriate asset allocation
percentage calculated above.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control Policies and Procedures Testing
- ------------------------------- -------
<S> <C> <C> <C>
6. Allocate Realized and Unrealized Gains and 6. Recalculated the "Change in Market Value" by
Losses between the classes in accordance with subtracting "Yesterday's Cumulative
the appropriate asset allocation percentage of Appreciation/Depreciation" from "Today's
each class. Cumulative Appreciation/Depreciation."
Recalculated the allocation for each class the
"Change in Market Value" and the "Net Realized
Gain/Loss" by:
- Calculating the Percent Value of Adjusted
Net Assets by Class for all Funds as described
in 3 above.
- Multiplying the "Changes in Market Value"
and the "Net Realized Gain/Loss" by the percent
Value of Adjusted Net Assets by Class (which is
calculated in Step 3 above).
Expected Results of Testing Results of Testing
- --------------------------- ------------------
6. "Change in Market Value" is arthmetically As expected
correct.
Allocation of "Change in Market Value" As expected
and "Net Realized Gain/Loss" is
arithmetically correct based on the percent
Value of Adjusted Net Assets by Class.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Control Objectives Control Policies and Procedures
- ------------------ -------------------------------
<S> <C> <C>
B. Net assets, NAV and dividend/distribution, 7. Record "Dividend Declared-Net
if applicable, for each class are accurately Investment Income and Net Realized
computed on a daily basis. (Continued) Capital Gains" to shareholders of
of each Class in the Class-specific
ledgers.
a. Daily dividends declared to shareholders of
each class are calculated and recorded in
the class-specific ledgers.
b. Periodic dividends declared to shareholders
of each class are recorded in the class-
specific ledgers based on Seligman's authorization
c. "Net Realized Gains" declared to shareholders
are calculated and recorded in class-specific
ledgers.
Testing Expected Results of Testing Results of Testing
- ------- --------------------------- ------------------
7a. For the daily dividend Funds, recalculated for 7. "Dividends Declared-Net Investment As expected (when
each class the "Dividends Declared-Net Investment Income for the periodic dividend Funds are applicable)
Income" by multiplying the "Daily Dividend Rate" arithmetically correct for each class.
by the "Ending Dividend Shares" for each class.
The "Daily Dividend Rate" was calculated as the
current day's "Revenue" for each class less
current day's "Expenses-Common and Specific"
dividend by the "Ending Dividend Share
Balance" for each class.
b. For the periodic dividend Funds, recalculated "Dividend Declared-Net Realized Gains" As expected (when
for each class the "Dividends Declared - Net are arithmetically correct for each class. applicable.)
Investment" by multiplying the dividend rate
authorized by the Fund's Board of Diretors by
the "Ending Share Balance."
c. Recalculated for each class the "Dividends "Dividend Declared-Net Realized Gains" As expected
Declared-Net Realized Gains" by multiplying are arithmetically correct for each class.
the net realized gain distribution per share
authorized by the Fund's Board of Directors/
Trustees by the "Ending Share Balance" per class.
<PAGE>
Control Policies and Procedures Testing
- ------------------------------- -------
8. For each class, recalculated the current 8. Recalculated for each class the "Net Assets
day's NAV and Offering Price. Adjusted for Pricing" by adding "Adjusted Net
Assets," "Revenues," "Expenses - Common
and Specific," "Net Realized Gain/Loss,"
"Dividends Declared-Net Investment Income
and Net Realized Gains" and "Change in Market Value"
Recalculated "Today's NAV" by dividing the "Net
Assets Adjusted for Pricing" by class by
"Ending Share Balance" by class.
Recalculated "Offering Price" for Class A
shares by applying the "Load" percentage as
stated in the Fund's prospectus.
Expected Results of Testing Results of Testing
- --------------------------- ------------------
8. "Net Assets Adjusted for Pricing" is As expected
arithmetically correct for each class.
"Today's NAV" is arithmetically correct for As expected
each class.
"Offering Price" is arithmetically correct for As expected
Class A.
<PAGE>
Control Objectives Control Policies and Procedures
- ------------------ --------------------------------
B. Net assets, NAV and 9. The satisfactory completion of above
dividend/distribution, if procedures are reviewed by lthe Fund
applicable, for each supervisor or manager.
class are accurately computed on
a daily basis. (Concluded)
</TABLE>
<TABLE>
<CAPTION>
Testing Expected Results of Testing Results of Testing
- ------- --------------------------- ------------------
<S> <C> <C> <C> <C>
9. We made inquiry of the Fund supervisor as to 9. Response that the Fund As expected
the daily review of the above procedures. supervisor or manager determines that the
above procedures are satisfactorily
completed on a daily basis.
</TABLE>
