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SELIGMAN
[photo]
SELIGMAN
FRONTIER
FUND, INC.
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SEEKING GROWTH IN CAPITAL VALUE THROUGH
INVESTMENTS IN SMALLER COMPANIES
SEPTEMBER 30, 1997 -- ANNUAL REPORT
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OVER THE LONG TERM -- J. & W. SELIGMAN & CO. INCORPORATED
TIME IS THE TEST
In an industry that has changed dramatically in recent years, it's
comforting to know that stability, tradition, and consistent professional
service can still be found in an investment management firm.
J. & W. Seligman & Co. Incorporated has been providing financial services
for more than 130 years. From its beginning, Seligman has followed a long-term
approach to making money for its clients, by managing investment products and
providing services of the highest quality. Today, Seligman manages the Seligman
Group of Funds, which offers investors more than 50 investment options.
A PLACE IN HISTORY
Established in 1864, Seligman played a major role in the geographical
expansion and industrial development of the United States. The firm helped
finance the westward path of the railroads and the building of the Panama Canal.
In the late 1800s and early 1900s, the firm was instrumental in financing the
fledgling automobile and steel industries. Seligman also participated in the
original underwritings for some of the nation's most prominent companies,
including General Motors, Victor Talking Machine, United Artists Theater
Circuit, and Maytag. In 1929, Seligman introduced Tri-Continental Corporation --
which today is the nation's largest diversified closed-end investment company.
SELIGMAN FRONTIER FUND
Seligman Frontier Fund, established December 10, 1984, is a mutual fund that
seeks capital appreciation by investing primarily in the common stocks of
smaller companies. Originally available exclusively to Seligman's high net-worth
private and institutional clients, Seligman Frontier Fund was opened to the
public in 1992. Since its inception, Seligman Frontier Fund has helped investors
seek their financial goals by providing growth of capital through strong
returns.
[photo]
JAMES, JESSE, AND JOSEPH SELIGMAN
TABLE OF CONTENTS
To the Shareholders ....................................................... 1
Interview With Your Portfolio Manager ..................................... 2
Performance Overview ...................................................... 4
Portfolio Overview ........................................................ 6
Portfolio of Investments .................................................. 8
Statement of Assets and Liabilities ....................................... 14
Statement of Operations ................................................... 15
Statements of Changes in Net Assets ....................................... 16
Notes to Financial Statements ............................................. 17
Financial Highlights ...................................................... 20
Report of Independent Auditors ............................................ 22
Board of Directors ........................................................ 23
Executive Officers and For More Information ............................... 24
Glossary of Financial Terms ............................................... 25
"Seligman Frontier Fund invests in the common stocks of companies which,
although smaller and less seasoned than more recognizable competitors in their
respective industries, offer greater potential for capital growth."
-- FRED E. BROWN,
FUND CHAIRMAN
1984 - 1988
"The long-term performance history and growth potential of small-company growth
stocks are compelling reasons to include this asset class in a diversified
investment portfolio."
-- WILLIAM C. MORRIS,
FUND CHAIRMAN
1989 - PRESENT
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TO THE SHAREHOLDERS
For the 12 months ended September 30, 1997, Seligman Frontier Fund performed
well. The Fund's total return of 21.19% based on the net asset value of Class A
shares lagged the 23.35% total return of the Russell 2000 Growth Index. However,
the Fund's performance improved significantly in the later half of the fiscal
year ended September 30, 1997, and the Fund's total return for the 12-month
period outpaced the 21.04% total return of its peers as measured by the Lipper
Small Cap Fund Index. Additional information on the Fund's investment results
begins on page 4.
In the last 12 months, a strong economic background, combining sustained
growth and low levels of inflation, helped support corporate revenues and the
equity markets. Until recently, however, the equity markets' performance was
primarily driven by the appreciation of the 50 largest stocks on the New York
Stock Exchange, moving price-to-earnings valuations near their 10-year highs.
Beginning in May, investor interest broadened to include mid- and
small-capitalization issues. The primary causes for this broadening were
two-fold. First, the continued strength of the US Dollar created uncertainty as
to the dependability of international profits for large-capitalized domestic
multinational corporations. Second, the turmoil in Southeast Asia forced
investors to seek safe haven in smaller domestic companies, which typically have
little or no Asian exposure. Therefore, small-cap stocks began to outperform
their larger peers, and Seligman Frontier Fund ended its fiscal year on a strong
note.
Throughout the year, the Fund remained focused on finding high-quality
companies with strong growth prospects. As valuations remain reasonable, we
expect that the broadening of the market should continue to benefit small-cap
growth stocks, in which the Fund invests.
The recent turmoil in Southeast Asia may continue to cause short-term
volatility in the US markets. Nevertheless, we believe the basic economic
fundamentals supporting the equity markets are still positive. As small-cap
stocks have historically outperformed large-cap stocks over the long term, we
believe that the growth potential the small-cap asset class brings to a
diversified investment portfolio remains compelling.
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.
A discussion with your Portfolio Manager, the performance overview,
portfolio holdings, and financial statements follow this letter.
By order of the Board of Directors,
/s/ William Morris
- ------------------
William C. Morris
Chairman
/s/ Brian T. Zino
-----------------
Brian T. Zino
President
October 31, 1997
1
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, ARSEN MRAKOVCIC
Q. HOW DID SELIGMAN FRONTIER FUND PERFORM IN THE PAST 12 MONTHS?
A. For its fiscal year ended September 30, 1997, Seligman Frontier Fund
performed well. Its total return of 21.19% based on the net asset value of
Class A shares slightly outpaced the 21.04% total return of its
competitors, as measured by the Lipper Small Cap Fund Index. The Russell
2000 Growth Index had a total return of 23.35%, helped in part by a number
of small-cap momentum growth stocks. These companies have what we consider
to be unsustainable business models and high valuations, and therefore, we
generally do not invest in these types of stocks.
Seligman Frontier Fund invests in reasonably-priced, small-capitalized
growth stocks, and its performance is reflective of this investment style.
While both the small-cap value and small-cap growth investment styles have
done well over the long term, they do not perform in tandem. For example,
in the last 12 months, small-cap value stocks performed better than
small-cap growth stocks, as reflected in the 33.19% total return of the
Russell 2000 Index, which measures the performance of the small-company
stock universe as a whole. However, during the Fund's last two fiscal
quarters, small-cap growth stocks outperformed small-cap value stocks.
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN FRONTIER FUND IN THE
PAST 12 MONTHS?
A. Over the last year, we witnessed continued economic growth and very little
increase in inflation. Corporate earnings reports were positive, and the
equity markets steadily appreciated. However, there was a significant
discrepancy in the performances of large-cap and small-cap stocks. Market
participants focused their attention on the largest, most liquid stocks
because of their predictable earnings growth, and these large-cap stocks
drove the markets' gains through May 1997.
Starting in May, however, small-cap stocks began to outperform large-cap
stocks, and Seligman Frontier Fund's results improved accordingly. Two
major factors played a part in this reversal: 1) the valuations of
small-cap stocks remained relatively inexpensive, whereas the valuations of
large-cap stocks neared 10-year highs; and 2) the projected
earnings-per-share growth of small-caps remained significantly greater than
that of large-caps.
Another condition which supported the performance of small-cap stocks in
the third calendar quarter was the anticipated slowing in the earnings
growth of large companies, which was partially tied to the enduring
strength of the US Dollar and its negative impact on the overseas earnings
of large companies. Further, the turnaround in the
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[photo]
SELIGMAN SMALL COMPANY TEAM: (FROM LEFT) RICK
RUVKUN, SONIA THOMAS (ADMINISTRATIVE ASSISTANT),
BRUCE ZIRMAN, HILARY SHANE, TED HILLENMEYER,(SEATED)
ARSEN MRAKOVCIC (PORTFOLIO MANAGER)
A TEAM APPROACH
Seligman Frontier Fund is managed by the Seligman Small Company Team, headed by
Arsen Mrakovcic. Mr. Mrakovcic is assisted in the management of the Fund by a
group of seasoned research professionals who are responsible for identifying
small companies in specific industry groups that offer the greatest potential
for growth.
YOUR PORTFOLIO MANAGER
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.
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2
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INTERVIEW WITH YOUR PORTFOLIO MANAGER, ARSEN MRAKOVCIC
performance of the technology sector, which had lagged until May, improved
the performance of small-cap growth stocks due to the significant
technology weighting in the growth arena. Small-cap growth stocks therefore
began to outpace small-cap value stocks, further supporting the Fund's
performance.
Q. WHAT WAS YOUR INVESTMENT STRATEGY?
A. We are long-term investors who seek to purchase small-cap stocks with
significant earnings growth potential that are selling at reasonable
valuations relative to their growth prospects. We strictly maintain a
small-cap growth investment discipline. Issues are added to the portfolio
on a stock-by-stock basis. Each company is chosen for its unique merits
rather than because of market momentum or as part of a sector investment.
We seek companies with businesses and market shares that are growing faster
than the industry norm. We also meet with managements and look for high
cash flows and a high percentage of management ownership. A stock is
reviewed for sale when its price reaches the sell target or when the
company or industry fundamentals deteriorate. The Fund remains highly
diversified to reduce downside risk: no sector has a weighting of more than
25% and no single holding represents more than 3% of the Fund's net assets.
Q. HOW WAS THE PERFORMANCE OF THE FUND'S LARGEST INDUSTRIES?
A. The business goods and services industry continued to play a vital role in
the Fund's performance. In the portfolio, companies providing
staffing-related services generally did well, benefiting from the new job
opportunities created as the economy expanded. AccuStaff and Personnel
Group of America were among the best performers in this group. Corporate
outsourcing also continued to grow in importance, and providers such as
Corporate Express, an office furniture supplier, had strong results.
The financial services group was instrumental to the performance of the
Fund as well. The low interest-rate environment generally benefited these
stocks, and we continued to seek those financial companies with the most
dynamic managements and strong prospects for earnings growth.
Additionally, the electronics stocks in the portfolio generally improved
the Fund's performance. This sector picked up in May with the rally in
technology stocks. Specifically, Cognex, Credence Systems, and Electro
Scientific Industries had excellent results.
On the other hand, the Fund's drugs and health care stocks had decidedly
mixed results this year due to regulatory and cost-control concerns.
However, the portfolio's weighting in drugs and health care was maintained
as we believe that the companies in the portfolio have tremendous growth
potential and exciting new products. For example, R.P. Scherer, a leading
manufacturer and supplier of gelatin caplets for large pharmaceutical
companies, did well due to excitement related to a new product, caplets
that melt in the mouth.
Q. WHAT IS YOUR OUTLOOK?
A. We believe that the attractive earnings found in small-cap stocks should
support the small-cap market well into the new year. The small-cap growth
stocks that are held in Seligman Frontier Fund's portfolio are still
trading at price-to-earnings ratios that are less than their projected
earnings growth rates. As the portfolio has been constructed to provide
good long-term earnings growth and capital appreciation potential while
maintaining reasonable valuations, Seligman Frontier Fund should continue
to benefit from the strength in small-cap stocks.
3
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PERFORMANCE OVERVIEW
This chart compares a $10,000 hypothetical investment made in Seligman
Frontier Fund Class A shares, with and without the initial 4.75% maximum sales
charge, for the 10-year period ended September 30, 1997, to a $10,000 investment
made in the Lipper Small Cap Fund Index (formerly named the Lipper Small Company
Growth Fund Index), the Russell 2000 Growth 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 Russell indices exclude the effect
of any fees or sales charges, and the Lipper Small Cap Fund Index excludes the
effect of sales charges.
[The following table represents a line chart in the printed report]
SELIGMAN
FRONTIER FUND
CLASS A LIPPER
----------------- RUSSELL SMALL
WITHOUT WITH 2000 CAP RUSSELL
SALES SALES GROWTH FUND 2000
CHARGE CHARGE INDEX INDEX INDEX
------ ------ ------- ------- -------
9/30/87 10000 9521 10000 10000 10000
7497 7138 6913 7648 7094
8534 8125 8117 8749 8447
9310 8864 8632 9399 9004
9/30/88 8775 8355 8395 9202 8919
8750 8331 8322 9239 8860
9488 9033 8939 9945 9542
10060 9578 9517 10592 10150
9/30/89 11433 10886 10367 11506 10835
11211 10674 9999 11158 10299
10874 10353 9733 10921 10071
11637 11080 10347 11557 10460
9/30/90 8915 8489 7647 8951 7893
10199 9711 8258 9612 8290
12586 11983 10780 11880 10755
12330 11740 10406 11760 10588
9/30/91 13671 13016 11529 12939 11452
15260 14530 12484 14267 12108
15408 14670 12826 14481 13016
13892 13227 11285 13284 12128
9/30/92 14341 13655 11504 13726 12475
17701 16854 13454 15922 14337
17735 16886 13214 16125 14950
19015 18105 13594 16608 15276
9/30/93 21608 20574 14862 18117 16612
22357 21287 15253 18615 17048
22071 21015 14633 17942 16595
20601 19615 13714 16973 15949
9/30/94 23725 22589 14992 18556 17056
23924 22779 14881 18532 16737
25797 24562 15696 19572 17509
28478 27115 17253 21384 19150
9/30/95 32454 30901 19215 24057 21041
32639 31077 19499 24389 21497
34482 32831 20619 25762 22594
36899 35133 21823 27821 23724
9/30/96 36803 35041 21637 28174 23804
36315 34577 21694 27906 25042
32732 31165 19418 25278 23748
39390 37505 22826 29590 27597
9/30/97 44600 42465 26688 34102 31703
The stocks of smaller companies may be subject to above-average market
fluctuations.
The performances 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.
4
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PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1997
AVERAGE ANNUAL
----------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
------ ------ ------ ------ ------- ---------
CLASS A**
With Sales Charge 29.81% 15.41% 24.26% 15.56% n/a n/a
Without Sales Charge 36.26 21.19 25.47 16.13 n/a n/a
CLASS B**
With CDSL+ 30.61 15.17 n/a n/a 12.21% n/a
Without CDSL 35.61 20.17 n/a n/a 14.84 n/a
CLASS D**
With 1% CDSL 34.69 19.32 n/a n/a n/a n/a
Without CDSL 35.69 20.32 n/a n/a n/a 23.15%
LIPPER SMALL CAP
FUND INDEX*** 34.91 21.04 19.99 13.00 15.41++ 19.39+++
RUSSELL 2000
GROWTH INDEX*** 37.44 23.35 18.33 10.32 13.88++ 18.12+++
RUSSELL 2000 INDEX*** 33.51 33.19 20.51 12.23 22.43++ 19.31+++
NET ASSET VALUE
SEPTEMBER 30, 1997 MARCH 31, 1997 SEPTEMBER 30, 1996
------------------ -------------- ------------------
CLASS A $17.55 $12.88 $15.38
CLASS B 16.68 12.30 14.78
CLASS D 16.69 12.30 14.77
CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30, 1997
PAID $0.870
REALIZED 1.533
UNREALIZED 3.216#
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.
- ----------
* Returns for periods of less than one year are not annualized.
** Return figures reflect any change in price per share and assume the
investment of dividends and capital gain distributions. Returns for Class A
shares are calculated with and without the effect of the initial 4.75%
maximum sales charge. Returns for Class A shares also reflect the effect of
the service fee of up to 0.25% under the 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 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.
*** The Lipper Small Cap Fund Index (Lipper Index), the Russell 2000 Growth
Index, and the Russell 2000 Index are unmanaged benchmarks that assume
investment of all dividends. The Lipper Index does not reflect sales
charges, and the Russell 2000 Growth Index and the Russell 2000 Index do
not reflect fees and sales charges. Investors cannot invest directly in an
index.
+ The CDSL is 5% for periods of one year or less, and 4% since inception.
++ From April 30, 1996.
+++ From April 30, 1993.
# Represents the per share amount of net unrealized appreciation of portfolio
securities as of September 30, 1997.
5
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PORTFOLIO OVERVIEW
DIVERSIFICATION OF ASSETS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
---------------------
SEPTEMBER 30,
-----------
ISSUES COST VALUE 1997 1996
------ ------------ ------------ ---- ----
<S> <C> <C> <C> <C> <C>
Short-term Holdings and
Other Assets Less Liabilities ... 2 $ 64,767,416 $ 64,767,416 6.3 3.3
-- ------------ ------------ ---- ----
Common Stocks:
Advertising ................... 2 11,257,158 14,750,875 1.4 0.7
Aerospace and Defense ......... 1 8,333,323 12,758,931 1.2 1.2
Business Goods and Services ... 16 142,363,269 168,037,521 16.3 20.8
Capital Goods ................. 4 33,824,985 44,261,425 4.3 6.2
Chemicals ..................... 1 8,080,591 7,081,250 0.7 2.0
Communications ................ 6 41,128,667 32,100,053 3.1 4.0
Computer Hardware Peripherals . -- -- -- -- 0.5
Computer Software and ServiceS 12 61,321,610 66,611,475 6.5 3.3
Construction and Services ..... -- -- -- -- 0.8
Consumer Goods and Services ... 4 27,233,891 36,171,037 3.5 2.2
Drugs and Health Care ......... 15 100,585,075 122,967,119 12.0 14.4
Educational Services .......... 4 15,855,462 18,002,812 1.8 --
Electronics ................... 11 70,267,190 96,341,938 9.4 8.3
Environmental Management ...... 2 12,567,091 19,912,781 1.9 0.5
Farm Equipment ................ 1 1,435,608 1,925,100 0.2 0.5
Financial Services ............ 15 52,227,864 67,627,897 6.6 6.8
Food and Beverages ............ -- -- -- -- 0.5
Gaming ........................ 3 17,839,693 20,231,250 2.0 1.3
Independent Power Producers ... 2 22,232,821 31,738,481 3.1 3.3
Industrial Goods and Services . 2 8,384,433 13,580,000 1.3 0.9
Manufacturing ................. -- -- -- -- 2.1
Media and Broadcasting ........ 4 25,923,934 37,356,022 3.6 4.2
Medical Products and Technology 7 38,959,191 54,810,425 5.3 5.5
Metals ........................ 2 4,651,875 5,228,438 0.5 0.2
Oil and Gas ................... 5 14,114,223 22,047,712 2.1 1.7
Plastics ...................... 2 2,453,200 3,603,200 0.4 0.4
Publishing .................... 1 5,742,500 7,850,000 0.8 0.5
Real Estate Investment Trust .. 1 5,661,628 7,489,600 0.7 --
Restaurants ................... -- -- -- -- 0.5
Retail Trade .................. 5 21,988,770 28,945,513 2.8 3.4
Transportation ................ 3 16,925,414 22,726,581 2.2 --
Other ......................... 2 -- 108,989 -- --
--- ------------ ------------ ---- ----
133 771,359,466 964,266,425 93.7 96.7
--- ----------- ------------ ---- ----
Net Assets ...................... 135 $836,126,882 $1,029,033,841 100.0 100.0
=== ============ ============== ===== =====
</TABLE>
6
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PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING PAST SIX MONTHS
SHARES
---------------------------
HOLDINGS
ADDITIONS INCREASE 9/30/97
- ----------- --------- ----------
Affiliated Computer Services (Class A) ...... 286,600 286,600
BISYS Group ................................. 320,500 320,500
Corporate Express ........................... 1,007,300 1,007,300
General Cable ............................... 350,000 350,000
JP Foodservice .............................. 324,600 324,600
KEMET ....................................... 300,000 300,000
Ocwen Financial ............................. 200,000 200,000
Pittston Brink's Group ...................... 250,000 500,000
PMC-Sierra .................................. 258,500 258,500
Wisconsin Central Transport ................. 301,800 301,800
SHARES
---------------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/97
- ------------ --------- ----------
Cognex ...................................... 353,400 496,600
Control Data Systems ........................ 460,000 --
Electronics for Imaging ..................... 300,000 --
Fiserv ...................................... 195,000 --
International Rectifier ..................... 500,000 --
Maxim Integrated Products ................... 250,000 --
Memtec (ADRs) ............................... 475,000 --
MetroMail ................................... 400,000 --
Vivra ....................................... 300,000 --
Watson Pharmaceuticals ...................... 454,700 145,300
Largest portfolio changes from the previous period to the current period are
based on cost of purchases and proceeds from sales of securities.
LARGEST INDUSTRIES
AT SEPTEMBER 30, 1997
[The following table represents a bar chart in the printed report]
PERCENT
OF NET
ASSETS AMOUNT
------- ------------
Business Goods and Services 16.3% $168,037,521
Drugs and Health Care 12.0% $122,967,119
Electronics 9.4% $ 96,341,938
Financial Services 6.6% $ 67,627,897
Computer Software and Services 6.5% $ 66,611,475
LARGEST PORTFOLIO HOLDINGS
AT SEPTEMBER 30, 1997
SECURITY VALUE
- ---------- ------------
AccuStaff ........................................... $29,925,000
Ceridian ............................................ 25,533,700
Corporate Express ................................... 21,216,256
Pittston Brink's Group .............................. 20,031,250
CalEnergy ........................................... 19,950,000
Lattice Semiconductor ............................... 18,895,313
Scherer (R.P.) ...................................... 18,581,250
Cognex .............................................. 16,387,800
Total Renal Care Holdings ........................... 15,570,000
Allied Waste Industries ............................. 15,225,281
7
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PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
COMMON STOCKS 93.7%
ADVERTISING 1.4%
ADVO*
Direct mail advertising services 417,000 $ 7,610,250
HA-LO INDUSTRIES*
Distributor of specialty
advertising products 250,000 7,140,625
------------
14,750,875
------------
AEROSPACE AND DEFENSE 1.2%
AVONDALE INDUSTRIES*
Ship construction for military
and commercial uses 484,900 12,758,931
------------
BUSINESS GOODS AND
SERVICES 16.3%
ACCUSTAFF*
Temporary personnel services 950,000 29,925,000
AMERICAN PAD & PAPER*
Manufacturer of paper-based
office products 264,600 3,290,963
BDM INTERNATIONAL*
Provider of information systems
software and services 334,000 8,370,875
CERIDIAN*
Provider of data processing
services 690,100 25,533,700
COPART*
Auctioneer of damaged vehicles
for insurance companies 203,000 3,590,562
CORPORATE EXPRESS
Supplier of office furniture 1,007,300 21,216,256
DST SYSTEMS*
Provider of information
processing and software
services 362,600 13,416,200
HOSPITALITY WORLDWIDE SERVICES*
Provider of interior and exterior
renovations and maintenance
for the hospitality industry 75,000 984,375
JP FOODSERVICE*
Distributor to food service
industry 324,600 10,224,900
BUSINESS GOODS AND
SERVICES (CONTINUED)
PERSONNEL GROUP OF AMERICA*
Personnel staffing services 250,000 $ 8,562,500
PIERCE LEAHY*
Archive records management
services 231,900 6,290,288
PITTSTON BRINK'S GROUP
Provider of security services 500,000 20,031,250
PMT SERVICES*
Marketer of electronic credit
card authorization and
payment systems 487,600 7,557,800
STAFF LEASING*
Provider of a broad range of
business services for small-
and medium-sized businesses 200,000 4,937,500
TELESPECTRUM WORLDWIDE*
Provider of telemarketing and
marketing research services 126,100 640,352
VESTCOM INTERNATIONAL*
Provider of computer output
and document management
services 180,000 3,465,000
------------
168,037,521
------------
CAPITAL GOODS 4.3%
CARBIDE/GRAPHITE GROUP*
Producer of graphite
electrodes 146,800 4,936,150
DONCASTERS (ADRS)*+
Manufacturer of tolerance-
critical components 500,000 15,000,000
OAK INDUSTRIES*
Manufacturer of electrical
controls 475,000 12,884,375
UCAR INTERNATIONAL*
Producer of graphite electrodes 239,600 11,440,900
------------
44,261,425
------------
CHEMICALS 0.7%
POLYMER GROUP*
Manufacturer and marketer
of polyolefin products 550,000 7,081,250
------------
- -------------------------
See footnotes on page 13.
8
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PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
COMMUNICATIONS 3.1%
ARCH COMMUNICATIONS GROUP*
Provider of nationwide
paging services 400,000 $ 3,475,000
CIDCO*
Designer and developer of
network service equipment 340,000 6,523,750
GLENAYRE TECHNOLOGIES*
Manufacturer of paging
infrastructure equipment 455,200 7,610,375
OMNIPOINT*
Provider of personal
communications services 475,000 10,375,781
STANFORD TELECOMMUNICATIONS*
Manufacturer of systems for
earth stations 79,800 1,730,663
WESTERN WIRELESS (CLASS A)*
Provider of wireless
communications services 126,750 2,384,484
------------
32,100,053
------------
COMPUTER SOFTWARE
AND SERVICES 6.5%
ADVANTAGE LEARNING SYSTEMS*
Developer of educational software 22,000 554,125
AFFILIATED COMPUTER SERVICES (CLASS A)*
Provider of information
processing services 286,600 7,093,350
AMERICAN MANAGEMENT SYSTEMS*
Management and administration
of computer services 250,000 4,765,625
ANALYSTS INTERNATIONAL
Provider of computer
programming services 125,000 4,867,187
BISYS GROUP*
Provider of data processing
services 320,500 10,286,047
BLACK BOX*
Provider of communications and
networking solutions 275,000 11,962,500
INSO CORPORATION*
Marketer and developer of textual
information software 183,600 2,289,263
PERVASIVE SOFTWARE*
Provider of embedded
database software 104,000 1,183,000
COMPUTER SOFTWARE
AND SERVICES (CONTINUED)
PRIMARK*
Provider of information through
software and databases 175,000 $ 5,173,438
PROBUSINESS SERVICES*
Provider of employee
administration services 75,000 1,429,687
PSW TECHNOLOGIES*
Provider of high-value solutions
to technology vendors and
business end-users 420,000 5,460,000
SYNOPSYS*
Developer of integrated circuit
design software 271,900 11,547,253
------------
66,611,475
------------
CONSUMER GOODS AND
SERVICES 3.5%
AMERICAN HOMESTAR
Retailer and producer of
manufactured homes 375,000 8,859,375
CARRIAGE SERVICES (CLASS A)*
Provider of funeral services
and products 302,300 5,271,356
COINMACH LAUNDRY*+
Provider of coin-operated
laundry equipment
and services 600,000 14,550,000
EQUITY*
Provider of funeral services 321,300 7,490,306
------------
36,171,037
------------
DRUGS AND HEALTH CARE 12.0%
AMERICAN HOMEPATIENT*
Provider of home health
care services 400,000 9,100,000
AMERISOURCE HEALTH (CLASS A)*
Distributor of pharmaceutical
supplies 240,500 14,054,219
CASTLE DENTAL CENTERS*
Manager of integrated dental
networks 122,000 1,692,750
COMPDENT*
Provider of managed-care
dental services 420,000 10,421,250
- -------------------------
See footnotes on page 13.
9
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
DRUGS AND HEALTH CARE
(CONTINUED)
HEALTHCOR HOLDINGS*
Provider of home health care
services 300,000 $ 1,537,500
INTEGRATED HEALTH SERVICES
Operator of geriatric
medical facilities 130,000 4,346,875
NATIONAL SURGERY CENTERS*
Operator of ambulatory
surgery centers 480,000 10,470,000
NCS HEALTHCARE*
Health care facility and
pharmacy services 275,000 7,046,875
OMNICARE
Provider of pharmacy services
to long-term care institutions 238,500 7,751,250
ORTHALLIANCE (CLASS A)*
Provider of management services
to orthodontic practices 300,000 4,462,500
PHYCOR*
Operator of multi-specialty
medical clinics 180,000 5,236,875
SCHERER (R.P.)*
Developer and producer of
pharmaceutical delivery
systems 300,000 18,581,250
SIERRA HEALTH SERVICES*
Owner and operator of HMOs 109,600 4,014,100
TOTAL RENAL CARE HOLDINGS*
Provider of dialysis services 311,400 15,570,000
WATSON PHARMACEUTICALS*
Manufacturer of off-patent
medications 145,300 8,681,675
------------
122,967,119
------------
EDUCATIONAL SERVICES 1.8%
EDUCATION MANAGEMENT*
Provider of postsecondary
education 130,900 3,436,125
EDUCATIONAL MEDICAL*+
Provider of diversified
career-oriented postsecondary
education 605,000 5,104,687
EDUCATIONAL SERVICES (CONTINUED)
Edutrek International (Class A)*
Operator of the American
College 233,000 $ 6,174,500
YOUTH SERVICES*
Operator of residential and
community-based programs
for at-risk youths 200,000 3,287,500
------------
18,002,812
------------
ELECTRONICS 9.4%
ADFLEX SOLUTIONS*
Flexible circuit boards 122,500 2,985,938
BURR-BROWN*
Manufacturer of microelectric
data devices for business
end-users 206,800 6,927,800
CERPROBE*
Developer and marketer of
circuit-testing products 100,000 2,531,250
COGNEX*
Manufacturer of machine
vision systems 496,600 16,387,800
CREDENCE SYSTEMS*
Manufacturer of automated
semiconductor testing
equipment 252,300 12,331,162
ELECTRO SCIENTIFIC INDUSTRIES*
Manufacturer of computer
controlled laser systems 95,000 5,818,750
GENERAL SEMICONDUCTORS*
Power semiconductors 363,500 4,680,062
KEMET*
Manufacturer and supplier
of capacitors 300,000 9,159,375
LATTICE SEMICONDUCTOR*
Manufacturer of programmable
logic devices 290,000 18,895,313
PMC-SIERRA*
Integrated circuit supplier 258,500 6,575,594
VISHAY INTERTECHNOLOGY*
Developer and manufacturer
of electronic passive components 380,100 10,048,894
------------
96,341,938
------------
- -------------------------
See footnotes on page 13.
10
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
ENVIRONMENTAL
MANAGEMENT 1.9%
ALLIED WASTE INDUSTRIES*
Integrated waste disposal 793,500 $ 15,225,281
WATERLINK*
Water purification and
treatment systems 250,000 4,687,500
------------
19,912,781
------------
FARM EQUIPMENT 0.2%
RDO EQUIPMENT (CLASS A)*
Sale and service of
John Deere equipment 83,700 1,925,100
------------
FINANCIAL SERVICES 6.6%
AMERICAN CAPITAL STRATEGIES*
Provider of commercial financing 138,900 2,751,956
CMAC INVESTMENT
Private mortgage insurance 200,000 10,725,000
COMMERCE BANCORP
Commercial bank 127,034 4,938,447
CONTIFINANCIAL*
Provider of consumer and
commercial financing 164,200 5,336,500
FINOVA GROUP
Provider of real estate
financing and insurance 78,400 7,418,600
FIRST INVESTORS FINANCIAL
SERVICES GROUP*
Consumer finance company 150,000 1,256,250
HEALTHCARE FINANCIAL PARTNERS*
Provider of financing for
health care service providers 178,500 5,466,563
IMPERIAL CREDIT INDUSTRIES*
Mortgage banking operations 164,900 4,380,156
INSIGNIA FINANCIAL GROUP*
Real estate management
services 273,900 5,512,238
MEDALLION FINANCIAL
Provider of loan financing for
the purchase of taxicab
medallions and related assets 50,000 1,081,250
OCWEN FINANCIAL*
Holding company involved
in asset acquisition, finance,
and management 200,000 8,425,000
FINANCIAL SERVICES (CONTINUED)
PFF BANCORP*
Holding company 100,000 $ 1,918,750
ROSLYN BANCORP*
Savings bank 200,000 4,443,750
SECURITY CAPITAL GROUP*
Savings and loan 21,500 739,062
STATEWIDE FINANCIAL
Savings bank 150,000 3,234,375
------------
67,627,897
------------
GAMING 2.0%
GTECH HOLDINGS*
Operator of state and local
lottery systems 300,000 10,256,250
INTERSTATE HOTELS*
Hotel management 200,000 6,525,000
SUN INTERNATIONAL HOTELS*
Operator of resort and
casino hotels 100,000 3,450,000
------------
20,231,250
------------
INDEPENDENT POWER
PRODUCERS 3.1%
CALENERGY*
Developer, marketer, and
operator of power
generation facilities 600,000 19,950,000
CALPINE*
Developer, marketer, and
operator of power
generation facilities 573,300 11,788,481
------------
31,738,481
------------
INDUSTRIAL GOODS AND
SERVICES 1.3%
GENERAL CABLE*
Developer of copper wire and
cable products 350,000 12,425,000
INDUSTRIAL DISTRIBUTION*
Distributor of maintenance,
repair, operation, and
production products 55,000 1,155,000
------------
13,580,000
------------
- -------------------------
See footnotes on page 13.
11
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
MEDIA AND
BROADCASTING 3.6%
CHANCELLOR BROADCASTING (CLASS A)*
Radio broadcasting 208,146 $ 10,992,711
HEARST-ARGYLE TELEVISION (CLASS A)*
TVbroadcasting 293,148 8,849,405
JACOR COMMUNICATIONS*
Radio broadcasting 265,000 11,701,406
PAXSON COMMUNICATIONS (CLASS A)*
TV broadcasting 500,000 5,812,500
------------
37,356,022
------------
MEDICAL PRODUCTS AND
TECHNOLOGY 5.3%
DENTSPLY INTERNATIONAL
Manufacturer of dental and
medical x-ray equipment 200,000 11,237,500
GULF SOUTH MEDICAL SUPPLY*
Distributor of medical supplies 179,700 4,818,206
HANGER ORTHOPEDIC GROUP*
Provider of orthopedic and
prosthetic rehabilitation services 410,500 6,131,844
SUBURBAN OSTOMY SUPPLY*
Medical supplies wholesaler 400,000 3,825,000
SYBRON INTERNATIONAL*
Manufacturer of laboratory
and dental supplies 275,000 11,807,812
THERMOQUEST*
Manufacturer of specialty
analytical instruments 250,000 4,838,500
WATERS*
Manufacturer of liquid
chromatography instruments 275,000 12,151,563
------------
54,810,425
------------
METALS 0.5%
METALS USA*
Metals processor and services 140,000 2,161,250
STEEL DYNAMICS*
Operator of steel minimills 130,000 3,067,188
------------
5,228,438
------------
OIL AND GAS 2.1%
AMERICAN OILFIELD DIVERS*
Provider of diving, marine
construction, and environmental
services to the oil and
offshore oil and gas industry 100,000 $ 1,528,125
GULF INDONESIA RESOURCES*
Developer and producer of oil
and natural gas 102,500 2,280,625
POGO PRODUCING
Oil and gas exploration,
production, and development 196,600 8,588,962
PRIDE INTERNATIONAL*
Provider of oil and
gas well services 100,000 3,400,000
SANTA FE ENERGY RESOURCES*
Oil and gas exploration,
production, and development 500,000 6,250,000
------------
22,047,712
------------
PLASTICS 0.4%
IVEX PACKAGING*
Manufacturer of specialty
packaging 37,700 603,200
SPARTECH
PVC compounds; plastic
sheeting 200,000 3,000,000
------------
3,603,200
------------
PUBLISHING 0.8%
JOURNAL REGISTER*
Publisher of newspapers 400,000 7,850,000
------------
REAL ESTATE INVESTMENT
TRUST 0.7%
PRISON REALTY TRUST
Prison REIT 198,400 7,489,600
------------
RETAIL TRADE 2.8%
BARNES & NOBLE*
Owner and operator of retail
book stores and superstores 188,600 5,327,950
BORDERS GROUP*
Operator of book superstores 198,000 5,445,000
- -------------------------
See footnotes on page 13.
12
<PAGE>
================================================================================
PORTFOLIO OF INVESTMENTS
September 30, 1997
SHARES VALUE
------ -----
RETAIL TRADE (CONTINUED)
GUCCI GROUP
Manufacturer and marketer
of apparel 86,700 $ 4,064,063
PARTY CITY*
Owner and operator of
party supplies stores 252,000 6,583,500
STAGE STORES*
Owner and operator of
apparel stores 175,000 7,525,000
------------
28,945,513
------------
TRANSPORTATION 2.2%
OMI*
Operator of a fleet of
cargo ships 600,000 7,500,000
US XPRESS ENTERPRISES*
Provider of transportation and
logistics services 280,000 5,635,000
WISCONSIN CENTRAL TRANSPORT*
Operator of regional railroad
systems 301,800 9,591,581
------------
22,726,581
------------
OTHER 108,989
------------
TOTAL COMMON STOCKS
(Cost $771,359,466) 964,266,425
------------
PRIN. AMT. VALUE
---------- -----
SHORT-TERM HOLDINGS 7.3%
ABN-AMRO Bank, Grand Cayman
Fixed Time Deposit
6 1/4%, 10/1/1997 $38,400,000 $ 38,400,000
Rabo Bank, Grand Cayman
Fixed Time Deposit,
6%, 10/1/1997 36,800,000 36,800,000
--------------
TOTAL SHORT-TERM HOLDINGS
(Cost $75,200,000) 75,200,000
--------------
TOTAL INVESTMENTS 101.0%
(Cost $846,559,466) 1,039,466,425
OTHER ASSETS
LESS LIABILITIES (1.0)% (10,432,584)
--------------
NET ASSETS 100.0% $1,029,033,841
==============
- --------------------------------
* Non-income producing security.
+ Affiliated issuers (Fund's holdings representing 5% or more of the outstanding
voting securities). Descriptions of companies have not been audited by Deloitte
& Touche LLP.
See Notes to Financial Statements.
13
<PAGE>
================================================================================
STATEMENT OF ASSETS AND LIABILITIES
September 30, 1997
ASSETS:
Investments, at value:
Common Stocks* (cost $771,359,466) ........... $964,266,425
Short-term Holdings (cost $75,200,000) ....... 75,200,000 $1,039,466,425
-----------
Cash ........................................................ 2,584,851
Receivable for securities sold .............................. 14,333,497
Receivable for Capital Stock sold ........................... 4,274,766
Expenses prepaid to shareholder service agent ............... 208,552
Receivable for dividends and interest ....................... 124,176
Other ....................................................... 41,482
--------------
TOTAL ASSETS ................................................ 1,061,033,749
--------------
LIABILITIES:
Payable for securities purchased ............................ 27,305,295
Payable for Capital Stock repurchased ....................... 3,079,792
Accrued expenses, taxes, and other .......................... 1,614,821
--------------
TOTAL LIABILITIES ........................................... 31,999,908
--------------
NET ASSETS .................................................. $1,029,033,841
==============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.10 par value; 500,000,000 shares authorized;
59,986,643 shares outstanding):
Class A ................................................... $ 3,237,931
Class B ................................................... 418,777
Class D ................................................... 2,341,956
Additional paid-in capital .................................. 759,667,216
Accumulated net investment loss ............................. (55,235)
Undistributed net realized gain ............................. 70,516,237
Net unrealized appreciation of investments .................. 192,906,959
--------------
NET ASSETS .................................................. $1,029,033,841
==============
NET ASSET VALUE PER SHARE:
CLASS A ($568,260,542 / 32,379,305 shares) .................. $17.55
======
CLASS B ($69,869,042 / 4,187,775 shares) .................... $16.68
======
CLASS D ($390,904,257 / 23,419,563 shares) .................. $16.69
======
- ----------
* Includes affiliated issuers (Fund's holdings representing 5% or more of the
outstanding voting securities) with a cost of $25,548,998 and a value of
$34,654,687.
See Notes to Financial Statements.
14
<PAGE>
================================================================================
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1997
INVESTMENT INCOME:
Interest .................................. $ 2,488,812
Dividends (net of foreign taxes
withheld of $13,480) ..................... 1,118,273
------------
TOTAL INVESTMENT INCOME ................... $ 3,607,085
EXPENSES:
Management fee ............................ 8,127,464
Distribution and service fees ............. 4,832,230
Shareholder account services .............. 2,209,092
Registration .............................. 293,914
Custody and related services .............. 264,855
Shareholder reports and communications .... 260,108
Auditing and legal fees ................... 61,531
Directors' fees and expenses .............. 27,846
Miscellaneous ............................. 35,164
------------
TOTAL EXPENSES ........................................... 16,112,204
------------
NET INVESTMENT LOSS ...................................... (12,505,119)
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS:
Net realized gain on investments .......... 91,955,538
Net change in unrealized appreciation of
investments .............................. 93,832,612
------------
NET GAIN ON INVESTMENTS .................................. 185,788,150
------------
INCREASE IN NET ASSETS FROM OPERATIONS ................... $173,283,031
============
- ----------
See Notes to Financial Statements.
15
<PAGE>
================================================================================
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1996
------------- ------------
<S> <C> <C> <C> <C>
OPERATIONS:
Net investment loss ......................................................... $ (12,505,119) $ (7,959,744)
Net realized gain on investments ............................................ ` 91,955,538 54,587,427
Net change in unrealized appreciation of investments ........................ 93,832,612 37,679,696
------------- ------------
INCREASE IN NET ASSETS FROM OPERATIONS ...................................... 173,283,031 84,307,379
------------- ------------
DISTRIBUTION TO SHAREHOLDERS:
Net realized gain on investments:
Class A ................................................................. (29,080,493) (10,171,960)
Class B ................................................................. (1,712,339) --
Class D ................................................................. (20,123,337) (5,808,812)
------------- ------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ................................... (50,916,169) (15,980,772)
------------- -------------
SHARES
------------------------
YEAR ENDED SEPTEMBER 30,
------------------------
1997 1996
---------- ----------
CAPITAL SHARE TRANSACTIONS:*
Net proceeds from sale of shares:
Class A ........................ 8,188,436 16,492,254 120,301,313 234,133,389
Class B ........................ 2,700,791 1,620,257 38,590,991 23,578,876
Class D ........................ 5,459,136 13,296,830 76,822,163 183,469,155
Exchanged from associated Funds:
Class A ........................ 10,428,910 9,570,832 150,564,472 139,553,114
Class B ........................ 442,678 46,856 6,149,856 666,508
Class D ........................ 2,960,507 2,094,306 41,877,344 29,327,262
Shares issued in payment of gain
distributions:
Class A ........................ 1,789,620 634,890 25,108,371 8,602,756
Class B ........................ 114,153 -- 1,533,070 --
Class D ........................ 1,400,777 414,331 18,812,429 5,431,884
---------- ---------- ------------- -------------
Total .............................. 33,485,008 44,170,556 479,760,009 624,762,944
---------- ---------- ------------- -------------
Cost of shares repurchased:
Class A ........................ (10,676,096) (3,546,560) (155,515,563) (50,876,224)
Class B ........................ (208,490) (11,460) (2,970,321) (168,482)
Class D ........................ (5,321,563) (1,773,522) (73,595,265) (24,524,473)
Exchanged into associated Funds:
Class A ........................ (11,414,103) (8,475,688) (165,114,909) (123,710,010)
Class B ........................ (486,787) (30,223) (6,666,931) (427,330)
Class D ........................ (3,910,240) (1,888,645) (54,310,345) (25,867,750)
---------- ---------- ------------- -------------
Total .............................. (32,017,279) (15,726,098) (458,173,334) (225,574,269)
---------- ---------- ------------- -------------
INCREASE IN NET ASSETS FROM CAPITAL
SHARE TRANSACTIONS ................. 1,467,729 28,444,458 21,586,675 399,188,675
=========== =========== ------------- -------------
INCREASE IN NET ASSETS ..................................................... 143,953,537 467,515,282
NET ASSETS:
Beginning of year .......................................................... 885,080,304 417,565,022
-------------- --------------
END OF YEAR (including accumulated net investment loss of $55,235
and $49,246, respectively) ................................................. $1,029,033,841 $885,080,304
============== =============
</TABLE>
- ----------
* The Fund began offering Class B shares on April 22, 1996.
See Notes to Financial Statements.
16
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
1. MULTIPLE CLASSES OF SHARES -- 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 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 of 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, if
applicable, of 1% imposed on 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 -- The financial statements have been
prepared in conformity with generally accepted accounting principles which
require management to make certain estimates and assumptions at the date of the
financial statements. The following summarizes the significant accounting
policies of the Fund:
a. SECURITY VALUATION -- 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. FEDERAL TAXES -- There is no provision for federal income 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. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment
transactions are recorded on trade dates. Identified cost of investments
sold is used for both financial statement and federal income tax purposes.
Dividends receivable and payable are recorded on ex-dividend dates. Interest
income is recorded on an accrual basis.
d. MULTIPLE CLASS ALLOCATIONS -- 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 attributable to a
particular class, are charged directly to such class. For the year ended
September 30, 1997, distribution and service fees were the only
class-specific expenses.
e. DISTRIBUTIONS TO SHAREHOLDERS -- The treatment for financial statement
purposes of distributions made to shareholders 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, or 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 SECURITIES -- Purchases and sales of portfolio
securities, excluding US Government obligations and short-term investments, for
the year ended September 30, 1997, amounted to $810,098,949 and $887,692,255,
respectively.
At September 30, 1997, 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 $227,964,985 and $35,058,026, respectively.
4. MANAGEMENT FEE, ADMINISTRATIVE SERVICES, AND OTHER TRANSACTIONS -- J. &
W. Seligman & Co. Incorporated (the "Manager") manages the affairs of the Fund
and provides the necessary personnel and facilities. Compensation of all
officers of the Fund, all directors of the Fund who are employees or consultants
of the Manager, and all personnel of the Fund and the Manager, is paid by the
Manager. The Manager 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. The management fee
17
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
reflected in the Statement of Operations represents 0.94% 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 $203,896 from sales of Class A shares after commissions of
$1,621,883 were paid to dealers.
The Fund has an Administration, Shareholder Services and
Distribution Plan (the "Plan") with respect to distribution of its shares. Under
the Plan, with respect to Class A shares, 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, 1997, fees paid aggregated $1,105,878, or 0.22% per annum of
average daily net assets of Class A shares.
Under the Plan, with respect to Class B and Class D shares, 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 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 provides 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, 1997, 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 $411,435 and $3,314,917, respectively.
The Distributor is entitled to retain any CDSL imposed on
redemptions of Class D shares occurring within one year of purchase and on
certain redemptions of Class A shares occurring within 18 months of purchase.
For the year ended September 30, 1997, such charges amounted to $148,173.
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
year ended September 30, 1997, amounted to $106,966.
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, 1997, Seligman Services, Inc. received commissions of $25,093 from the sale
of shares of the Fund. Seligman Services, Inc. also received distribution and
service fees of $65,586, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $2,206,235 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.
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, 1997, of $55,235 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. COMMITTED LINE OF CREDIT -- The Fund has a $78 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
0.50% 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. To
date, the Fund has not borrowed from the credit facility.
18
<PAGE>
================================================================================
NOTES TO FINANCIAL STATEMENTS
6. AFFILIATED ISSUERS -- As defined under the Investment Company Act of
1940, as amended, affiliated issuers are those issuers in which the Fund's
holdings represent 5% or more of the outstanding voting securities. A summary of
the Fund's transactions in the securities of these issuers during the year ended
September 30, 1997, is as follows:
<TABLE>
<CAPTION>
GROSS GROSS
BEGINNING PURCHASES SALES AND ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES AND ADDITIONS REDUCTIONS SHARES GAIN INCOME VALUE
- --------- ------ ------------- ---------- ------ ---- ------ -----
<S> <C> <C> <C> <C> <C> <C> <C>
Coinmach Laundry ..... 370,000 230,000 -- 600,000 -- -- $14,550,000
DONCASTERS (ADRs) .... -- 500,000 -- 500,000 -- -- 15,000,000
Educational Medical .. -- 605,000 -- 605,000 -- -- 5,104,687
-----------
TOTAL ................ $34,654,687
===========
</TABLE>
19
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
The Fund's financial highlights are presented below. "Per share
operating performance" data is designed to allow investors to trace the
operating performance of eachClass, on a per share basis, from the beginning net
asset value to the ending net asset value, so that investors can understand what
effect the individual items have on their investment, assuming it was held
throughout the period. Generally, 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.
"Total return based on net asset value" measures each Class's
performance assuming that investors purchased Fund shares at net asset value as
of the beginning of the period, invested dividends and capital gains paid at net
asset value, and then sold their shares at the net asset value on the last day
of the period. The total return computations do not reflect any sales charges
investors may incur in purchasing or selling shares of the Fund. 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 the commissions were paid. This rate is
provided for periods beginning October 1, 1995.
<TABLE>
<CAPTION>
CLASS A
---------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
---------------------------------------------------------------------------------
1997o 1996 1995 1994 1993
----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ........... $15.38 $14.04 $11.62 $12.83 $10.22
------ ------ ------ ------ ------
Net investment loss .......................... (.16) (.13) (.06) (.08) (.03)
Net realized and unrealized investment gain .. 3.20 1.95 3.87 1.10 4.54
------ ------ ------ ------ ------
INCREASE FROM INVESTMENT OPERATIONS .......... 3.04 1.82 3.81 1.02 4.51
Distributions from net gain realized ......... (.87) (.48) (1.39) (2.23) (1.90)
------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE ... 2.17 1.34 2.42 (1.21) 2.61
------ ------ ------ ------ ------
NET ASSET VALUE, END OF YEAR ................. $17.55 $15.38 $14.04 $11.62 $12.83
====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: 21.19% 13.40% 36.80% 9.79% 50.67%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ............... 1.52% 1.56% 1.43% 1.34% 1.25%
Net investment loss to average net assets .... (1.10)% (.91)% (.50)% (.87)% (.27)%
Portfolio turnover ........................... 97.37% 59.36% 71.52% 124.76% 129.13%
Average commission rate paid ................. $.0540 $.0538
NET ASSETS, END OF YEAR
(000S omitted) ............................. $568,261 $523,737 $272,122 $58,478 $43,188
</TABLE>
- ----------
See footnotes on page 21.
20
<PAGE>
================================================================================
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B CLASS D
---------------------- ---------------------------------------------------------
YEAR 4/22/96* 5/3/93*
ENDED TO YEAR ENDED SEPTEMBER 30, TO
-----------------------------------------------
9/30/97o 9/30/96o 1997o 1996o 1995o 1994o 9/30/93
-------- -------- ----- ----- ----- ----- -------
<S> <C> <C> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ..... $14.78 $14.55 $14.77 $13.61 $11.40 $12.80 $10.12
------ ------ ------ ------ ------ ------ ------
Net investment loss (.27) (.11) (.27) (.24) (.15) (.23) (.04)
Net realized and unrealized investment gain 3.04 .34 3.06 1.88 3.75 1.06 2.72
------ ------ ------ ------ ------ ------ ------
INCREASE FROM INVESTMENT OPERATIONS ...... 2.77 .23 2.79 1.64 3.60 .83 2.68
Distributions from net gain realized ..... (.87) -- (.87) (.48) (1.39) (2.23) --
------ ------ ------ ------ ------ ------ ------
NET INCREASE (DECREASE) IN NET ASSET VALUE 1.90 .23 1.92 1.16 2.21 (1.40) 2.68
------ ------ ------ ------ ------ ------ ------
NET ASSET VALUE, END OF PERIOD .......... $16.68 $14.78 $16.69 $14.77 $13.61 $11.40 $12.80
====== ====== ====== ====== ====== ====== ======
TOTAL RETURN BASED ON NET ASSET VALUE: 20.17% 1.58% 20.32% 12.47% 35.53% 8.06% 26.48%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .......... 2.30% 2.45%+ 2.30% 2.35% 2.29% 2.72% 2.24%+
Net investment loss to average net assets (1.88)% (1.80)%+ (1.88)% (1.70)% (1.35)% (2.25)% (1.94)%+
Portfolio turnover ...................... 97.37% 59.36%++ 97.37% 59.36% 71.52% 124.76% 129.13%+++
Average commission rate paid ............ $.0540 $.0538++ $.0540 $.0538
NET ASSETS, END OF PERIOD
(000S omitted) .......................... $69,869 $24,016 $390,904 $337,327 $145,443 $9,318 $967
</TABLE>
- ----------
o The per share amounts for the periods ended September 30, 1997, 1996, 1995,
and 1994, are calculated based on average shares outstanding.
* Commencement of offering of shares.
+ Annualized.
++ For the year ended September 30, 1996.
+++ For the year ended September 30, 1993.
See Notes to Financial Statements.
21
<PAGE>
================================================================================
REPORT OF INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
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, 1997, 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 each of the periods presented. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and 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, 1997, 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, 1997, 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 31, 1997
- --------------------------------------------------------------------------------
22
<PAGE>
================================================================================
BOARD OF DIRECTORS
- --------------------------------------------------------------------------------
FRED E. BROWN
DIRECTOR EMERITUS
DIRECTOR AND CONSULTANT, J. &W. Seligman &Co.
Incorporated
JOHN R. GALVIN 2
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
DIRECTOR, USLIFE Corporation
ALICE S. ILCHMAN 3
PRESIDENT, Sarah Lawrence College
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Aluminum Corporation
BETSY S. MICHEL 2
TRUSTEE, Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co.
Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3
DIRECTOR, The Brooklyn Union Gas Company
TRUSTEE, Committee for Economic Development
DIRECTOR, Dow Jones & Co., Inc.
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, J. & W. Seligman & Co.
Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3
RETIRED VICE PRESIDENT, Pfizer Inc.
DIRECTOR, USLIFECorporation
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
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
- ----------------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
- --------------------------------------------------------------------------------
23
<PAGE>
================================================================================
EXECUTIVE OFFICERS
- --------------------------------------------------------------------------------
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
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
FOR MORE INFORMATION
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
- --------------------------------------------------------------------------------
24
<PAGE>
================================================================================
GLOSSARY OF FINANCIAL TERMS
CAPITAL GAIN DISTRIBUTION -- A payment to mutual fund shareholders of profits
realized on the sale of securities in a fund's portfolio. For tax purposes,
these profits may be considered short-, mid-, or long-term capital gains and may
be taxed at different rates.
CAPITAL APPRECIATION/DEPRECIATION -- An increase or decrease in the market value
of a mutual fund's portfolio securities, which is reflected in the net asset
value of the fund's shares. Capital appreciation/depreciation of an individual
security is in relation to the original purchase price.
COMPOUNDING -- The change in the value of an investment as shareholders receive
earnings on their investment's earnings. For example, if $1,000 is invested at a
fixed rate of 7% a year, the initial investment is worth $1,070 after one year.
If the return is compounded, second year earnings will be based not on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES LOAD (CDSL) -- Depending on the class of shares owned,
a fee charged by a mutual fund when shares are sold back to the fund (the CDSL
expires after a fixed time period).
DIVIDEND -- A payment by a mutual fund, usually derived from the fund's net
investment income (dividends and interest less expenses).
DIVIDEND YIELD -- A measurement of a fund's dividend as a percentage of the
maximum offering price.
EXPENSE RATIO -- The cost of doing business for a mutual fund, expressed as a
percent of the fund's net assets.
INVESTMENT OBJECTIVE -- The shared investment goal of a fund and its
shareholders.
MANAGEMENT FEE -- The amount paid by a mutual fund to its investment advisor(s).
MULTIPLE CLASSES OF SHARES -- Although an individual mutual fund invests in only
one portfolio of securities, it may offer investors several purchase options
which are "classes" of shares. Multiple classes permit shareholders to choose
the fee structure that best meets their needs and goals. Generally, each class
will differ in terms of how and when sales charges and certain fees are
assessed.
NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (NASD) -- A self-regulatory
body with authority over firms that distribute mutual funds.
NET ASSET VALUE (NAV) PER SHARE -- The market worth of one fund share, obtained
by adding a mutual fund's total assets (securities, cash, and any accrued
earnings), subtracting liabilities, and dividing the resulting net assets by the
number of shares outstanding.
OFFERING PRICE (OP) -- The price at which a mutual fund's share can be
purchased. The offering price per share is the current net asset value plus any
sales charge.
PORTFOLIO TURNOVER -- A measure of the trading activity in a mutual fund's
investment portfolio that reflects how often securities are bought and sold.
PROSPECTUS -- The legal document describing a mutual fund to all prospective
shareholders. It contains information required by the Securities and Exchange
Commission (SEC), such as a fund's investment objective and policies, services,
investment restrictions, officers and directors, how shares are bought and
redeemed, fund fees and other charges, and the fund's financial statements.
SEC YIELD -- SEC Yield refers to the net income earned by a fund during a recent
30-day period. This income is annualized and then divided by the maximum
offering price per share on the last day of the 30-day period. The SEC Yield
formula reflects semiannual compounding.
SECURITIES AND EXCHANGE COMMISSION -- The primary US federal agency that
regulates the registration and distribution of mutual fund shares.
STATEMENT OF ADDITIONAL INFORMATION -- Document that contains updated or more
detailed information about a mutual fund and supplements the prospectus. It is
available at no charge upon request.
TOTAL RETURN -- A measure of a fund's performance encompassing all elements of
return. Reflects the change in share price over a given period and assumes all
distributions are taken in additional fund shares. The AVERAGE ANNUAL TOTAL
RETURN represents the average annual compounded rate of return for the periods
presented.
YIELD ON SECURITIES -- For bonds, the current yield is the coupon rate of
interest, divided by the purchase price. For stocks, the yield is measured by
dividing dividends paid by the market price of the stock.
- --------
Adapted from the Investment Company Institute's 1997 MUTUAL FUND FACT BOOK.
25
<PAGE>
SELIGMAN FINANCIAL SERVICES, INC.
AN AFFILIATE OF
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
This material 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.
EQF2 9/97
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