SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
THIS REPORT IS INTENDED ONLY FOR THE INFORMATION OF SHAREHOLDERS OR THOSE WHO
HAVE RECEIVED THE OFFERING PROSPECTUS COVERING SHARES OF CAPITAL STOCK OF
SELIGMAN FRONTIER FUND, INC., WHICH CONTAINS INFORMATION ABOUT THE SALES
CHARGES, MANAGEMENT FEE, AND OTHER COSTS. PLEASE READ THE PROSPECTUS CAREFULLY
BEFORE INVESTING OR SENDING MONEY.
EQFR2 9/96
- --------------------------------------------------------------------------------
ANNUAL REPORT
- --------------------------------------------------------------------------------
SELIGMAN FRONTIER FUND, INC.
- --------------------------------------------------------------------------------
SEPTEMBER 30, 1996
[LOGO]
- --------------------------------------------------------------------------------
A CAPITAL APPRECIATION FUND
ESTABLISHED IN 1984
<PAGE>
================================================================================
TO THE SHAREHOLDERS
- --------------------------------------------------------------------------------
Seligman Frontier Fund had a rewarding fiscal year, outpacing the Russell 2000
Index for the 12 months ended September 30, 1996.
After reducing interest rates twice in 1995, and again in January 1996, the
Federal Reserve Board left rates unchanged for the next eight months. The
economy, which slowed in the last quarter of 1995, bounced back in the second
quarter of 1996 and maintained a healthy, non-inflationary pace thereafter.
Economic reports issued in September of 1996 reflected the economy's strength,
showing increases in production, new home sales, wages, and spending.
With the lowest unemployment rate since June 1990, strong personal incomes,
interest rates far below their 1980s levels, and few signs of inflationary
pressure, consumer confidence as measured by The Conference Board rose 25% above
its January 1996 level.
In the last 12 months, the growing economy propelled the Russell 2000 and
Nasdaq indices to record highs through May 1996. While the economy continued to
grow with very little actual inflation, ongoing apprehension created a difficult
market environment for small-cap stocks. There were corrections in the equity
markets in June and July which reduced small-cap valuations. However, the
markets recovered most of their lost ground by September. With small-cap stocks
now trading at more reasonable valuations relative to earnings, we expect the
positive economic environment to prove beneficial for the small-cap market.
Going forward, we foresee continued, albeit moderate, economic growth and a
benign level of inflation. This environment of modest growth, combined with
relatively stable interest rates, should be beneficial for financial markets in
the months ahead. As always, there could be short-term volatility, but we remain
confident in the long-term outlook.
As we near the end of the year, we encourage you to review your overall
investment portfolio. When doing so, you may wish to consult your financial
advisor to discuss financial issues such as tax planning, and to ensure that you
are following the best investment strategy to help you seek your financial
goals.
Specific performance information, including a discussion with your Portfolio
Manager, and a chart and table that analyze longer-term performance, follows
this letter.
We thank you for your continued interest in Seligman Frontier Fund, and look
forward to serving your investment needs in the many years to come. By order of
the Board of Directors,
/s/William C. Morris
- --------------------
William C. Morris
Chairman /s/Brian T. Zino
----------------
Brian T. Zino
President
October 30, 1996
1
<PAGE>
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ANNUAL PERFORMANCE OVERVIEW
- --------------------------------------------------------------------------------
The following is a discussion with your Portfolio Manager regarding Seligman
Frontier Fund, Inc. and a chart and table comparing your Fund's performance to
the performance of the Russell 2000 Index, the Nasdaq Composite Index, and the
Lipper Small Company Growth Fund Index.
YOUR PORTFOLIO MANAGER
- ----------------------------
[PHOTO]
- ----------------------------
ARSEN MRAKOVCIC is a Managing Director of J. & W. Seligman & Co. Incorporated
and has been Portfolio Manager and Vice President of Seligman Frontier Fund
since September 1995. Mr. Mrakovcic began working with Seligman Frontier Fund as
a portfolio assistant in 1992. Mr. Mrakovcic also manages the US portion of
Seligman Henderson Global Smaller Companies Fund, a global small-cap fund.
Additional responsibilities include portfolio management of Seligman Frontier
Portfolio and the US portion of Seligman Henderson Global Smaller Companies
Portfolio within Trillium, Seligman's variable annuity product, and management
of institutional assets within the small-cap discipline.
HOW DID SELIGMAN FRONTIER FUND PERFORM IN THE PAST 12 MONTHS?
The Fund had positive results over the last 12 months. It outpaced the Russell
2000 Index but underperformed the Lipper Small Company Growth Fund Index due
mainly to its relative overweighting in the electronics sector.
WHAT ECONOMIC FACTORS INFLUENCED SELIGMAN FRONTIER FUND IN THE PAST 12 MONTHS?
Seligman Frontier Fund generally benefited from the economy's growth thus far in
1996. However, reports of continued high employment and robust housing figures
created fears of inflation. These fears culminated in a July correction of the
equity markets which depressed small-cap stocks. The equity markets as a whole
bounced back from the setback over the summer as economic reports continued to
show signs of strong growth and inflationary indicators remained stable.
WHAT MARKET EVENTS AFFECTED THE FUND IN THE PAST 12 MONTHS?
The economic growth that characterized the last 12 months supported new market
highs in May for small-cap companies. The Fund's portfolio broadly benefited
from the market advances throughout this period. The July sell-off, however,
deflated small-cap valuations, and reduced the Fund's gains. A recovery was
initiated later in the summer and small-cap stocks improved gradually through
September.
HOW WAS THE PERFORMANCE OF THE FUND'S LARGER SECTORS?
The Fund's holdings in the electronics sector performed poorly, dampening the
portfolio's investment results in the first six months of 1996. The July
correction further reduced the value of these holdings, even though we had pared
the portfolio's exposure through June. The summer correction did, however,
result in the most attractive electronics valuations in ten months, presenting
us with a good buying opportunity.
Conversely, the Fund's business goods and services stocks performed well over
the last 12 months. The corporate outsourcing trend continues to benefit the
holdings in this sector. During the last three months, we trimmed some of the
positions that had seen significant gains, taking profits. We will maintain the
Fund's exposure to business goods and services, as the sector still has strong
long-term prospects.
This quarter, we increased the Fund's positions in independent power
producers -- a very promising industry -- by purchasing Calpine to complement
the CalEnergy holding. These alternative energy companies are particularly
appealing, as they have recurring revenue from fixed multi-year contracts in an
industry with very high barriers to entry. Both companies have outstanding
growth prospects and fit the Fund's investment strategy of purchasing viable
corporate entities, with expanding products and markets, in the early stages of
their profitability.
Finally, health care was another growing investment focus for the Fund over
the past 12 months. We added pharmaceutical companies with good earnings growth
potential and selectively purchased issues that should continue to prosper
despite potential health care reform. In financial services, another of the
Fund's larger weightings, we added new positions in smaller banks that should
benefit from banking's industry-wide consolidation trend.
WHAT IS YOUR INVESTMENT STRATEGY?
Seligman Frontier Fund remains a true small-cap investment. Its investment
strategy continues to focus on companies that are growing quickly, and that have
increasing earnings and high liquidity. Further, we maintain a bottom-up
approach to investing, researching more than 1,000 individual companies a year
and selecting each stock in the portfolio on individual merit. While the last 12
months have been mixed for the small-cap universe, the Fund's stock selection
has been quite rewarding -- the majority of the top holdings met or exceeded
Wall Street's earnings expectations this past quarter.
WHAT IS YOUR OUTLOOK FOR THE FUND?
Though small-cap stocks have trailed large-cap stocks' performance this quarter,
we used these market conditions as a buying opportunity. Looking ahead, the
Fund's holdings seem well positioned, and valuations are currently attractive.
Further, we believe the small-cap market continues to offer high growth
potential. Historically, small-cap companies have outperformed large-cap
companies over long holdings periods, and we anticipate continued solid
investment performance and growth going forward.
3
<PAGE>
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PERFORMANCE COMPARISON CHART September 30, 1996
- --------------------------------------------------------------------------------
This chart compares a $10,000 hypothetical investment made in Seligman Frontier
Fund Class A shares, with and without the maximum initial sales charge of 4.75%,
for the 10-year period ended September 30, 1996, to a $10,000 investment made in
the Nasdaq Composite Index, the Lipper Small Company Growth Fund Index, and the
Russell 2000 Index for the same period. The performances of Seligman Frontier
Fund Class B and Class D shares are not shown in this chart but are included in
the table on page 5. It is important to keep in mind that the indices do not
include any fees or sales charges.
Seligman Frontier Fund will no longer be compared to the Nasdaq Composite
Index after September 30, 1996, as this Index measures the performance of 4,500
over-the-counter stocks but is heavily influenced by the performance of 100 of
the largest Nasdaq stocks, and your Fund invests primarily in smaller companies.
Your Manager believes the Russell 2000 Index is a more appropriate benchmark for
your Fund, as it is widely regarded as the premier measure of
small-capitalization stocks. Therefore, your Fund will continue to be compared
to the Lipper Small Company Growth Fund Index and the Russell 2000 Index.
[THE FOLLOWING TABLE REPRESENTS A GRAPHIC CHART]
<TABLE>
<CAPTION>
SELIGMAN FRONTIER FUND CLASS A
WITHOUT SALES WITH SALES NASDAQ LIPPER SMALL COMPANY
CHARGE CHARGE COMPOSITE INDEX GROWTH FUND INDEX RUSSELL 2000
------ ------ --------------- ----------- ------------------
<S> <C> <C> <C> <C> <C>
9/30/86 10000.00 9522.61 10000.00 10000.00 10000.00
12/31/86 10420.97 9923.49 9946.96 10201.00 10061.62
3/31/87 12678.05 12072.82 12263.67 12183.05 12508.11
6/30/87 12472.23 11876.83 12110.25 12039.29 12419.54
9/30/87 12828.98 12216.54 12669.75 12603.94 12939.58
12/31/87 9618.13 9158.98 9423.96 9639.49 9179.30
3/31/88 10947.86 10425.23 10683.55 11026.61 10930.03
6/30/88 11943.12 11372.98 11254.46 11846.99 11650.45
9/30/88 11257.86 10720.43 11056.27 11598.21 11540.72
12/30/88 11225.23 10689.36 10875.76 11644.60 11464.38
3/31/89 12171.54 11590.50 11598.66 12534.25 12347.58
6/30/89 12905.75 12289.66 12413.10 13350.23 13133.72
9/30/89 14667.85 13967.64 13486.19 14502.35 14020.48
12/29/89 14382.32 13695.74 12970.03 14062.93 13326.59
3/30/90 13949.96 13284.02 12420.23 13764.80 13031.88
6/29/90 14928.90 14216.23 13183.05 14565.91 13534.51
9/30/90 11437.33 10891.34 9824.34 11281.30 10213.46
12/31/90 13083.86 12459.26 10660.74 12114.98 10726.87
3/28/91 16146.05 15375.26 13753.67 14972.91 13916.79
6/28/91 15818.54 15063.39 13571.74 14821.68 13701.07
9/30/91 17537.95 16700.71 15024.96 16308.30 14818.13
12/31/91 19577.49 18642.89 16720.57 17981.53 15666.78
3/31/92 19766.51 18822.89 17217.62 18251.25 16841.87
6/30/92 17822.27 16971.46 16072.09 16743.70 15692.91
9/30/92 18398.34 17520.03 16633.00 17299.59 16142.57
12/31/92 22708.46 21624.40 19304.48 20067.52 18551.29
3/31/93 22751.68 21665.55 19680.33 20324.39 19344.24
6/30/93 24393.77 23229.25 20074.43 20932.08 19766.54
9/30/93 27721.18 26397.81 21752.08 22834.81 21494.75
12/31/93 28681.38 27312.17 22151.88 23462.77 22058.75
3/31/94 28314.68 26962.97 21201.13 22613.42 21473.39
6/30/94 26428.78 25167.10 20131.75 21392.29 20637.11
9/30/94 30436.31 28983.32 21795.14 23388.19 22069.69
12/30/94 30692.53 29227.31 21443.53 23357.79 21656.94
3/31/95 33094.56 31514.67 23304.25 24668.16 22655.37
6/30/95 36534.49 34790.39 26619.05 26952.43 24779.01
9/30/95 41635.09 39647.49 29758.47 30321.48 27226.21
12/29/95 41872.82 39873.87 30003.43 30739.92 27816.21
3/29/96 44236.61 42124.81 31408.46 32470.58 29235.34
6/28/96 47337.16 45077.35 33793.03 35064.98 30697.90
9/30/96 47214.37 44960.42 34987.89 35510.30 30801.86
</TABLE>
THE PERFORMANCE OF CLASS B AND D SHARES WILL BE GREATER THAN OR LESS THAN THE
PERFORMANCE SHOWN FOR CLASS A SHARES, BASED ON THE DIFFERENCES IN SALES CHARGES
AND FEES PAID BY SHAREHOLDERS.
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The rates of
return will vary and the principal value of an investment will fluctuate.
Shares, if redeemed, may be worth more or less than their original cost. Past
performance is not indicative of future investment results.
4
<PAGE>
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SELIGMAN FRONTIER FUND, INC.
- -------------------------------------------------------------------------------
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS*
FOR PERIODS ENDED SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
AVERAGE ANNUAL
------------------------------------------
CLASS B CLASS D
SINCE SINCE
INCEPTION ONE FIVE 10 INCEPTION
4/22/96 YEAR YEARS YEARS 5/3/93
------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C>
CLASS A
With Sales Charge n/a 8.02% 20.73% 16.22% n/a
Without Sales Charge n/a 13.40 21.90 16.79 n/a
CLASS B
With 5% CDSL (3.42)% n/a n/a n/a n/a
Without CDSL 1.58 n/a n/a n/a n/a
CLASS D
With 1% CDSL n/a 11.47 n/a n/a n/a
Without CDSL n/a 12.47 n/a n/a 23.99%
RUSSELL 2000 INDEX** 0.01+ 13.13 15.76 11.91 15.52++
LIPPER SMALL COMPANY
GROWTH FUND INDEX** 1.28+ 17.12 16.84 13.51 18.88++
NASDAQ COMPOSITE
INDEX*** 3.06+ 17.57 18.42 13.34 19.82++
</TABLE>
NET ASSET VALUE
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996 JUNE 30, 1996 MARCH 31, 1996 DECEMBER 31, 1995 SEPTEMBER 30, 1995
---------------------- -------------- ----------------- -------------------- ---------------------
<S> <C> <C> <C> <C> <C>
CLASS A $15.38 $15.42 $14.41 $13.64 $14.04
CLASS B 14.78 14.85 14.55+++ n/a n/a
CLASS D 14.77 14.85 13.90 13.18 13.61
</TABLE>
CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30, 1996
CAPITAL GAIN
-----------------------------------
REALIZED UNREALIZEDo
------------ -------------
CLASS A $0.933 $1.693
CLASS B 0.933 1.693
CLASS D 0.933 1.693
- ----------
* Return figures reflect any change in price per share and assume the
reinvestment of dividends and capital gain distributions. Return figures for
Class A shares are calculated with and without the effect of the initial
4.75% maximum sales charge. Class A share returns reflect the effect of the
0.25% Administration, Shareholder Services and Distribution Plan after June
1, 1992, only. Returns for Class B shares are calculated with and without
the effect of the maximum 5% contingent deferred sales load ("CDSL"),
charged only on certain redemptions made within one year of the date of
purchase, declining to 1% in the sixth year and 0% thereafter. Returns for
Class D shares are calculated with and without the effect of the 1% CDSL,
charged only on redemptions made within one year of the date of purchase.
Performance data quoted represent changes in prices and assume that all
distributions within the periods are invested in additional shares. The
rates of return will vary and the principal value of an investment will
fluctuate. Shares, if redeemed, may be worth more or less than their
original cost. Past performance is not indicative of future investment
results.
** The Russell 2000 Index and the Lipper Small Company Growth Fund Index are
unmanaged indices that assume reinvestment of estimated dividends and do not
reflect fees and expenses. Investors may not invest directly in an index.
*** The Nasdaq Composite Index is an unmanaged index that does not reflect
fees and expenses. Investors may not invest directly in an index.
+ From April 30, 1996.
++ From April 30, 1993.
+++ As of April 22, 1996.
o Represents the per share amount of net unrealized appreciation of portfolio
securities as of September 30, 1996.
5
<PAGE>
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SELIGMAN FRONTIER FUND, INC.
- --------------------------------------------------------------------------------
LARGEST PORTFOLIO CHANGES
DURING PAST THREE MONTHS
SHARES
----------------------------
HOLDINGS
ADDITIONS INCREASE 9/30/96
- ------------ ----------- ------------
American Pad & Paper 600,000 600,000
Calpine 420,000 420,000
Coinmach Laundry 370,000 370,000
Health Management
Associates (Class A) 500,000 500,000
International Rectifier 400,000 400,000
Memtec (ADRs) 300,000 300,000
Omnipoint 225,000 475,000
Polymer Group 400,000 400,000
SCI Systems 150,000 150,000
Saks Holdings 150,000 216,000
SHARES
----------------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/96
- -------------- ----------- ------------
BDM International 100,000 250,000
Corporate Express 100,000 330,000
Electronics for Imaging 175,000 --
General Nutrition 475,000 --
Genesis Health Ventures 200,000 --
Meadowbrook Insurance Group 201,000 94,100
Oakley 250,000 --
St. John Knits 147,000 --
United Transnet 595,000 --
SunGard Data Systems 125,000 --
Largest portfolio changes from the previous quarter to the current quarter are
based on cost of purchases and proceeds from sales of securities.
MAJOR PORTFOLIO HOLDINGS
AT SEPTEMBER 30, 1996
SECURITY VALUE
- -------- -----------
CalEnergy .............................................. $22,312,500
Watson Pharmaceuticals ................................. 20,693,750
Ceridian ............................................... 17,500,000
DST Systems ............................................ 16,480,000
Scherer (R.P.) ......................................... 16,428,750
BDM International ...................................... 14,937,500
Total Renal Care Holdings .............................. 14,707,500
HFS .................................................... 14,217,625
UCAR International ..................................... 14,175,000
Omnipoint .............................................. 13,656,250
MAJOR SECTORS
AT SEPTEMBER 30, 1996
[THE FOLLOWING TABLE REPRESENTS A PIE CHART.]
Business Goods and Services ...........20.8%
Drugs and Health Care ................. 9.6%
Electronics ........................... 8.3%
Financial Services .................... 6.8%
Capital Goods ......................... 6.2%
Medical Products and Technology ....... 5.5%
Pharmaceuticals ....................... 4.8%
Short-Term Holdings ................... 4.5%
Media and Broadcasting ................ 4.2%
Communications ........................ 4.0%
Retail Trade .......................... 3.4%
Computer Software and Services ........ 3.3%
Independent Power Producers ........... 3.3%
Consumer Goods and Services ........... 2.2%
Manufacturing ......................... 2.1%
Specialty Chemicals ................... 2.0%
Oil and Gas ........................... 1.7%
Other ................................. 7.3%
6
<PAGE>
===============================================================================
PORTFOLIO OF INVESTMENTS September 30, 1996
- -------------------------------------------------------------------------------
SHARES VALUE
-------- -------
COMMON STOCKS 96.7%
ADVERTISING 0.7%
Heritage Media (Class A)*
Broadcasting, in-store media ............... 336,000 $ 6,342,000
------------
AEROSPACE AND DEFENSE 1.2%
Avondale Industries*
Ship construction for military
and commercial uses ........................ 600,000 11,100,000
------------
BUSINESS GOODS AND
SERVICES 20.8%
Abacus Direct*
Information products and
marketing research ......................... 45,500 938,437
AccuStaff*
Temporary personnel
services ................................... 410,000 10,634,375
American Pad & Paper*
Manufacturer of paper-based
office products ............................ 600,000 12,750,000
BDM International*
Information systems
software and services ...................... 250,000 14,937,500
Bell & Howell Holdings*
Publishing and information
services ................................... 309,600 9,829,800
BISYS Group*
Data processing services ................... 220,000 9,075,000
Ceridian*
Data processing services ................... 350,000 17,500,000
Coinmach Laundry*
Coin-operated laundry and
equipment services ......................... 370,000 7,608,125
Corporate Express*
Supplier of office products ................ 330,000 12,787,500
DST Systems*
Information processing
and software services ...................... 515,000 16,480,000
Fiserv*
Data processing services ................... 70,000 2,686,250
Inter-Tel*
Manufacturer of electronic
telecommunications
equipment .................................. 433,000 8,849,438
May & Speh*
Computer-based information
management systems ......................... 220,000 4,427,500
MetroMail*
Direct mail marketing
information services ....................... 300,000 6,487,500
National Data
Transaction processor ...................... 300,000 13,087,500
National Processing*
Transaction processor ...................... 250,000 4,875,000
Nu-Kote Holdings (Class A)*
Manufacturer of copier
toner supplies ............................. 310,000 3,293,750
Personnel Group of America*
Personnel staffing services ................ 125,000 3,250,000
TeleSpectrum Worldwide*
Telemarketing and marketing
research services .......................... 350,000 6,781,250
US Office Products*
Supplier of office products ................ 335,000 12,080,937
Wilmar Industries*
Distributor of repair and
maintenance products ....................... 252,000 5,859,000
------------
184,218,862
------------
CAPITAL GOODS 6.2%
Carbide/Graphite Group*
Producer of graphite
electrodes ................................. 475,000 8,728,125
DT Industries
Manufacturer of custom
machines and metal products ................ 150,000 5,100,000
Fusion Systems*
Manufacturer of ultraviolet
curing systems ............................. 110,000 1,952,500
Greenfield Industries
Manufacturer of expendable
cutting tools .............................. 200,000 4,850,000
Oak Industries*
Manufacturer of electrical
controls ................................... 400,000 13,300,000
UCAR International*
Producer of graphite
electrodes ................................. 350,000 14,175,000
Wolverine Tube*
Manufacturer of copper and
copper-alloy tubing ....................... 150,000 6,450,000
------------
54,555,625
------------
7
<PAGE>
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PORTFOLIO OF INVESTMENTS (continued)
- -------------------------------------------------------------------------------
SHARES VALUE
-------- -------
COMMUNICATIONS 4.0%
Arch Communications Group*
Provider of nationwide
paging services ............................ 400,000 $ 5,475,000
CIDCO*
Designer and developer of
network service equipment .................. 340,000 7,012,500
Glenayre Technologies*
Manufacturer of paging
infrastructure equipment ................... 300,000 6,862,500
Omnipoint*
Personal communications
services ................................... 475,000 13,656,250
Western Wireless (Class A)*
Wireless communications
services ................................... 126,750 2,138,906
------------
35,145,156
------------
COMPUTER HARDWARE
PERIPHERALS 0.5%
Planar Systems*
Manufacturer of electro-
luminescent displays ....................... 418,000 4,284,500
------------
COMPUTER SOFTWARE
AND SERVICES 3.3%
CompuServe*
Interactive/Internet
services ................................... 280,000 3,815,000
Control Data Systems*
Developer of tailored
computer systems ........................... 480,000 11,130,000
Mentor Graphics*
Developer of integrated
circuit design software .................... 525,000 4,692,187
Synopsys*
Developer of integrated circuit
design software ............................ 200,000 9,225,000
------------
28,862,187
------------
CONSTRUCTION AND
SERVICES 0.8%
AMRE*
Siding and cabinet refacing ................ 520,000 7,215,000
------------
CONSUMER GOODS AND
SERVICES 2.2%
Barefoot
Lawn care services ......................... 290,000 2,972,500
Carriage Services (Class A)*
Funeral services and products .............. 125,000 2,390,625
HFS*
Hotel and motel franchises ................. 212,600 14,217,625
------------
19,580,750
------------
DRUGS AND HEALTH CARE
SERVICES 9.6%
American HomePatient*
Provider of home health
care services .............................. 290,750 6,396,500
AmeriSource Health (Class A)*
Distributor of pharmaceutical
supplies ................................... 260,000 11,570,000
Community Psychiatric Centers*
Owner and operator of acute
psychiatric hospitals ...................... 485,000 4,546,875
Health Management
Associates (Class A)*
Operator of acute care
hospitals .................................. 500,000 12,437,500
Healthcor Holdings*
Home health care services .................. 300,000 3,581,250
National Surgery Centers*
Operator of ambulatory
surgery centers ............................ 200,000 5,475,000
Omnicare
Provider of pharmacy services
to long-term care institutions ............. 370,000 11,285,000
Paracelsus Healthcare*
Owner and operator of
health care facilities ..................... 200,000 2,025,000
RISCORP (Class A)*
Managed-care worker
compensation ............................... 50,000 846,875
Schein (Henry)*
Marketer of health care
products and services ...................... 100,000 3,875,000
Total Renal Care Holdings*
Provider of dialysis services .............. 370,000 14,707,500
Vivra*
Dialysis and health care
centers .................................... 250,000 8,156,250
------------
84,902,750
------------
- ---------
See footnotes on page 11.
8
<PAGE>
===============================================================================
September 30, 1996
- -------------------------------------------------------------------------------
SHARES VALUE
-------- -------
ELECTRONICS 8.3%
Cognex*
Manufacturer of machine
vision systems ............................. 700,000 $ 11,462,500
Credence Systems*
Automated semiconductor
testing equipment .......................... 250,000 3,906,250
Electro Scientific Industries*
Computer controlled laser
systems .................................... 132,500 2,467,812
Electroglas*
Manufacturer of semiconductor
wafer probing equipment .................... 239,000 3,301,188
International Rectifier*
Power semiconductors ....................... 400,000 5,550,000
Lattice Semiconductor*
Manufacturer of programmable
logic devices .............................. 290,000 8,391,875
Maxim Integrated Products*
Linear and mixed signal
integrated circuits ........................ 250,000 8,859,375
Sanmina*
Manufacturer of electronic
circuit boards and back planes ............. 230,000 9,315,000
Ultratech Stepper*
Photolithography systems for
the manufacture of semi-
conductors and their film
recording heads ............................ 80,000 1,505,000
Vicor*
Manufacturer of modular power
converters ................................. 350,000 8,684,375
Xilinx*
Field programmable gate
arrays ..................................... 125,000 4,242,188
Zilog*
Application-specific
microcontrollers ........................... 300,000 5,737,500
------------
73,423,063
------------
ENVIRONMENTAL
MANAGEMENT 0.5%
Allied Waste Industries*
Integrated waste disposal .................. 500,000 4,593,750
------------
FARM EQUIPMENT 0.5%
AGCO
Manufacturer and distributor
of farm equipment .......................... 185,000 4,717,500
------------
FINANCIAL SERVICES 6.8% Bank United (Class A)
General banking company .................... 100,000 2,462,500
CMAC Investment
Private mortgage insurance ................. 145,000 9,207,500
Commerce Bancorp
Commercial bank ............................ 150,000 3,956,250
First Investors Financial
Services Group*
Consumer finance company ................... 150,000 1,425,000
First Savings Bank
of Washington
Savings bank ............................... 150,000 2,512,500
Flushing Financial*
Savings bank ............................... 200,000 3,662,500
GCR Holdings
Property and casualty
insurance .................................. 210,000 5,092,500
Jayhawk Acceptance*
Consumer finance company ................... 350,000 4,943,750
KlamathFirst Bancorp
Savings and loan ........................... 150,000 2,146,875
Leasing Solutions*
Lessor of processing and
communications equipment. .................. 230,000 6,540,625
Meadowbrook Insurance Group
Marketer of risk management
insurance .................................. 94,100 2,634,800
PFF Bancorp*
Holding company ............................ 100,000 1,225,000
T. Rowe Price
Investment management ...................... 230,000 7,503,750
Roosevelt Financial Group
Savings bank ............................... 300,000 5,156,250
Statewide Financial
Savings bank ............................... 150,000 1,940,625
------------
60,410,425
------------
FOOD AND BEVERAGES 0.5%
Canandaigua Wine (Class A)*
Domestic wine producer ..................... 200,000 4,175,000
------------
- ---------
See footnotes on page 11.
9
<PAGE>
===============================================================================
PORTFOLIO OF INVESTMENTS (continued)
- -------------------------------------------------------------------------------
SHARES VALUE
-------- -------
GAMING 1.3%
GTECH Holdings*
Operator of state and local
lottery systems ............................ 350,000 $ 11,243,750
------------
INDEPENDENT POWER
PRODUCERS 3.3%
CalEnergy*
Developer of geothermal
energy power ............................... 700,000 22,312,500
Calpine*
Developer of power
generation facilities ...................... 420,000 6,720,000
------------
29,032,500
------------
INDUSTRIAL GOODS
AND SERVICES 0.9%
Memtec (ADRs)
Researcher, developer, and
producer of filtration and
separation products ........................ 300,000 8,456,250
------------
MANUFACTURING 2.1%
American Homestar*
Retailer and producer of
manufactured homes ......................... 200,000 4,825,000
Polymer Group*
Manufacturer and marketer
of polyolefin products ..................... 400,000 5,600,000
SCI Systems*
Assembler of electronic
circuit boards ............................. 150,000 8,446,875
------------
18,871,875
------------
MEDIA AND BROADCASTING 4.2%
Argyle Television (Class A)*
Owner, operator, and manager
of TV stations ............................. 395,000 11,208,125
Chancellor Broadcasting
(Class A)*
Radio broadcasting ......................... 100,000 4,175,000
Evergreen Media (Class A)*
Radio broadcasting ......................... 337,500 10,631,250
Jacor Communications*
Radio broadcasting ......................... 130,000 4,452,500
Paxson Communications
(Class A)*
Radio and TV broadcasting .................. 600,000 6,750,000
------------
37,216,875
------------
MEDICAL PRODUCTS AND
TECHNOLOGY 5.5%
CompDent*
Provider of managed care
dental services ............................ 275,000 10,450,000
Dentsply International
Manufacturer of dental and
medical x-ray equipment .................... 290,000 12,868,750
Rural/Metro*
Emergency ambulance and
fire services .............................. 202,300 7,308,088
Sybron International*
Laboratory and dental
supplies ................................... 325,000 9,425,000
Waters*
Manufacturer of liquid
chromatography instruments ................ 275,000 9,006,250
------------
49,058,088
------------
METALS 0.2%
NN Ball & Roller
Manufacturer of steel balls
and rollers ................................ 100,000 1,425,000
------------
OIL AND GAS 1.7%
Pogo Producing
Oil and gas exploration,
production, and development ................ 225,000 8,043,750
Santa Fe Energy Resources*
Oil and gas exploration,
production, and development ................ 500,000 7,125,000
------------
15,168,750
------------
PHARMACEUTICALS 4.8%
Protein Design Labs*
Antibody technology research
and development ............................ 200,000 5,012,500
Scherer (R.P.)*
Developer and producer of
pharmaceutical delivery
systems .................................... 337,000 16,428,750
Watson Pharmaceuticals*
Manufacturer of off-patent
medications ................................ 550,000 20,693,750
------------
42,135,000
------------
PLASTICS 0.4%
Spartech
PVC compounds; plastic
sheeting ................................... 400,000 3,850,000
------------
- ---------
See footnotes on page 11.
10
<PAGE>
===============================================================================
September 30, 1996
- -------------------------------------------------------------------------------
SHARES VALUE
-------- -------
PUBLISHING 0.5%
World Color Press*
Commercial printer and
distributor ................................ 201,800 $ 4,490,050
------------
RESTAURANTS 0.5%
Longhorn Steaks*
Operator of full-service
restaurants ................................ 300,000 4,500,000
------------
RETAIL TRADE 3.4%
Borders Group*
Operator of book
superstores ................................ 125,000 4,656,250
Casey's General Store
Operator of convenience stores ............. 350,000 6,103,125
Consolidated Stores*
Retailer of close-out
merchandise ................................ 100,000 4,000,000
Friedman's (Class A)*
Retailer of fine jewelry ................... 400,000 7,425,000
Saks Holdings*
Men and women's fashion
retailer ................................... 216,000 7,560,000
------------
29,744,375
------------
SPECIALTY CHEMICALS 2.0%
Minerals Technologies
Manufacturer of specialty
minerals and products ..................... 250,000 9,343,750
------------
Sealed Air*
Manufacturer of protective
packaging .................................. 215,000 8,008,750
------------
17,352,500
------------
TOTAL COMMON STOCKS
(Cost $756,997,234 ) ............................... 856,071,581
------------
SHORT-TERM HOLDINGS4.5%
(Cost $39,550,000) ................................ 39,550,000
------------
TOTAL INVESTMENTS 101.2%
(Cost $796,547,234) ............................... 895,621,581
OTHER ASSETS LESS
LIABILITIES (1.2)% .............................. (10,541,277)
------------
NET ASSETS 100.0% ................................... $885,080,304
============
- ---------
* Non-income producing security.
Descriptions of companies have not been audited by Deloitte & Touche LLP.
See Notes to Financial Statements.
11
<PAGE>
===============================================================================
STATEMENT OF ASSETS AND LIABILITIES September 30, 1996
- -------------------------------------------------------------------------------
ASSETS:
Investments, at value:
Common stocks (cost $756,997,234) .......... $856,071,581
Short-term holdings (cost $39,550,000) ..... 39,550,000
------------
$895,621,581
Cash 289,471
Receivable for securities sold ................. 3,425,342
Receivable for Capital Stock sold .............. 3,035,411
Expenses prepaid to shareholder service agent .. 192,809
Receivable for dividends and interest .......... 108,545
Other .......................................... 24,184
------------
Total Assets ................................... 902,697,343
------------
LIABILITIES:
Payable for securities purchased ............... 14,050,498
Payable for Capital Stock repurchased .......... 2,130,695
Accrued expenses, taxes, and other ............. 1,435,846
------------
Total Liabilities .............................. 17,617,039
------------
Net Assets ..................................... $885,080,304
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.10 par value;
500,000,000 shares authorized; 58,518,914
shares outstanding):
Class A .................................... $ 3,406,254
Class B .................................... 162,543
Class D .................................... 2,283,094
Additional paid-in capital ..................... 738,269,579
Accumulated net investment loss ................ (49,246)
Undistributed net realized gain ................ 41,933,733
Net unrealized appreciation of investments ..... 99,074,347
------------
NET ASSETS ..................................... $885,080,304
============
NET ASSET VALUE PER SHARE:
Class A ($523,736,760 / 34,062,538 shares) ..... $15.38
======
Class B ($24,016,368 / 1,625,430 shares) ....... $14.78
======
Class D ($337,327,176 / 22,830,946 shares) ..... $14.77
======
- ---------
See Notes to Financial Statements.
12
<PAGE>
===============================================================================
STATEMENT OF OPERATIONS For the Year Ended September 30, 1996
- -------------------------------------------------------------------------------
INVESTMENT INCOME:
Interest ....................................... $ 3,015,125
Dividends ...................................... 1,274,156
------------
Total investment income ........................ $ 4,289,281
EXPENSES:
Management fee ................................. 6,014,692
Distribution and service fees .................. 3,383,181
Shareholder account services ................... 1,991,428
Registration ................................... 274,156
Shareholder reports and communications ......... 209,012
Custody and related services ................... 187,378
Shareholders' meeting .......................... 83,801
Auditing and legal fees ........................ 61,604
Directors' fees and expenses ................... 28,359
Miscellaneous .................................. 15,414
------------
Total expenses ................................. 12,249,025
-----------
Net investment loss ............................ (7,959,744)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments ............... 54,587,427
Net change in unrealized appreciation
of investments 37,679,696
-----------
Net gain on investments ........................ 92,267,123
-----------
INCREASE IN NET ASSETS FROM OPERATIONS ......... $84,307,379
===========
- ---------
See Notes to Financial Statements.
13
<PAGE>
===============================================================================
STATEMENT OF CHANGES IN NET ASSETS
- -------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995
------------ ------------
OPERATIONS:
Net investment loss ......................... $ (7,959,744) $ (1,269,598)
Net realized gain on investments ............ 54,587,427 14,852,097
Net change in unrealized appreciation
of investments ......................... 37,679,696 51,312,770
------------- -------------
Increase in net assets from operations ...... 84,307,379 64,895,269
------------- -------------
DISTRIBUTION TO SHAREHOLDERS:
Net realized gain on investments:
Class A ................................ (10,171,960) (7,039,282)
Class D ................................ (5,808,812) (1,338,879)
------------- -------------
Decrease in net assets from distributions .. (15,980,772) (8,378,161)
------------- -------------
CAPITAL SHARE TRANSACTIONS:*
SHARES
--------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995
------------ ------------
Net proceeds from sale of shares:
Class A ................................ 16,492,254 14,343,047
Class B ................................ 1,620,257 --
Class D ................................ 13,296,830 9,799,966
Exchanged from associated Funds:
Class A ................................ 9,570,832 2,239,426
Class B ................................ 46,856 --
Class D ................................ 2,094,306 977,881
Shares issued in payment of gain
distributions:
Class A ................................ 634,890 630,353
Class D ................................ 414,331 125,619
------------ -------------
Total ...................................... 44,170,556 28,116,292
------------ -------------
Cost of shares repurchased:
Class A ................................ (3,546,560) (1,348,459)
Class B ................................ (11,460) --
Class D ................................ (1,773,522) (261,304)
Exchanged into associated Funds:
Class A ................................ (8,475,688) (1,508,671)
Class B ................................ (30,223) --
Class D ................................ (1,888,645) (771,800)
------------ -------------
Total ...................................... (15,726,098) (3,890,234)
------------ -------------
Increase in net assets from capital
share transactions ..................... 28,444,458 24,226,058
============ =============
YEAR ENDED SEPTEMBER 30,
--------------------------------
1996 1995
------------ ------------
Net proceeds from sale of shares:
Class A ................................ 234,133,389 176,507,457
Class B ................................ 23,578,876 --
Class D ................................ 183,469,155 116,142,280
Exchanged from associated Funds:
Class A ................................ 139,553,114 27,111,701
Class B ................................ 666,508 --
Class D ................................ 29,327,262 11,153,674
Shares issued in payment of gain
distributions:
Class A ................................ 8,602,756 6,606,096
Class D ................................ 5,431,884 1,286,339
------------ -------------
Total ...................................... 624,762,944 338,807,547
------------ -------------
Cost of shares repurchased:
Class A ................................ (50,876,224) (16,084,996)
Class B ................................ (168,482) --
Class D ................................ (24,524,473) (3,189,105)
Exchanged into associated Funds:
Class A ................................ (123,710,010) (17,704,056)
Class B ................................ (427,330) --
Class D ................................ (25,867,750) (8,577,404)
------------ -------------
Total (225,574,269) (45,555,561)
------------ -------------
Increase in net assets from capital
share transactions ..................... 399,188,675 293,251,986
------------ -------------
Increase in net assets ..................... 467,515,282 349,769,094
NET ASSETS:
Beginning of year .......................... 417,565,022 67,795,928
------------ -------------
End of year ................................ $885,080,304 $417,565,022
============ =============
- ---------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
14
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS
- -------------------------------------------------------------------------------
1. Seligman Frontier Fund, Inc. (the "Fund") offers three classes of shares. All
shares existing prior to May 3, 1993, the commencement date of Class D shares,
were classified as Class A shares. The Fund began offering Class B shares on
April 22, 1996. Class A shares are sold with an initial sales charge of up to
4.75% and a continuing service fee of up to 0.25% on an annual basis. Class A
shares purchased in an amount of $1,000,000 or more are sold without an initial
sales charge but are subject to a contingent deferred sales load ("CDSL") of 1%
on redemptions within 18 months of purchase. Class B shares are sold without an
initial sales charge but are subject to a distribution fee of up to 0.75% and a
service fee of up to 0.25% on an annual basis, and a CDSL, if applicable, of 5%
on redemptions in the first year after purchase, declining to 1% in the sixth
year and 0% thereafter. Class B shares will automatically convert to Class A
shares on the last day of the month that precedes the eighth anniversary of
their date of purchase. Class D shares are sold without an initial sales charge
but are subject to a distribution fee of up to 0.75% and a service fee of up to
0.25% on an annual basis, and a CDSL of 1% imposed on certain redemptions made
within one year of purchase. The three classes of shares represent interests in
the same portfolio of investments, have the same rights and are generally
identical in all respects except that each class bears its separate distribution
and certain other class expenses, and has exclusive voting rights with respect
to any matter on which a separate vote of any class is required.
2. Significant accounting policies followed, all in conformity with generally
accepted accounting principles, are given below:
a. Investments in stocks are valued at current market values or, in their
absence, at fair values determined in accordance with procedures approved by
the Board of Directors. Securities traded on national exchanges are valued
at last sales prices or, in their absence and in the case of
over-the-counter securities, a mean of bid and asked prices. Short-term
holdings maturing in 60 days or less are valued at amortized cost.
b. There is no provision for federal income or excise tax. 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. Investment transactions are recorded on trade dates. Identified cost of
investments sold is used for both financial statement and federal income tax
purposes. Dividends receivable and payable are recorded on ex-dividend
dates. Interest income is recorded on an accrual basis.
d. All income, expenses (other than class-specific expenses), and realized and
unrealized gains or losses are allocated daily to each class of shares based
upon the relative value of the shares of each class. Class-specific
expenses, which include distribution and service fees and any other items
that are specifically attributed to a particular class, are charged directly
to such class. For the year ended September 30, 1996, distribution and
service fees were the only class-specific expenses.
e. 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
are caused primarily by differences in the timing of the recognition of
certain components of income, expense, and realized capital gain for federal
income tax purposes. 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.
3. Purchases and sales of portfolio securities, excluding U.S. Government
obligations and short-term investments, for the year ended September 30, 1996,
amounted to $744,928,633 and $362,881,600, respectively.
15
<PAGE>
===============================================================================
NOTES TO FINANCIAL STATEMENTS (continued)
- -------------------------------------------------------------------------------
At September 30, 1996, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $159,533,436 and $60,459,089, respectively.
4. 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. Effective January 1, 1996, the Manager receives a fee,
calculated daily and payable monthly, equal to 0.95% per annum of the first $750
million of the Fund's average daily net assets and 0.85% per annum of the Fund's
average daily net assets in excess of $750 million. Prior to January 1, 1996,
the management fee rate was 0.75% per annum of the Fund's average daily net
assets. The management fee reflected in the Statement of Operations represents
0.92% per annum of the Fund's average daily net assets.
Seligman Financial Services, Inc. (the "Distributor"), agent for the
distribution of the Fund's shares, and an affiliate of the Manager, received
concessions of $689,900 from sales of Class A shares after commissions of
$5,532,809 were paid to dealers.
The Fund has an Administration, Shareholder Services and Distribution Plan
(the "Plan") with respect to Class A shares under which service organizations
can enter into agreements with the Distributor and receive a continuing fee of
up to 0.25% on an annual basis, payable quarterly, of average daily net assets
of Class A shares attributable to the particular service organizations for
providing personal services and/or the maintenance of shareholder accounts. The
Distributor charges such fees to the Fund pursuant to the Plan. For the year
ended September 30, 1996, fees paid aggregated $882,717, or 0.21% per annum of
average daily net assets of Class A shares.
The Fund has a Plan with respect to Class B and Class D shares under which
service organizations can enter into agreements with the Distributor and receive
a continuing fee for providing personal services and/or the maintenance of
shareholder accounts of up to 0.25% on an annual basis of the average daily net
assets of the Class B and Class D shares for which the organizations are
responsible; and, for Class D shares only, fees for providing other distribution
assistance of up to 0.75% on an annual basis of such average daily net assets.
Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan.
With respect to Class B shares, a distribution fee of up to 0.75% on an
annual basis of average daily net assets is payable monthly by the Fund to the
Distributor; however, the Distributor has sold its rights to substantially all
of this fee to a third party (the "Purchaser"), which provided funding to the
Distributor to enable it to pay commissions to dealers at the time of the sale
of the related Class B shares.
For the year ended September 30, 1996, fees incurred under the Plan,
equivalent to 1% per annum of the average daily net assets of Class B and Class
D shares, amounted to $54,086 and $2,446,378, respectively.
The Distributor is entitled to retain any CDSL imposed on certain
redemptions of Class D shares occurring within one year of purchase. For the
year ended September 30, 1996, such charges amounted to $117,636.
The Distributor has sold its rights to collect any CDSL imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSL and the distribution fees with respect to Class B
shares described above, the Distributor receives payments from the Purchaser
based on the value of Class B shares sold. The aggregate amount of such payments
and the Class B shares distribution fees retained by the Distributor for the
period ended September 30, 1996, amounted to $61,955.
16
<PAGE>
Seligman Services, Inc., an affiliate of the Manager, is eligible to receive
commissions from certain sales of shares of the Fund, as well as distribution
and service fees pursuant to the Plan. For the year ended September 30, 1996,
Seligman Services, Inc. received commissions of $156,157 from sales of shares of
the Fund. Seligman Services, Inc. also received distribution and service fees of
$73,340, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $1,991,428 for shareholder account services.
Certain officers and directors of the Fund are officers or directors of the
Manager, the Distributor, Seligman Services, Inc., and/or Seligman Data Corp.
Fees of $28,000 were incurred by the Fund for the legal services of
Sullivan & Cromwell, a member of which firm is a director of the Fund.
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Interest is accrued on the deferred
balances. The annual cost of such fees and interest is included in directors'
fees and expenses, and the accumulated balance thereof at September 30, 1996, of
$49,246 is included in other liabilities. Deferred fees and the related accrued
interest are not deductible for federal income tax purposes until such amounts
are paid.
5. Effective July 31, 1996, the Fund entered into an $80 million committed line
of credit facility with a group of banks. Borrowings pursuant to the credit
facility are subject to interest at a rate equal to the federal funds rate plus
0.75% per annum. The Fund incurs a commitment fee of 0.10% per annum on the
unused portion of the credit facility. The credit facility may be drawn upon
only for temporary purposes and is subject to certain other customary
restrictions. The credit facility commitment expires one year from the date of
the agreement but is renewable with the consent of the participating banks. The
Fund made no borrowings during the period ended September 30, 1996.
17
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
The Fund's financial highlights are presented below. The per share operating
performance data is designed to allow investors to trace the operating
performance, on a per share basis, from each Class' beginning net asset value to
the ending net asset value so that they 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 share amounts.
The total return based on net asset value measures each Class' performance
assuming investors purchased Fund shares at net asset value as of the beginning
of the period, reinvested dividends and capital gains paid at net asset value,
and then sold their shares at the net asset value per share on the last day of
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------
1996o 1995o 1994o 1993 1992
------ ----- ----- ----- -----
PER SHARE OPERATING
PERFORMANCE:
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period ............. $14.04 $11.62 $12.83 $10.22 $10.71
------ ------ ------ ------ ------
Net investment loss .............................. (0.13) (0.06) (0.08) (0.03) (0.07)
Net realized and unrealized
investment gain ............................... 1.95 3.87 1.10 4.54 0.58
------ ------ ------ ------ ------
Increase from investment operations .............. 1.82 3.81 1.02 4.51 0.51
Distributions from net gain realized ............. (0.48) (1.39) (2.23) (1.90) (1.00)
------ ------ ------ ------ ------
Net increase (decrease) in net asset value ....... 1.34 2.42 (1.21) 2.61 (0.49)
------ ------ ------ ------ ------
Net asset value, end of period ................... $15.38 $14.04 $11.62 $12.83 $10.22
====== ====== ====== ====== ======
TOTAL RETURN BASED ON
NET ASSET VALUE: .............................. 13.40% 36.80% 9.79% 50.67% 4.91%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................... 1.56% 1.43% 1.34% 1.25% 1.37%
Net investment loss to average net assets ........ (0.91)% (0.50)% (0.87)% (0.27)% (0.71)%
Portfolio turnover ............................... 59.36% 71.52% 124.76% 129.13% 129.46%
Average commission rate paid ..................... $0.0538
Net assets, end of period
(000s omitted) ................................ $523,737 $272,122 $58,478 $43,188 $27,178
</TABLE>
- ----------
The per share data for the fiscal year 1992 have been restated to reflect the
2-for-1 stock split effected on April 16, 1992, as a 100% stock dividend. 0
The per share data for the years/periods ended September 30, 1996, 1995, and
1994 are based on average shares outstanding for the periods.
* Commencement of offering of shares.
** For the year ended September 30, 1996.
+ Annualized.
++ For the year ended September 30, 1993.
See Notes to Financial Statements.
18
<PAGE>
the period. The total return computations do not reflect any sales charges
investors may incur in purchasing or selling shares of the Fund. The total
returns for periods of less than one year are not annualized.
Average commission rate paid represents the average commission paid by the
Fund to purchase or sell portfolio securities. It is determined by dividing the
total commission dollars paid by the number of shares purchased and sold during
the period for which commissions were paid. This rate is provided for fiscal
periods beginning October 1, 1995.
<TABLE>
<CAPTION>
CLASS B CLASS D
-------- --------------------------------------
4/22/96* YEAR ENDED SEPTEMBER 30, 5/3/93*
TO -------------------------------------- TO
9/30/96o 1996o 1995o 1994o 9/30/93
------- ------- ----- ----- ---------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING
PERFORMANCE:
Net asset value, beginning of period .......... $14.55 $13.61 $11.40 $12.80 $10.12
------ ------ ------ ------ ------
Net investment loss ........................... (0.11) (0.24) (0.15) (0.23) (0.04)
Net realized and unrealized
investment gain ............................ 0.34 1.88 3.75 1.06 2.72
------ ------ ------ ------ ------
Increase from investment operations ........... 0.23 1.64 3.60 0.83 2.68
Distributions from net gain realized .......... -- (0.48) (1.39) (2.23) --
------ ------ ------ ------ ------
Net increase (decrease) in net asset value .... 0.23 1.16 2.21 (1.40) 2.68
------ ------ ------ ------ ------
Net asset value, end of period ................ $14.78 $14.77 $13.61 $11.40 $12.80
====== ====== ====== ====== ======
TOTAL RETURN BASED ON
NET ASSET VALUE: ........................... 1.58% 12.47% 35.53% 8.06% 26.48%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................ 2.45%+ 2.35% 2.29% 2.72% 2.24%+
Net investment loss to average net assets ..... (1.80)%+ (1.70)% (1.35)% (2.25)% (1.94)%+
Portfolio turnover ............................ 59.36%** 59.36% 71.52% 124.76% 129.13%++
Average commission rate paid .................. $0.0538** $0.0538
Net assets, end of period
(000s omitted) ............................. $24,016 $337,327 $145,443 $9,318 $967
</TABLE>
19
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REPORT OF INDEPENDENT AUDITORS
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THE BOARD OF DIRECTORS AND SHAREHOLDERS,
SELIGMAN FRONTIER FUND, INC.:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Frontier Fund, Inc. as of September
30, 1996, the related statements of operations for the year then ended and of
changes in net assets for each of the years in the two-year period then ended,
and the financial highlights for 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 financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
September 30, 1996, 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 Frontier
Fund, Inc. as of September 30, 1996, the results of its operations, the changes
in its net assets, and the financial highlights for the respective stated
periods, in conformity with generally accepted accounting principles.
DELOITTE & TOUCHE LLP
New York, New York
October 30, 1996
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BOARD OF DIRECTORS
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FRED E. BROWN
Director and Consultant,
J. & W. Seligman & Co. Incorporated
JOHN R. GALVIN 2
Dean, Fletcher School of Law
and Diplomacy at Tufts University
Director, USLIFE Corporation
ALICE S. ILCHMAN 3
President, Sarah Lawrence College
Trustee, Committee for Economic Development
Director, NYNEX
Chairman, The Rockefeller Foundation
FRANK A. MCPHERSON 2
Chairman and CEO, Kerr-McGee Corporation
Director, Kimberly-Clark Corporation
Director, Baptist Medical Center
JOHN E. MEROW
Partner, Sullivan & Cromwell, Law Firm
Director, Commonwealth Aluminum Corporation
BETSY S. MICHEL 2
Director or Trustee, Various Organizations
WILLIAM C. MORRIS 1
Chairman
Chairman of the Board and President,
J. & W. Seligman & Co. Incorporated
Chairman, Carbo Ceramics Inc.
Director, Kerr-McGee Corporation
JAMES C. PITNEY 3
Partner, Pitney, Hardin, Kipp & Szuch, Law Firm
Director, Public Service Enterprise Group
JAMES Q. RIORDAN 3
Director, The Brooklyn Union Gas Company
Trustee, Committee for Economic Development
Director, Dow Jones & Co., Inc.
Director, Public Broadcasting Service
RONALD T. SCHROEDER 1
Managing Director,
J. & W. Seligman & Co. Incorporated
ROBERT L. SHAFER 3
Director or Trustee,
Various Organizations
JAMES N. WHITSON 2
Executive Vice President and Director,
Sammons Enterprises, Inc.
Director, C-SPAN
Director, Red Man Pipe and Supply Company
BRIAN T. ZINO 1
President
Managing Director, J. & W. Seligman & Co. Incorporated
Chairman, Seligman Data Corp.
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Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
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EXECUTIVE OFFICERS
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WILLIAM C. MORRIS
Chairman
BRIAN T. ZINO
President
ARSEN MRAKOVCIC
Vice President
LAWRENCE P. VOGEL
Vice President
THOMAS G. ROSE
Treasurer
FRANK J. NASTA
Secretary
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MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, NY 10017
GENERAL COUNSEL
Sullivan & Cromwell
INDEPENDENT AUDITORS
Deloitte & Touche LLP
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, NY 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, NY 10017
IMPORTANT TELEPHONE NUMBERS
(800) 221-2450 SHAREHOLDER SERVICES
(800) 445-1777 RETIREMENT PLAN
SERVICES
(800) 622-4597 24-HOUR AUTOMATED
TELEPHONE ACCESS
SERVICE
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