SELIGMAN
- ----------
FRONTIER
FUND, INC.
[Picture]
ANNUAL REPORT
SEPTEMBER 30, 1998
SEEKING GROWTH
IN CAPITAL VALUE
THROUGH
INVESTMENTS IN
SMALL-COMPANY
GROWTH STOCKS
[LOGO]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
<PAGE>
SELIGMAN -- TIMES CHANGE...VALUES ENDURE
J. & W. SELIGMAN & CO. INCORPORATED IS A FIRM WITH A LONG TRADITION OF
INVESTMENT EXPERTISE, OFFERING A BROAD ARRAY OF INVESTMENT CHOICES TO HELP
TODAY'S INVESTORS SEEK THEIR LONG-TERM FINANCIAL GOALS.
[picture omitted]
James, Jesse, and Joseph Seligman, 1870
TIMES CHANGE...
Established in 1864, Seligman's history of providing financial services has been
marked not by fanfare, but rather by a quiet and firm adherence to financial
prudence. While the world has changed dramatically in the 134 years since
Seligman first opened its doors, the firm has continued to offer its clients
high-quality investment solutions through changing times.
In the late 19th century, as the country grew, Seligman helped finance the
westward expansion of the railroads, the construction of the Panama Canal, and
the launching of urban transit systems. In the first part of the 20th century,
as America became an industrial power, the firm helped fund the growing capital
needs of the nascent automobile and steel industries.
With the formation of Tri-Continental Corporation in 1929 -- today, the nation's
largest diversified publicly-traded closed-end investment company -- Seligman
began shifting its emphasis from investment banking to investment management.
Despite the stock market crash and ensuing depression, Seligman was convinced of
the importance that investment companies could have in building wealth for
individual investors and began managing its first mutual fund in 1930.
In the decades that followed, Seligman has continued to offer forward-looking
investment solutions, including funds that focus on technology stocks, municipal
bonds, and international securities.
...VALUES ENDURE
Seligman is proud of its distinctive past and of the traditional values that
continue to shape the firm's business decisions and investment judgment. While
much has changed over the years, the firm's commitment to providing prudent
investment management that seeks to build wealth for clients over time is an
enduring value that will guide Seligman into the new millennium.
Table of
Contents
To the Shareholders ........................................................ 1
Interview With Your Portfolio Manager ...................................... 2
Performance Overview ....................................................... 4
Portfolio Overview ......................................................... 7
Portfolio of Investments ................................................... 9
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
<PAGE>
TO THE SHAREHOLDERS
For the 12 months ended September 30, 1998, Seligman Frontier Fund had a total
return of -21.32% based on the net asset value of Class A shares, outperforming
the -24.83% total return of the Russell 2000 Growth Index, which is its market
benchmark. The total return of its peer group, as measured by the Lipper Small
Cap Funds Average was -20.52%. A discussion with your Portfolio Manager
regarding the past 12 months begins on page 2.
Despite their often superior sales and earnings growth, attractive valuations,
and limited exposure to depressed foreign markets, small-capitalization growth
stocks fared poorly in the past year compared to large-capitalization growth
stocks. The primary reason for the poor returns in the sector was the Asian
financial crisis, which caused investors to seek the perceived safety and
liquidity of large-cap growth stocks. The situation for small caps further
deteriorated in the final months of the Fund's fiscal year as the Asian crisis
worsened, Japan's recession and banking problems deepened, Russia's economy
neared ruin, and Brazil encountered fiscal problems that threatened all of Latin
America. The quest for liquidity in these volatile financial markets further
exacerbated investors' flight to large caps.
Global financial disorder, while likely to continue for many months, may
ultimately have a positive impact on small-cap valuations. Widespread currency
devaluations and depressed demand for products in Asia, Latin America, and
Russia, has led to concern about the future earnings of large-cap multinational
companies. Ongoing uncertainty about business conditions may compel investors to
favor smaller domestic companies whose revenues typically have only modest
exposure to today's tumultuous overseas markets.
Meanwhile, small-cap valuations have dropped to levels last seen in 1990, just
before the most recent extended run-up in value. In the 12 months ended
September 30, the S&P 500 gained 9.0%, while the Russell 2000 Growth Index fell
by 24.83%. The last two times the Russell 2000 suffered comparable declines, in
1979 and in 1990, strong rallies in small-cap stock prices followed. We believe
that the present low valuations and relatively positive earnings prospects of
small caps improve the potential for outperformance relative to large caps,
especially in light of the possibility that large caps may experience further
earnings pressure in the coming months.
As you may know, companies are modifying their computer systems to recognize
dates of January 1, 2000, and beyond. This is often referred to as the "Y2K"
problem. Unless systems are updated, many applications may interpret the last
two digits of the year to mean 1900 instead of 2000. J. & W. Seligman & Co.
Incorporated, the Seligman Investment Companies, and Seligman Data Corp., your
shareholder service agent, have jointly established a team to ensure that your
investment and shareholder services are not disrupted. This team is supported by
consulting firms specializing in Y2K solutions. Substantial work has been
performed to date, and we are confident that when our plans are finalized and
all systems are tested, there will be no disruption in the services provided by
your Fund.
Thank you for your continued support of Seligman Frontier Fund. We look forward
to serving your investment needs in the many years to come. The Fund's portfolio
of investments and financial statements follow this letter.
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, 1998
1
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
ARSEN MRAKOVCIC
Q. HOW DID SELIGMAN FRONTIER FUND PERFORM IN THE PAST 12 MONTHS?
A. For the 12 months ended September 30, 1998, Seligman Frontier Fund posted a
total return of -21.32% based on the net asset value of Class A shares. The
Fund outperformed the -24.83% return of the Russell 2000 Growth Index, its
market benchmark. The Fund's return lagged the -20.52% total return of its
peers, as measured by the Lipper Small Cap Funds Average.
Q. WHICH ECONOMIC AND MARKET FACTORS INFLUENCED SELIGMAN FRONTIER FUND IN THE
PAST 12 MONTHS?
A. Small-capitalization growth stocks continued to underperform
large-capitalization growth stocks during the period, stretching the gradual
price decline to three and one-half years. The decline in small-cap stock
prices persisted, despite their attractive valuations relative to their
growth rates.
Despite ongoing strength in the domestic economy, economic turmoil began to
spread throughout the world during the past 12 months, increasing investor
concern in the US equity markets. The Asian financial crisis worsened, Japan
again failed to resolve its banking problems, Russia allowed the ruble to
devalue and subsequently defaulted on many of its debts, emerging markets
collapsed, and the specter of economic crises looming throughout Latin
America pressured equity markets worldwide. These factors prompted a
so-called "flight to quality," in which many domestic and overseas investors
sought the perceived safety and liquidity of large-cap growth stocks, often
at the expense of small-cap stocks. As the US stock market was shaken by
volatility in the final quarter of the Fund's fiscal year, the situation for
small-cap stocks further deteriorated. Small caps were also hurt by
continuing heavy volumes of initial public offering (IPO) activity,
resulting in an oversupply of small-cap stocks in the market.
Q. WHAT WAS YOUR INVESTMENT STRATEGY DURING THE YEAR?
A. We are long-term investors who purchase small- capitalization growth stocks
with significant earnings growth potential, and that are selling at
reasonable cash flow valuations. Holdings are added to the portfolio based
on their individual merits, on a stock-by-stock basis.
We analyze the underlying fundamentals of companies, and prefer those with
strong management, solid product lines, market niche dominance, proprietary
and innovative products, and significant management ownership. Additionally,
we favor companies with revenues and reported earnings growth of 20% or
more, and with businesses and market shares that are growing faster than the
- --------------------------------------------------------------------------------
SELIGMAN SMALL COMPANY TEAM
Ted Hillenmeyer, Arsen Mrakovcic (Portfolio Manager), Rick Ruvkun, Sonia Thomas
(Administrative Assistant),Bruce Zirman
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
2
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
ARSEN MRAKOVCIC
industry norm. We prefer companies that generate operating cash flow to
finance growth over those which rely on excessive debt.
We choose to sell stocks when they reach our target price, or when the
company or industry fundamentals deteriorate. Seligman Frontier Fund remains
highly diversified in order to reduce sector risk. No sector has a weighting
of more than 25%, and no single stock represents more than 3% of the Fund's
net assets.
Q. WHAT INDUSTRY GROUPS INFLUENCED THE FUND'S PERFORMANCE?
A. In an environment of global economic uncertainty and equity market
volatility, defensive stocks lived up to their name. Consumer noncyclical
stocks, such as Duane Reade, also did well. Health care stocks also were a
profitable part of the portfolio. Several stocks in the pharmaceuticals
sector outperformed expectations, as did some holdings in the consumer
staples sector, such as U.S. Foodservice, a provider to the food service
industry. Additionally, information technology services companies posted
solid results for the 12-month period. These included BISYS Group, a
supplier of data processing services; American Management Systems, which
furnishes management and administration of computer services; and Ceridian,
which provides data processing services.
Further, a number of companies in the portfolio were acquired by larger
companies during the 12-month period. Mergers and acquisitions activity
demonstrates that the private market recognizes the quality of these
companies, and the value of their stocks. These companies included R.P.
Scherer, which manufactures soft gelatin capsules ("softgels"), and
AmeriSource Health, a distributor of pharmaceutical supplies. As a result of
mergers activity, these companies posted strong performances, benefiting the
Fund.
The basic materials sector is generally more sensitive to global economic
conditions, and did not do well in the 12-month period. The capital goods,
financial services, and transportation sectors also underperformed our
expectations, mainly due to stock selection in each sector. In the capital
goods sector, UCAR International, a producer of graphite electrodes,
affected the portfolio's performance due to the company's unresolved
antitrust issues. In the financial services sector, CCA Prison Realty Trust,
a real estate investment trust for prisons, underperformed expectations
because of concerns about slowing growth in the prison-building industry.
Additionally, within the portfolio, there were poor performers even in
strong industry sectors. Health care company ESC Medical Systems develops
and manufactures medical devices for non-invasive, elective treatment of
varicose veins. The stock suffered because of depressed demand, as
discretionary procedures generally are more sensitive to economic
conditions. In the business goods and services sector, Modis Professional
Services, formerly AccuStaff, a provider of temporary personnel services,
also underperformed expectations because of nationwide high levels of
employment. In the educational services sector, EduTrek International,
operator of the American Intercontinental University, also dampened the
portfolio's performance.
Q. WHAT IS YOUR OUTLOOK?
A. History gives us reason for optimism. Despite the recent broad market
downturn, which caused the S&P 500 to fall 14.1% from its peak on July 17,
the S&P 500 was still up 9.0% in the past 12 months. However, the Russell
2000 Index dropped 19.02% in this period, and the Russell 2000 Growth Index
fell 24.83%. This wide gap in performance between the S&P 500 and the
Russell 2000 Indices suggests that small caps are attractively valued
compared to the large-cap growth stocks of the S&P 500. At current
valuations, small caps should provide an attractive alternative to large
caps, which have high price-to-earnings ratios. In fact, small-cap
(Continued on page 6)
3
<PAGE>
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, and assumes that all distributions within the period are invested in
additional shares, for the 10-year period ended September 30, 1998, to a $10,000
investment made in the Lipper Small Cap Funds Average (Lipper Average), the
Lipper Small Cap Fund Index (Lipper 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 Lipper
Average and the Lipper Index exclude the effect of sales charges, and the
Russell indices exclude the effect of any fees or sales charges.
Seligman Frontier Fund will no longer be compared to the Lipper Index after
September 30, 1998. Instead, the Fund will be compared to the Lipper Average,
which measures the performance of the entire universe of funds that have similar
investment objectives to your Fund. The Manager believes that the Lipper Average
is more appropriate than the more narrowly focused Lipper Index, which measures
the performance of only 30 funds. Therefore, going forward, your Fund will be
compared to the Lipper Average, the Russell 2000 Growth Index, and the Russell
2000 Index.
[Table below presents plot points for line chart]
Lipper Lipper Russell
SmCap SmCap 2000 Russell
Without With Funds Fund Growth 2000
DATE Sales Charge Sales Charge Avg Index Index Index
- --------------------------------------------------------------------------------
9/30/88 10,000 9,530 10,000 10,000 10,000 10,000
12/31/88 9,971 9,503 10,053 10,050 9,913 9,934
3/31/89 10,812 10,304 10,860 10,808 10,649 10,699
6/30/89 11,464 10,925 11,657 11,528 11,338 11,380
9/30/89 13,029 12,417 12,783 12,527 12,350 12,149
12/31/89 12,775 12,175 12,419 12,166 11,912 11,547
3/31/90 12,391 11,809 12,249 11,907 11,595 11,292
6/30/90 13,261 12,638 13,199 12,605 12,326 11,728
9/30/90 10,159 9,682 10,182 9,760 9,109 8,850
12/31/90 11,622 11,076 11,114 10,490 9,837 9,295
3/31/91 14,342 13,668 13,974 12,961 12,842 12,059
6/30/91 14,051 13,391 13,746 12,821 12,397 11,872
9/30/91 15,578 14,847 15,251 14,123 13,734 12,840
12/31/91 17,390 16,573 16,805 15,582 14,871 13,575
3/31/92 17,558 16,733 17,268 15,753 15,279 14,593
6/30/92 15,831 15,088 15,850 14,431 13,444 13,598
9/30/92 16,343 15,575 16,380 14,912 13,705 13,987
12/31/92 20,171 19,224 19,026 17,326 16,028 16,075
3/31/93 20,210 19,261 19,489 17,519 15,741 16,762
6/30/93 21,668 20,651 20,091 18,063 16,194 17,128
9/30/93 24,624 23,467 21,860 19,729 17,705 18,625
12/31/93 25,477 24,280 22,403 20,260 18,170 19,114
3/31/94 25,151 23,970 21,775 19,526 17,431 18,607
6/30/94 23,476 22,373 20,595 18,470 16,336 17,882
9/30/94 27,036 25,766 22,324 20,189 17,859 19,123
12/31/94 27,263 25,983 22,260 20,161 17,727 18,766
3/31/95 29,397 28,016 23,548 21,292 18,698 19,631
6/30/95 32,452 30,928 25,659 23,266 20,553 21,471
9/30/95 36,983 35,246 28,663 26,174 22,890 23,591
12/31/95 37,194 35,448 29,313 26,535 23,229 24,103
3/31/96 39,294 37,449 31,256 28,032 24,562 25,332
6/30/96 42,048 40,073 33,684 30,258 25,996 26,600
9/30/96 41,939 39,970 34,369 30,639 25,775 26,690
12/31/96 41,383 39,440 35,217 30,348 25,842 28,078
3/31/97 37,300 35,548 32,890 27,489 23,132 26,626
6/30/97 44,887 42,779 38,527 32,162 27,191 30,942
9/30/97 50,824 48,437 44,840 37,067 31,792 35,546
12/31/97 48,762 46,472 42,640 34,906 29,185 34,355
3/31/98 53,648 51,129 47,342 38,648 32,652 37,812
6/30/98 51,880 49,444 45,390 37,156 30,778 36,050
9/30/98 39,987 38,109 35,638 29,205 23,896 28,786
The stocks of smaller companies may be subject to above-average market price
fluctuations.
The performances of Class B and Class 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
<PAGE>
PERFORMANCE OVERVIEW
INVESTMENT RESULTS PER SHARE
TOTAL RETURNS
FOR PERIODS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
AVERAGE ANNUAL
---------------------------------------------------------------------------------
CLASS B CLASS D
SINCE SINCE
SIX ONE FIVE 10 INCEPTION INCEPTION
MONTHS* YEAR YEARS YEARS 4/22/96 5/3/93
---------- -------- -------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
CLASS A**
With Sales Charge (28.99)% (25.08)% 9.12% 14.31% n/a n/a
Without Sales Charge (25.46) (21.32) 10.18 14.87 n/a n/a
CLASS B**
With CDSC+ (29.49) (25.45) n/a n/a (2.99)% n/a
Without CDSC (25.78) (21.95) n/a n/a (1.97) n/a
CLASS D**
With 1% CDSC (26.46) (22.64) n/a n/a n/a n/a
Without CDSC (25.72) (21.94) 9.12 n/a n/a 13.20%
LIPPER SMALL CAP FUNDS AVERAGE*** (24.72) (20.52) 10.27 13.55 2.44o 12.41oo
LIPPER SMALL CAP FUND INDEX*** (24.43) (21.21) 8.16 11.31 (1.47)o 10.56oo
RUSSELL 2000 GROWTH INDEX*** (26.82) (24.83) 6.19 9.11 (4.11)o 8.66oo
RUSSELL 2000 INDEX*** (23.87) (19.02) 9.10 11.15 3.18o 11.07oo
</TABLE>
NET ASSET VALUE
SEPTEMBER 30, 1998 MARCH 31, 1998 SEPTEMBER 30, 1997
-------------------- ----------------- --------------------
CLASS A $12.44 $16.69 $17.55
CLASS B 11.66 15.71 16.68
CLASS D 11.67 15.71 16.69
CAPITAL GAIN INFORMATION
FOR THE YEAR ENDED SEPTEMBER 30, 1998
PAID $1.634
REALIZED 0.471
UNREALIZED (0.393)++
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 (12b-1) 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 charge ("CDSC"), charged 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% CDSC, charged on redemptions made within one
year of the date of purchase.
*** The Lipper Average, the Lipper Index, the Russell 2000 Growth Index, and the
Russell 2000 Index are unmanaged benchmarks that assume investment of all
dividends. The Lipper Average and Index do not reflect sales charges, and
the Russell 2000 Growth Index and the Russell 2000 Index do not reflect fees
and sales charges. The monthly performance of the Lipper Average is used in
the Performance Overview. Investors cannot invest directly in an average or
an index.
+ The CDSC is 5% for periods of one year or less, and 3% since inception.
++ Represents the per share amount of net unrealized depreciation of portfolio
securities as of September 30, 1998.
o From April 30, 1996.
oo From April 30, 1993.
5
<PAGE>
INTERVIEW WITH YOUR PORTFOLIO MANAGER,
ARSEN MRAKOVCIC (CONTINUED)
valuations have fallen to levels not seen since 1990, just before the
beginning of their last extended increase in price. The last two times the
Russell 2000 was down 30% from its highs, in 1979 and in 1990, strong
rallies followed.
Small-cap companies are generally distinguished by the type of innovation
that drives economic growth in this country. Smaller companies tend to
possess internal management dynamics and product cycles that can weather
economic turmoil and fickle financial markets. Further, smaller companies
can, to a greater degree than larger companies, control their own destiny,
irrespective of overall economic conditions. We are confident that the
valuations and earnings prospects of small-cap stocks are favorable,
especially in light of the possibility that large caps may experience
earnings pressure in the coming months.
We believe the case is strong for an impending appreciation in the price of
small-cap stocks. Global financial disorder is likely to persist for many
months, and could have less of a negative impact on small caps than on large
caps. The strong dollar, widespread currency devaluations, and depressed
demand for products in Asia, Latin America, and Russia has led to
uncertainty about future earnings of large-cap multinational companies that
do business in these regions. However, most small-cap growth companies have
little exposure to depressed overseas markets, and they do not compete
against local firms for market share. The earnings growth of a majority of
US small caps is dependent to a great degree on the viability of their
innovative products and their product cycles, and reflects their ability to
execute their business plans. Overall, small-cap companies are less
dependent on global economic conditions than are large-cap companies.
The Federal Reserve Board's September and October cuts in short-term
interest rates may benefit long-duration investments such as small-cap
stocks. The rate reductions were done to temper inflation and sustain
domestic economic growth, and to help cushion the US economy from global
financial turmoil. Since the revenues of smaller companies are primarily
linked to the strength of the domestic economy, an interest-rate cut may
improve their earnings. Finally, the IPO market has slowed significantly,
since the pricing of recent new issues was soft, and after-market
performance was poor. Lower volumes of IPOs could help the performances of
existing small-cap stocks.
6
<PAGE>
PORTFOLIO OVERVIEW
DIVERSIFICATION OF NET ASSETS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
PERCENT OF NET ASSETS
SEPTEMBER 30,
------------------------
ISSUES COST VALUE 1998 1997
------- ----------------- ---------------- -------- --------
COMMON STOCKS:
<S> <C> <C> <C> <C> <C>
Basic Materials .................. 1 $ 10,515,779 $ 5,718,600 0.8 1.8
Capital Goods .................... 12 69,335,393 70,346,906 9.9 10.9
Communication Services ........... -- -- -- -- 0.3
Consumer Cyclicals ............... 21 148,741,535 153,814,828 21.6 18.1
Consumer Staples ................. 11 77,651,120 76,684,434 10.8 6.4
Energy ........................... 5 30,913,966 26,190,088 3.7 3.3
Financial Services ............... 10 47,932,737 40,044,378 5.6 8.6
Health Care ...................... 23 135,773,969 130,795,161 18.4 17.3
Technology ....................... 24 146,864,724 140,975,289 19.8 22.9
Transportation ................... 1 2,916,595 2,771,437 0.4 2.2
Utilities ........................ 1 11,115,552 11,267,800 1.6 1.9
Other ............................ 1 -- 6,875 -- --
----- ---------------- ---------------- ------- -------
110 681,761,370 658,615,796 92.6 93.7
SHORT-TERM HOLDINGS AND
OTHER ASSETS LESS LIABILITIES .... 1 52,427,941 52,427,941 7.4 6.3
----- ---------------- ---------------- ------- -------
NET ASSETS ......................... 111 $734,189,311 $711,043,737 100.0 100.0
===== ================ ================ ======= =======
</TABLE>
LARGEST INDUSTRIES
SEPTEMBER 30, 1998
[Table below represents values for a bar chart]
CONSUMER CYCLICALS 21.6% $153,814,828
TECHNOLOGY 19.8% $140,975,289
HEALTH CARE 18.4% $130,795,161
CONSUMER STAPLES 10.8% $76,684,434
CAPITAL GOODS 9.9% $70,346,906
7
<PAGE>
PORTFOLIO OVERVIEW
LARGEST PORTFOLIO CHANGES
DURING THE PAST SIX MONTHS
SHARES
----------------------------
HOLDINGS
ADDITIONS INCREASE 9/30/98
- ----------- ----------- -----------
AVX ............................. 581,500 581,500
Casella Waste Systems
(Class A) ..................... 280,700 280,700
ESC Medical Systems ............. 250,000 250,000
Personnel Group of America ...... 533,100 1,033,100
PSS World Medical ............... 648,900 990,700
Schein (Henry) .................. 177,400 177,400
Sinclair Broadcast Group
(Class A) ..................... 134,300 268,600(1)
Superior Services ............... 300,200 300,200
Universal Health Services
(Class B) ..................... 150,000 150,000
Vlasic Foods International ...... 498,600 498,600
SHARES
----------------------------
HOLDINGS
REDUCTIONS DECREASE 9/30/98
- ------------- ----------- -----------
Black Box ....................... 275,000 --
Ceridian ........................ 236,400 157,700
Credence Systems ................ 561,700 --
Equity .......................... 337,700 --
First Sierra Financial .......... 300,000 --
Kemet ........................... 801,500 --
National Surgery Centers ........ 577,800 --
Oak Industries .................. 304,000 142,900
Scherer (R.P.) .................. 300,100 --
Synopsys ........................ 213,300 --
Largest portfolio changes from previous period to the current period are based
on cost of purchases and proceeds from sales of securities.
- ----------
(1) Includes 134,300 shares received as a result of a 2-for-1 stock split.
LARGEST PORTFOLIO HOLDINGS
SEPTEMBER 30, 1998
SECURITY VALUE
- ---------- ---------------
Total Renal Care Holdings .............. $18,564,000
PSS World Medical ...................... 18,327,950
Burr-Brown ............................. 14,931,652
Modis Professional Services ............ 14,172,225
U.S. Foodservice ....................... 13,632,187
Province Healthcare .................... 13,191,578
Allied Waste Industries ................ 13,072,391
Personnel Group of America ............. 12,720,044
Omnicare ............................... 12,700,575
BISYS Group ............................ 11,772,047
8
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
SHARES VALUE
-------- -------
<S> <C> <C>
COMMON STOCKS 92.6%
BASIC MATERIALS 0.8%
UCAR INTERNATIONAL*
Producer of graphite electrodes 317,700 $ 5,718,600
--------------
CAPITAL GOODS 9.9%
Allied Waste Industries*
Integrated waste disposal 558,500 13,072,391
AVX
Manufacturer and supplier of
passive electronic
components and related
products 581,500 8,649,812
CASELLA WASTE SYSTEMS (CLASS A)*
Provider of non-hazardous
solid waste collection,
disposal, and recycling
services 280,700 9,508,712
COGNEX*
Manufacturer of machine
vision systems 73,500 849,844
CORPORATE EXPRESS*
Supplier of office furniture 522,600 6,222,206
FLANDERS*
Designer, manufacturer, and
marketer of a range of
air filtration products 405,300 1,608,534
INTEGRATED ELECTRICAL SERVICES*
Provider of electrical
contracting and
maintenance services 225,900 3,360,263
IVEX PACKAGING*
Manufacturer of specialty
packaging 321,900 4,667,550
KEYSTONE AUTOMOTIVE*
Distributor of aftermarket
collision replacement
parts for automobiles
and light trucks 314,900 6,140,550
OAK INDUSTRIES*
Manufacturer of electrical
controls 142,900 3,858,300
SUPERIOR SERVICES*
Provider of solid waste
collection, disposal, and
recycling services 300,200 8,433,744
WASTE CONNECTIONS*
Provider of solid waste
collection, disposal, and
recycling services 200,000 3,975,000
--------------
70,346,906
--------------
CONSUMER CYCLICALS 21.6%
AMERICAN HOMESTAR*
Retailer and producer of
manufactured homes 503,100 10,942,425
BARNES & NOBLE*
Owner and operator of retail
book stores and superstores 229,100 6,185,700
COPART*
Auctioneer of damaged vehicles
for insurance companies 305,600 6,742,300
DUANE READE*
Retail drugstore chain 293,400 11,130,862
HA-LO INDUSTRIES*
Distributor of specialty
advertising products 327,300 9,573,525
JOURNAL REGISTER*
Publisher of newspapers 616,300 9,090,425
MARKET FACTS*
Compiler of information for
the optimization of the
marketing decision process 224,600 6,316,875
MEMBERWORKS*
Provider of membership
service programs for
various industries 212,000 3,272,750
METAMOR WORLDWIDE*
International provider of
information technology
and staffing services 200,000 5,450,000
MODIS PROFESSIONAL SERVICES
Temporary personnel services 973,200 14,172,225
NOVA*
Provider of language
instruction courses 348,205 10,685,541
PERSONNEL GROUP OF AMERICA*
Personnel staffing services 1,033,100 12,720,044
PETERSEN COMPANIES (CLASS A)*
Special-interest
magazine publisher 331,800 9,456,300
9
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
SHARES VALUE
------ -------
CONSUMER CYCLICALS (continued)
PIER 1 IMPORTS
Retailer specializing in
decorative home
furnishings, gifts, and
related items 324,600 $ 2,434,500
PITTSTON BRINK'S GROUP
Provider of security services 236,000 8,260,000
PRE-PAID LEGAL SERVICES*
Underwriter and marketer of
legal service plans 144,900 3,704,006
PRIMARK*
Provider of information through
software and databases 332,700 10,147,350
PROVANT*
Provider of training and
development services 328,600 4,764,700
RESORTQUEST INTERNATIONAL*
Provider of upscale vacation
condominiums and
home rentals 302,000 2,661,375
WILMAR INDUSTRIES*
Marketer and distributor of
repair and maintenance
products to the apartment
housing market 229,200 4,913,475
ZIFF-DAVIS*
Integrated media and
marketing company focused
on computer and
Internet-related technology 164,200 1,190,450
--------------
153,814,828
--------------
CONSUMER STAPLES 10.8%
AURORA FOODS*
Producer and marketer of
brand name food products 229,400 3,154,250
CAREER EDUCATION*
Provider of private
post-secondary education 219,000 4,776,937
CARRIAGE SERVICES (CLASS A)*
Provider of funeral products
and services 416,100 10,272,469
EDUTREK INTERNATIONAL (CLASS A)*
Operator of the American
InterContinental University 304,500 2,131,500
HEARST-ARGYLE TELEVISION*
TV broadcasting 208,948 6,973,640
JACOR COMMUNICATIONS*
Radio broadcasting 225,200 11,393,712
PREMIER PARKS*
Owner and operator of
regional theme parks 560,300 9,805,250
SINCLAIR BROADCAST GROUP
(CLASS A)*
Diversified broadcasting
company that owns and
services television and
radio stations 268,600 4,347,963
U.S. FOODSERVICE*
Distributor to food service
industry 327,500 13,632,187
VLASIC FOODS INTERNATIONAL*
Manufacturer and marketer of
branded convenience
food products 498,600 9,317,588
YOUTH SERVICES INTERNATIONAL*
Operator of residential and
community-based programs
for at-risk youths 287,000 878,938
--------------
76,684,434
--------------
ENERGY 3.7%
CABOT OIL & GAS (CLASS A)
Explorer, developer, and
producer of oil and gas 232,700 3,548,675
CALPINE*
Developer, marketer, and
operator of power
generation facilities 449,800 9,108,450
EAGLE GEOPHYSICAL*
Company specializing in
seismic data collection 252,600 1,728,731
MCDERMOTT INTERNATIONAL
A leading worldwide energy
services company 258,900 6,974,119
SANTA FE ENERGY RESOURCES*
Oil and gas exploration,
production, and
development 511,800 4,830,113
--------------
26,190,088
--------------
10
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
SHARES VALUE
-------- --------
FINANCIAL SERVICES 5.6%
AMERICAN CAPITAL STRATEGIES
Provider of commercial
financing 243,700 $ 3,944,894
CCA PRISON REALTY TRUST
Prison REIT 319,300 5,747,400
CRUSADER HOLDING
Provider of community
banking services, including
residential mortgages and
commercial leases 75,390 909,392
DST SYSTEMS*
Provider of information
processing and software
services 151,000 7,965,250
ESG RE
International provider of
health, life, and special
risk reinsurance 258,500 3,974,437
FIRSTSERVICE* (CANADA)
Provider of property
management and
business services 361,900 4,071,375
INSIGNIA/ESG HOLDINGS*
Provider of real estate
management and services 309,533 3,559,630
INSIGNIA FINANCIAL GROUP
(CLASS A)*
Real estate management
services 190,400 1,880,200
STIRLING COOKE BROWN HOLDINGS
(Bermuda)
Provider of risk management
services 240,000 3,555,000
T&W FINANCIAL*
Equipment leasing company 300,800 4,436,800
--------------
40,044,378
--------------
HEALTH CARE 18.4%
AMERICAN DENTAL PARTNERS*
Provider of dental practice
management services 139,500 1,205,367
AMSURG (CLASS A)*
Developer and operator of
ambulatory surgery centers 200,000 1,387,500
BARR LABORATORIES*
Developer, manufacturer, and
marketer of generic
prescription drugs 140,500 4,267,687
COMPDENT*
Provider of managed-care
dental services 276,400 3,714,125
ESC MEDICAL SYSTEMS*
Manufacturer of specialized
medical devices 250,000 1,753,906
HANGER ORTHOPEDIC GROUP*
Provider of orthopedic and
prosthetic rehabilitation
services 410,500 7,645,563
NCS HEALTHCARE (CLASS A)*
Health care facility and
pharmacy services 29,200 512,825
NEW AMERICAN HEALTHCARE*
Owner and operator of acute
care hospitals 191,800 2,013,900
OMNICARE
Provider of pharmacy services
to long-term care institutions 360,300 12,700,575
PMR*
Operator of mental health
care programs 225,000 1,575,000
PROFESSIONAL DETAILING*
Provider of consulting services
to the pharmaceutical
industry 210,000 5,814,375
PROVINCE HEALTHCARE*
Provider of health care
services in non-urban
markets 390,500 13,191,578
PSS WORLD MEDICAL*
Distributor of medical
supplies, equipment,
and pharmaceuticals 990,700 18,327,950
QUORUM HEALTH GROUP*
Owner of acute care hospitals 327,000 5,313,750
RENAL CARE GROUP*
Provider of dialysis services 150,600 3,854,419
11
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
SHARES VALUE
-------- --------
HEALTH CARE (continued)
RENEX*o
Provider of dialysis and
ancillary services 363,900 $ 2,172,028
SCHEIN (HENRY)*
International marketer of
health care products
and services to
medical providers 177,400 6,175,738
SCHEIN PHARMACEUTICALS*
Developer, manufacturer,
and vendor of generic
pharmaceuticals 144,600 1,229,100
SOMNUS MEDICAL TECHNOLOGIES*
Developer and manufacturer
of medical devices used
in treatment of upper
respiratory disorders 200,000 612,500
TOTAL RENAL CARE HOLDINGS*
Provider of dialysis services 773,500 18,564,000
TRIANGLE PHARMACEUTICALS*
Developer of new drug
candidates, primarily in
the antiviral area 257,600 3,381,000
UNIVERSAL HEALTH SERVICES
(CLASS B)*
Owner and operator of
health care institutions 150,000 6,262,500
WATSON PHARMACEUTICALS*
Manufacturer of off-patent
medications 179,700 9,119,775
--------------
130,795,161
--------------
TECHNOLOGY 19.8%
AFFILIATED COMPUTER SERVICES
(CLASS A)*
Provider of information
processing services 223,300 6,810,650
AMERICAN MANAGEMENT SYSTEMS*
Management and administration
of computer services 250,000 6,781,250
ANALYSTS INTERNATIONAL
Provider of computer
programming services 187,500 5,613,281
ANTEC*
Developer and supplier of
products for the cable
television industry 437,700 6,756,994
AVANT!*
Developer and marketer of
software products that
assist design engineers 773,800 9,817,587
BISYS GROUP*
Provider of data processing
services 268,500 11,772,047
BURR-BROWN*
Manufacturer of microelectric
data devices for business
end-users 879,950 14,931,652
CERIDIAN*
Provider of data processing
services 157,700 9,048,037
GENERAL SEMICONDUCTORS*
Manufacturer of power
semiconductors 371,500 2,229,000
GLENAYRE TECHNOLOGIES*
Manufacturer of paging
infrastructure equipment 1,027,900 7,484,397
HMT TECHNOLOGY*
Supplier of high-performance
thin-film disks for
high-end, high-capacity,
hard disk drives 563,500 4,384,734
INDUS INTERNATIONAL*
Worldwide developer and
marketer of management
software and implementation
services 192,200 961,000
INSO*
Marketer and developer of
textual information software 213,600 4,071,750
KLA-TENCOR*
Manufacturer of wafer and
metrology equipment 249,300 6,209,128
MICROCHIP TECHNOLOGY*
Supplier of field programmable
microcontrollers 388,500 8,462,016
12
<PAGE>
PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1998
SHARES VALUE
-------- --------
TECHNOLOGY (continued)
MICROGRAFX*
Developer and marketer of
graphics applications
and software 64,000 $ 620,000
NATIONAL INSTRUMENTS*
Provider of instrumentation
hardware and software
products for the engineering
and scientific industries 95,200 2,323,475
PMC-SIERRA* (CANADA)
Integrated circuit supplier 227,300 7,202,569
PSW TECHNOLOGIES*
Provider of high-value solutions
to technology vendors and
business end users 131,000 309,078
SANMINA*
Provider of services for
equipment manufacturers
in the electronics industry 186,700 5,245,103
TRANSACTION SYSTEMS ARCHITECTS
(CLASS A)*
Worldwide developer and
marketer of software
products for electronic
funds transfer 105,600 3,738,900
UNIGRAPHICS SOLUTIONS (CLASS A)*
International provider of
services used for virtual
product development 286,900 2,707,619
WATERS*
Manufacturer of liquid
chromatography instruments 161,700 10,833,900
XILINX*
Supplier of field-programmable
gate arrays 76,100 2,661,122
--------------
140,975,289
--------------
TRANSPORTATION 0.4%
US XPRESS ENTERPRISES (CLASS A)*
Provider of transportation
and logistics services 227,400 2,771,437
--------------
UTILITIES 1.6%
CALENERGY*
Developer, marketer, and
operator of power
generation facilities 425,200 11,267,800
--------------
OTHER 6,875
--------------
TOTAL COMMON STOCKS 92.6%
(Cost $681,761,370) 658,615,796
--------------
TOTAL Short-Term Holdings 4.8%
(COST $34,000,000) 34,000,000
--------------
TOTAL INVESTMENTS 97.4%
(Cost $715,761,370) 692,615,796
OTHER ASSETS
LESS LIABILITIES 2.6% 18,427,941
--------------
NET ASSETS 100.0% $ 711,043,737
==============
- ---------
</TABLE>
* Non-income producing security.
o 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, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
ASSETS:
Investments, at value:
Common stocks* (cost $681,761,370) .......... $658,615,796
Short-term holdings (cost $34,000,000) ...... 34,000,000 $692,615,796
-------------
CASH 5,538,205
Receivable for securities sold ................................................ 37,764,588
Receivable for Capital Stock sold ............................................. 1,409,925
Receivable for dividends and interest ......................................... 234,157
Expenses prepaid to shareholder service agent ................................. 225,957
Other ......................................................................... 21,615
------------
TOTAL ASSETS .................................................................. 737,810,243
------------
LIABILITIES:
Payable for securities purchased .............................................. 20,203,557
Payable for Capital Stock repurchased ......................................... 5,174,292
Accrued expenses, taxes, and other ............................................ 1,388,657
------------
TOTAL LIABILITIES ............................................................. 26,766,506
------------
NET ASSETS $711,043,737
============
COMPOSITION OF NET ASSETS:
Capital Stock, at par ($0.10 par value; 500,000,000 shares authorized;
58,929,477 shares outstanding):
Class A ..................................................................... $ 3,054,929
Class B ..................................................................... 576,228
Class D ..................................................................... 2,261,791
Additional paid-in capital .................................................... 728,345,680
Accumulated net investment loss ............................................... (49,317)
Net unrealized depreciation of investments .................................... (23,145,574)
------------
NET ASSETS $711,043,737
============
NET ASSET VALUE PER SHARE:
CLASS A ($379,944,784 / 30,549,293 shares) .................................... $12.44
======
CLASS B ($67,198,845 / 5,762,276 shares) ...................................... $11.66
======
CLASS D ($263,900,108 / 22,617,908 shares) .................................... $11.67
======
</TABLE>
- ---------
* Includes affiliated issuers (issuers in which the Fund's holdings represent 5%
or more of the outstanding voting securities) with a cost of $2,677,342 and a
value of $2,172,028. See Notes to Financial Statements.
14
<PAGE>
STATEMENT OF OPERATIONS
For the Year Ended September 30, 1998
<TABLE>
<CAPTION>
<S> <C> <C>
INVESTMENT INCOME:
Interest ....................................... .. $ 2,340,267
Dividends ...................................... .. 1,670,493
--------------
TOTAL INVESTMENT INCOME .......................................... $ 4,010,760
EXPENSES:
Management fee .................................... 8,859,463
Distribution and service fees ..................... 5,561,203
Shareholder account services ...................... 2,105,436
Shareholder reports and communications ............ 343,135
Custody and related services ...................... 208,950
Registration ...................................... 196,073
Auditing and legal fees ........................... 59,420
Directors' fees and expenses ...................... 16,194
Miscellaneous ..................................... 35,291
.................................................. --------------
TOTAL EXPENSES ................................................... 17,385,165
-------------
NET INVESTMENT LOSS .............................................. (13,374,405)
NET REALIZED AND UNREALIZED GAIN (LOSS)ON INVESTMENTS:
Net realized gain on investments* ................................ 27,728,578
Net change in unrealized appreciation of investments ............. (216,052,533)
--------------
NET LOSS ON INVESTMENTS .......................................... (188,323,955)
--------------
DECREASE IN NET ASSETS FROM OPERATIONS ........................... $(201,698,360)
==============
</TABLE>
- ---------
* Includes net realized loss from affiliated issuers of $4,089,614.
See Notes to Financial Statements.
15
<PAGE>
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997
------------- -------------
<S> <C> <C>
OPERATIONS:
Net investment loss ............................................................ $ (13,374,405) $ (12,505,119)
Net realized gain on investments ............................................... 27,728,578 91,955,538
Net change in unrealized appreciation of investments ........................... (216,052,533) 93,832,612
-------------- --------------
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS .............................. (201,698,360) 173,283,031
-------------- --------------
DISTRIBUTION TO SHAREHOLDERS:
Net realized gain on investments:
Class A ..................................................................... (53,153,741) (29,080,493)
Class B ..................................................................... (7,202,049) (1,712,339)
Class D ..................................................................... (37,501,083) (20,123,337)
--------------- --------------
DECREASE IN NET ASSETS FROM DISTRIBUTIONS ...................................... (97,856,873) (50,916,169)
--------------- --------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
--------------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------------
1998 1997
------------ ------------
<S> <C> <C> <C> <C>
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of shares:
CLASS A ...................................... 5,029,443 8,188,436 78,991,830 120,301,313
CLASS B ...................................... 2,005,337 2,700,791 29,952,250 38,590,991
CLASS D ...................................... 2,895,974 5,459,136 42,946,058 76,822,163
Exchanged from associated Funds:
CLASS A ...................................... 19,887,832 10,428,910 302,151,838 150,564,472
CLASS B ...................................... 1,708,776 442,678 24,644,626 6,149,856
CLASS D ...................................... 18,380,183 2,960,507 261,891,857 41,877,344
Shares issued in payment of gain distributions:
CLASS A ...................................... 3,197,741 1,789,620 47,518,435 25,108,371
CLASS B ...................................... 474,373 114,153 6,655,460 1,533,070
CLASS D ...................................... 2,484,536 1,400,777 34,882,889 18,812,429
-------------- -------------- --------------- ---------------
Total .......................................... 56,064,195 33,485,008 829,635,243 479,760,009
-------------- -------------- --------------- ---------------
Cost of shares repurchased:
CLASS A ..................................... (9,287,625) (10,676,096) (142,825,418) (155,515,563)
CLASS B ...................................... (570,218) (208,490) (8,232,601) (2,970,321)
CLASS D ...................................... (5,658,913) (5,321,563) (81,513,938) (73,595,265)
Exchanged into associated Funds:
Class A ......................................(20,657,403) (11,414,103) (315,167,006) (165,114,909)
Class B ...................................... (2,043,767) (486,787) (29,641,042) (6,666,931)
Class D ......................................(18,903,435) (3,910,240) (270,690,109) (54,310,345)
-------------- -------------- --------------- -------------
Total .......................................... (57,121,361) (32,017,279) (848,070,114) (458,173,334)
-------------- -------------- --------------- -------------
INCREASE (DECREASE) IN NET ASSETS FROM
CAPITAL SHARE TRANSACTIONS ................... (1,057,166) 1,467,729 (18,434,871) 21,586,675
============== ============== =============== =============
INCREASE (DECREASE) IN NET ASSETS .............................................. (317,990,104) 143,953,537
NET ASSETS:
Beginning of year .............................................................. 1,029,033,841 885,080,304
--------------- -------------
END OF YEAR (including accumulated net investment loss of $49,317
and $55,235, respectively) ................................................... $ 711,043,737 $1,029,033,841
=============== =============
</TABLE>
- ----------
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. 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
charge ("CDSC") 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 CDSC, 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 CDSC, 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, at the 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, 1998,
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. For the year ended
September 30, 1998, permanent differences aggregating approximately $13
million have been reclassified from accumulated net investment loss and
undistributed net realized gain to additional paid-in capital. These
reclassifications will have no effect on net assets, results of operations,
or net asset value per share of the Fund.
For the year ended September 30, 1998, the Fund redeemed 57,121,361 of its
shares from shareholders aggregating $848,070,114, of which approximately
$2,200,000 represents capital gain distributions. This information is
provided for federal income tax purposes only.
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, 1998, amounted to $757,185,252 and $874,511,926,
respectively.
17
<PAGE>
NOTES TO FINANCIAL STATEMENTS
At September 30, 1998, the cost of investments for federal income tax
purposes was substantially the same as the cost for financial reporting
purposes, and the tax basis gross unrealized appreciation and depreciation of
portfolio securities amounted to $89,766,901 and $113,595,579 respectively.
4. MANAGEMENT FEE, DISTRIBUTION 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 reflected in the Statement of Operations represents
0.93% per annum of the Fund's average daily net assets.
Seligman Advisors, Inc. (the "Distributor") (formerly Seligman Financial
Services, Inc.), agent for the distribution of the Fund's shares and an
affiliate of the Manager, received concessions of $117,076 from sales of Class A
shares after commissions of $923,157 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, 1998, fees incurred
under the Plan aggregated $1,175,841, or 0.23% 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, 1998, 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 $796,405 and $3,588,957, respectively.
The Distributor is entitled to retain any CDSC 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, 1998, such charges amounted to $119,411.
The Distributor has sold its rights to collect any CDSC imposed on
redemptions of Class B shares to the Purchaser. In connection with the sale of
its rights to collect any CDSC 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, 1998, amounted to $59,977.
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, 1998,
Seligman Services, Inc. received commissions of $14,982 from the sale of shares
of the Fund. Seligman Services, Inc. also received distribution and service fees
of $87,176, pursuant to the Plan.
Seligman Data Corp., which is owned by certain associated investment
companies, charged the Fund at cost $2,105,436 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.
18
<PAGE>
NOTES TO FINANCIAL STATEMENTS
The Fund has a compensation arrangement under which directors who receive
fees may elect to defer receiving such fees. Directors may elect to have their
deferred fees accrue interest or earn a return based on the performance of the
Fund or other funds in the Seligman Group of Investment Companies. The cost of
such fees and earnings accrued thereon is included in directors' fees and
expenses, and the accumulated balance thereof at September 30, 1998, of $49,317
is included in other liabilities. Deferred fees and related accrued earnings are
not deductible for federal income tax purposes until such amounts are paid.
5. COMMITTED LINE OF CREDIT -- Effective July 1, 1998, the Fund terminated its
$78 million committed line of credit and entered into a joint $800 million
committed line of credit that is shared by substantially all funds in the
Seligman Group of Investment Companies. The Fund's borrowings are limited to 10%
of its net assets. Borrowings pursuant to the credit facility are subject to
interest at a rate equal to the overnight federal funds rate plus 0.50% on an
overnight basis. The Fund incurs a commitment fee of 0.08% per annum on its
share of 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.
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 of an
issuer represent 5% or more of the outstanding voting securities of the issuer.
A summary of the Fund's transactions in the securities of these issuers during
the year ended September 30, 1998, is as follows:
<TABLE>
<CAPTION>
GROSS GROSS
BEGINNING PURCHASES SALES AND ENDING REALIZED DIVIDEND ENDING
AFFILIATE SHARES AND ADDITIONS REDUCTIONS SHARES GAIN (LOSS) INCOME VALUE
- ---------- ----------- -------------- -------------- --------- ------------ ---------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Coinmach Laundry ............ 600,000 -- 600,000 -- $(2,084,286) -- $ --
DONCASTERS (ADRs) ........... 500,000 -- 500,000 -- 509,806 -- --
Quest Education* ............ 605,000 -- 605,000 -- (2,515,134) -- --
Renex ....................... -- 363,900 -- 363,900 -- -- 2,172,028
----------- -----------
TOTAL ....................... $(4,089,614) $2,172,028
=========== ===========
</TABLE>
*Formerly Educational Medical.
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, based on average shares
outstanding.
"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.
<TABLE>
<CAPTION>
CLASS A
-----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
-----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF YEAR ............................... $17.55 $15.38 $14.04 $11.62 $12.83
-------- -------- -------- -------- --------
Net investment loss .............................................. (0.16) (0.16) (0.13) (0.06) (0.08)
Net realized and unrealized investment gain (loss) ............... (3.32) 3.20 1.95 3.87 1.10
-------- -------- -------- -------- --------
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS ................... (3.48) 3.04 1.82 3.81 1.02
Distributions from net gain realized ............................. (1.63) (0.87) (0.48) (1.39) (2.23)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSET VALUE ....................... (5.11) 2.17 1.34 2.42 (1.21)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ..................................... $12.44 $17.55 $15.38 $14.04 $11.62
======== ======== ======== ======== ========
TOTAL RETURN BASED ON NET ASSET VALUE: (21.32)% 21.19% 13.40% 36.80% 9.79%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................... 1.47% 1.52% 1.56% 1.43% 1.34%
Net investment loss to average net assets ........................ (1.05)% (1.10)% (0.91)% (0.50)% (0.87)%
Portfolio turnover ............................................... 83.90% 97.37% 59.36% 71.52% 124.76%
Net Assets, End of Year (000s omitted) ........................... $379,945 $568,261 $523,737 $272,122 $58,478
</TABLE>
- ----------
See footnotes on page 21.
20
<PAGE>
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
CLASS B
------------------------------------
YEAR ENDED
SEPTEMBER 30, 4/22/96*
--------------------- TO
1998 1997 9/30/96
-------- -------- --------
<S> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE:
NET ASSET VALUE, BEGINNING OF PERIOD ............................ $16.68 $14.78 $14.55
-------- -------- --------
Net investment loss ............................................. (0.27) (0.27) (0.11)
Net realized and unrealized investment gain (loss) .............. (3.12) 3.04 0.34
-------- -------- --------
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS .................. (3.39) 2.77 0.23
Distributions from net gain realized ............................ (1.63) (0.87) --
-------- -------- --------
NET INCREASE (DECREASE) IN NET ASSET VALUE ...................... (5.02) 1.90 0.23
-------- -------- --------
NET ASSET VALUE, END OF PERIOD .................................. $11.66 $16.68 $14.78
======== ======== ========
TOTAL RETURN BASED ON NET ASSET VALUE: .......................... (21.95)% 20.17% 1.58%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets .................................. 2.24% 2.30% 2.45%+
Net investment loss to average net assets ....................... (1.82)% (1.88)% (1.80)%+
Portfolio turnover .............................................. 83.90% 97.37% 59.36%++
NET ASSETS, END OF PERIOD (000s omitted) ........................ $67,199 $69,869 $24,016
</TABLE>
<TABLE>
<CAPTION>
CLASS D
----------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
----------------------------------------------------------
1998 1997 1996 1995 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PER SHARE OPERATING PERFORMANCE
NET ASSET VALUE, BEGINNING OF YEAR ............................. $16.69 $14.77 $13.61 $11.40 $12.80
-------- -------- -------- -------- --------
Net investment loss ............................................ (0.27) (0.27) (0.24) (0.15) (0.23)
Net realized and unrealized investment gain (loss) ............. (3.12) 3.06 1.88 3.75 1.06
-------- -------- -------- -------- --------
INCREASE (DECREASE) FROM INVESTMENT OPERATIONS ................. (3.39) 2.79 1.64 3.60 0.83
Distributions from net gain realized ........................... (1.63) (0.87) (0.48) (1.39) (2.23)
-------- -------- -------- -------- --------
NET INCREASE (DECREASE) IN NET ASSET VALUE ..................... (5.02) 1.92 1.16 2.21 (1.40)
-------- -------- -------- -------- --------
NET ASSET VALUE, END OF YEAR ................................... $11.67 $16.69 $14.77 $13.61 $11.40
======== ======== ======== ======== ========
Total return based on net asset value: ......................... (21.94)% 20.32% 12.47% 35.53% 8.06%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets ................................. 2.24% 2.30% 2.35% 2.29% 2.72%
Net investment loss to average net assets ...................... (1.82)% (1.88)% (1.70)% (1.35)% (2.25)%
Portfolio turnover ............................................. 83.90% 97.37% 59.36% 71.52% 124.76%
NET ASSETS, END OF YEAR (000s omitted) ......................... $263,900 $390,904 $337,327 $145,443 $9,318
</TABLE>
- ----------
* Commencement of offering of shares.
+ Annualized.
++ For the year ended September 30, 1996.
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, 1998, 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, 1998, by correspondence
with the Fund's custodian and brokers; where replies were not received from
brokers we performed other auditing procedures. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, such financial statements and financial highlights present
fairly, in all material respects, the financial position of Seligman Frontier
Fund, Inc. as of September 30, 1998, 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, 1998
22
<PAGE>
BOARD OF DIRECTORS
JOHN R. GALVIN 2, 4
DEAN, Fletcher School of Law and Diplomacy
at Tufts University
DIRECTOR, Raytheon Company
ALICE S. ILCHMAN 3, 4
TRUSTEE, Committee for Economic Development
CHAIRMAN, The Rockefeller Foundation
FRANK A. MCPHERSON 2, 4
DIRECTOR, Kimberly-Clark Corporation
DIRECTOR, Baptist Medical Center
JOHN E. MEROW 2, 4
RETIRED CHAIRMAN AND SENIOR PARTNER,
Sullivan & Cromwell, Law Firm
DIRECTOR, Commonwealth Industries, Inc.
DIRECTOR, New York Presbyterian Hospital
BETSY S. MICHEL 2, 4
TRUSTEE, The Geraldine R. Dodge Foundation
CHAIRMAN OF THE BOARD OF TRUSTEES, St. George's School
WILLIAM C. MORRIS 1
CHAIRMAN
CHAIRMAN OF THE BOARD, J. & W. Seligman & Co.
Incorporated
CHAIRMAN, Carbo Ceramics Inc.
DIRECTOR, Kerr-McGee Corporation
JAMES C. PITNEY 3, 4
RETIRED PARTNER, Pitney, Hardin, Kipp & Szuch, Law Firm
JAMES Q. RIORDAN 3, 4
DIRECTOR, KeySpan Energy Corporation
TRUSTEE, Committee for Economic Development
DIRECTOR, Public Broadcasting Service
RICHARD R. SCHMALTZ 1
MANAGING DIRECTOR, DIRECTOR OF INVESTMENTS,
J. & W. Seligman & Co. Incorporated
TRUSTEE EMERITUS, Colby College
ROBERT L. SHAFER 3, 4
RETIRED VICE PRESIDENT, Pfizer Inc.
JAMES N. WHITSON 2, 4
DIRECTOR AND CONSULTANT, Sammons Enterprises, Inc.
DIRECTOR, C-SPAN
DIRECTOR, CommScope, Inc.
BRIAN T. ZINO 1
PRESIDENT
PRESIDENT, J. & W. Seligman & Co. Incorporated
CHAIRMAN, Seligman Data Corp.
DIRECTOR, ICIMutual Insurance Company
DIRECTOR EMERITUS
Fred E. Brown
DIRECTOR AND CONSULTANT, J. &W. Seligman &Co.
Incorporated
- ----------------
Member: 1 Executive Committee
2 Audit Committee
3 Director Nominating Committee
4 Board Operations Committee
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 Advisors, 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
(212) 682-7600 Outside the United States
(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 taxed at different rates, primarily depending upon the
length of time the securities were owned by the fund.
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 not be based on the
original $1,000, but on the $1,070, which includes the first year's earnings.
CONTINGENT DEFERRED SALES CHARGE (CDSC) -- Depending on the class of shares
owned, a fee charged by a mutual fund when shares are sold back to the fund (the
CDSC 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 -- A document that contains updated or more
detailed information about an investment company and that 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 1998 MUTUAL FUND FACT BOOK.
25
<PAGE>
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.
SELIGMAN ADVISORS, INC.
an affiliate of
[logo]
J. & W. SELIGMAN & CO.
INCORPORATED
ESTABLISHED 1864
100 PARK AVENUE, NEW YORK, NY 10017
EQF2 9/98 [RECYCLE LOGO] Printed on Recycled Paper
