- --------------------------------------------------------------------------------
PROSPECTUS
SELIGMAN
FRONTIER
FUND, INC.
February 1, 1998
[LOGO]
- --------------------------------------------------------------------------------
A CAPITAL APPRECIATION FUND
IN ITS 14TH YEAR
<PAGE>
SELIGMAN FRONTIER FUND, INC.
100 Park Avenue o New York, N.Y. 10017
New York City Telephone: (212) 850-1864
Toll-Free Telephone: (800) 221-2450--all continental United States
For Retirement Plan Information--Toll-Free Telephone: (800) 445-1777
February 1, 1998
Seligman Frontier Fund, Inc. (the "Fund") is an open-end, diversified
management investment company that invests to produce growth in capital value.
Income may be considered but will only be incidental to the Fund's investment
objective of growth in capital value. For a description of the Fund's investment
objective and policies, including the risk factors associated with an investment
in the Fund, see "Investment Objective, Policies and Risks." There can be no
assurance that the Fund's investment objective will be achieved.
Investment advisory and management services are provided to the Fund by J.
& W. Seligman & Co. Incorporated (the "Manager") and, to the extent requested by
the Manager in respect of foreign assets, Seligman Henderson Co. (the
"Subadviser"). The Fund's distributor is Seligman Financial Services, Inc., an
affiliate of the Manager.
The Fund offers three classes of shares. Class A shares are sold subject to
an initial sales load of up to 4.75% and an annual service fee currently charged
at a rate of up to .25% of the average daily net asset value of the Class A
shares. Class A shares purchased in an amount of $1,000,000 or more are sold
without an initial sales load 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 load but are subject to a CDSL of 5% on
redemptions in the first year after purchase of such shares, declining to 1% in
the sixth year and 0% thereafter, an annual distribution fee of .75% and an
annual service fee of up to .25% of the average daily net asset value of the
Class B shares. 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 load but are subject
to a CDSL of 1% imposed on redemptions within one year of purchase, an annual
distribution fee of up to .75% and an annual service fee of up to .25% of the
average daily net asset value of the Class D shares. Any CDSL payable upon
redemption of shares will be assessed on the lesser of the current net asset
value or the original purchase price of the shares redeemed. No CDSL will be
imposed on shares acquired through the reinvestment of dividends or
distributions received from any class of shares. See "Alternative Distribution
System." Shares of the Fund may be purchased through any authorized investment
dealer.
This Prospectus sets forth concisely the information a prospective investor
should know about the Fund before investing. Please read it carefully before you
invest and keep it for future reference. Additional information about the Fund,
including a Statement of Additional Information, has been filed with the
Securities and Exchange Commission. The Statement of Additional Information is
available upon request without charge by calling or writing the Fund at the
telephone numbers or address set forth above. The Statement of Additional
Information is dated the same date as this Prospectus and is incorporated herein
by reference in its entirety.
SHARES IN THE FUND ARE NOT DEPOSITS OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED
BY, ANY BANK, AND SHARES ARE NOT FEDERALLY INSURED BY THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER AGENCY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
----------
TABLE OF CONTENTS
PAGE
----
Summary of Fund Expenses ............................................. 2
Financial Highlights ................................................. 3
Alternative Distribution System....................................... 5
Investment Objective, Policies and Risks.............................. 7
Management Services................................................... 9
Purchase of Shares ................................................... 11
Telephone Transactions................................................ 16
Redemption of Shares.................................................. 17
Administration, Shareholder Services and
Distribution Plan................................................... 19
Exchange Privilege.................................................... 20
Further Information about Transactions in the Fund.................... 22
Dividends and Gain Distributions ..................................... 22
Federal Income Taxes.................................................. 23
Shareholder Information .............................................. 24
Advertising the Fund's Performance ................................... 26
Organization and Capitalization ...................................... 27
<PAGE>
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
----------------- ----------------- -----------------
(INITIAL SALES (DEFERRED SALES (DEFERRED SALES
LOAD ALTERNATIVE) LOAD ALTERNATIVE) LOAD ALTERNATIVE)
<S> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............ 4.75% None None
Sales Load on Reinvested Dividends ............... None None None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds,
whichever is lower) ............................ None; 5% in 1st year 1% in 1st year
except 1% 4% in 2nd year None thereafter
in first 18 months 3% in 3rd and
if initial sales 4th years
load was waived 2% in 5th year
in full due to size 1% in 6th year
of purchase None thereafter
Redemption Fees ............................... None None None
Exchange Fees ................................. None None None
</TABLE>
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS D
------- ------- -------
<S> <C> <C> <C>
ANNUAL FUND OPERATING EXPENSES FOR FISCAL 1997
(as a percentage of average net assets)
Management Fees................................... .94% .94% .94%
12b-1 Fees ....................................... .22% 1.00%* 1.00%*
Other Expenses ................................... .36% .36% .36%
Total Fund Operating Expenses .................... 1.52% 2.30% 2.30%
</TABLE>
The purpose of this table is to assist investors in understanding the
various costs and expenses which shareholders of the Fund may bear directly or
indirectly. The sales load on Class A shares is a one-time charge paid at the
time of purchase of shares. Reductions in initial sales loads are available in
certain circumstances. Class A shares are not subject to an initial sales load
for purchases of $1,000,000 or more; however, such shares are subject to a CDSL,
a one-time charge, only if the shares are redeemed within eighteen months of
purchase. The CDSLs on Class B and Class D shares are one-time charges paid only
if shares are redeemed within six years or one year of purchase, respectively.
For more information concerning reductions in sales loads and for a more
complete description of the various costs and expenses, see "Purchase of
Shares," "Redemption of Shares" and "Management Services" herein. The Fund's
Administration, Shareholder Services and Distribution Plan, to which the caption
"12b-1 Fees" relates, is discussed under "Administration, Shareholder Services
and Distribution Plan" herein.
<TABLE>
<CAPTION>
EXAMPLE 1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
An investor would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return and (2) redemption
at the end of each time period..............................Class A $62 $ 93 $126 $220
Class B+ 73 102 143 244
Class D 33 72 123 264
An investor would pay the following expenses on the same
investment, assuming no redemption ........................ Class B+ $23 $72 $123 $244
Class D 23 72 123 264
</TABLE>
THE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN AND THE 5%
ANNUAL RETURN USED IN THIS EXAMPLE IS A HYPOTHETICAL RATE.
- ----------
* Includes an annual distribution fee of .75% and an annual service fee of
.25%. Pursuant to the Rules of the National Association of Securities
Dealers, Inc., the aggregate deferred sales loads and annual distribution
fees on Class B and Class D shares of the Fund may not exceed 6.25% of total
gross sales, subject to certain exclusions. The maximum sales charge rule is
applied separately to each class. The 6.25% limitation is imposed on the Fund
rather than on a per shareholder basis. Therefore, a long-term Class B or
Class D shareholder of the Fund may pay more in total sales loads (including
distribution fees) than the economic equivalent of 6.25% of such
shareholder's investment in such shares.
+ The expenses shown for the ten-year period reflect the conversion of Class B
shares to Class A shares after 8 years.
2
<PAGE>
FINANCIAL HIGHLIGHTS
The Fund's financial highlights for the periods presented below have been
audited by Deloitte & Touche LLP, independent auditors. This information, which
is derived from the financial and accounting records of the Fund, should be read
in conjunction with the financial statements and notes contained in the Fund's
1997 Annual Report, which is incorporated by reference in the Fund's Statement
of Additional Information, copies of which may be obtained by calling or writing
the Fund at the telephone numbers or address provided on the cover page of this
Prospectus.
"Per share operating performance" data is designed to allow investors to
trace the operating performance of each Class, on a per share basis, from the
beginning net asset value to the ending net asset value so that they can
understand what effect the individual items have on their investment, assuming
it was held throughout the period. Generally, the per share amounts are derived
by converting the actual dollar amounts incurred for each item, as disclosed in
the financial statements, to their equivalent per share amount.
"Total return based on net asset value" measures each Class's performance
assuming investors purchased shares of the Fund at the 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 net asset value per share on the last day of
the period. The total return computations do not reflect any sales loads
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 commissions paid by
the Fund to purchase or sell securities. It is determined by dividing the total
commission dollars paid by the number of shares purchased and sold during the
period for which commissions were paid.
<TABLE>
<CAPTION>
CLASS A
------------------------------------------------------------------------------------------
YEAR ENDED SEPTEMBER 30,
------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990 1989 1988
PER SHARE OPERATING ---- ---- ---- ---- ---- ---- ---- ---- ---- ----
PERFORMANCE:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year . $15.38 $14.04 $11.62 $12.83 $10.22 $10.71 $7.01 $8.99 $6.90 $9.35
------ ------ ------ ------ ------ ------ ------ ----- ----- -----
Net investment loss ................ (.16) (.13) (.06) (.08) (.03) (.07) (.03) -- -- (.02)
Net realized and unrealized
investment gain (loss) ........... 3.20 1.95 3.87 1.10 4.54 .58 3.76 (1.98) 2.09 (1.44)
------ ------ ------ ------ ------ ------ ------ ----- ----- -----
Increase (decrease) from
investment operations ............ 3.04 1.82 3.81 1.02 4.51 .51 3.73 (1.98) 2.09 (1.46)
Dividends paid ..................... -- -- -- -- -- -- (.01)* -- -- --
Distributions from net gain realized (.87) (.48) (1.39) (2.23) (1.90) (1.00) (.02) -- -- (.99)
------ ------ ------ ------ ------ ------ ------ ----- ----- -----
Net increase (decrease)
in net asset value ............... 2.17 1.34 2.42 (1.21) 2.61 (.49) 3.70 (1.98) 2.09 (2.45)
------ ------ ------ ------ ------ ------ ------ ----- ----- -----
Net asset value, end of year ....... $17.55 $15.38 $14.04 $11.62 $12.83 $10.22 $10.71 $7.01 $8.99 $6.90
====== ====== ====== ====== ====== ====== ====== ===== ===== =====
TOTAL RETURN BASED ON
NET ASSET VALUE: ................... 21.19% 13.40% 36.80% 9.79% 50.67% 4.91% 53.34% (22.02)% 30.29% (12.25)%
RATIOS/SUPPLEMENTAL DATA:
Expenses to average net assets...... 1.52% 1.56% 1.43% 1.34% 1.25% 1.37% 1.28% 1.26% 1.32% 1.19%
Net investment income (loss)
to average net assets............. (1.10)% (.91)% (.50)% (.87)% (.27)% (.71)% (.35)% -- .02% (.20)%
Portfolio turnover.................. 97.37% 59.36% 71.52% 124.76% 129.13% 129.46% 38.56% 38.55% 50.60% 80.03%
Average commission rate paid........ $.0540 $.0538
Net assets, end of year
(000s omitted).................... $568,261 $523,737 $272,122 $58,478 $43,188 $27,178 $23,449 $17,127 $22,966 $19,205
</TABLE>
- ----------------
All per share data for fiscal years 1988 through 1992 have been restated to
reflect the 2-for-1 stock split effected as a 100% stock dividend which occurred
on April 16,1992. For fiscal years 1994 through 1997, the above per share
amounts of net investment loss and net realized and unrealized investment gain
(loss) have been calculated based upon average shares outstanding for the
periods.
* Excess of taxable dividend over net investment income was charged against
paid-in capital.
The data provided above reflects historical information and therefore has
not been adjusted to reflect(i), for the periods prior to its implementation,
the effect of the Administration, Shareholder Services and Distribution Plan
approved by shareholders on May 1, 1992 and effective June 1, 1992 and (ii)
through September 30, 1996 the effect of the increase in the management fee rate
payable by the Fund, approved by shareholders on December 12, 1995 and effective
January 1, 1996.
3
<PAGE>
FINANCIAL HIGHLIGHTS (continued)
<TABLE>
<CAPTION>
CLASS B CLASS D
------------------ ------------------------------------------------
YEAR 4/22/96* YEAR ENDED SEPTEMBER 30, 5/3/93*
ENDED TO ------------------------------------ TO
9/30/97 9/30/96 1997 1996 1995 1994 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
Dividends paid ......................... -- -- -- -- -- -- --
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%0 2.30% 2.35% 2.29% 2.72% 2.24%0
Net investment income (loss)
to average net assets ................ (1.88)% (1.80)%0 (1.88)% (1.70)% (1.35)% (2.25)% (1.94)%0
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>
- ----------
* Commencement of offering of shares + For the year ended September 30, 1996.
++ For the year ended September 30, 1993.
0 Annualized.
The data provided above reflects historical information and therefore has
not been adjusted to reflect, through September 30, 1996, the effect of the
increase in the management fee rate payable by the Fund, approved by
shareholders on December 12, 1995 and effective January 1, 1996.
4
<PAGE>
ALTERNATIVE DISTRIBUTION SYSTEM
The Fund offers three classes of shares. Class A shares are sold to
investors who have concluded that they would prefer to pay an initial sales load
and have the benefit of lower continuing fees. Class B shares are sold to
investors choosing to pay no initial sales load, a higher distribution fee and a
CDSL with respect to redemptions within six years of purchase and who desire
shares to convert automatically to Class A shares after eight years. Class D
shares are sold to investors choosing to pay no initial sales load, a higher
distribution fee and, with respect to redemptions within one year of purchase, a
CDSL. The Alternative Distribution System allows investors to choose the method
of purchasing shares that is most beneficial in light of the amount of the
purchase, the length of time the shares are expected to be held and other
relevant circumstances. Investors should determine whether under their
particular circumstances it is more advantageous to incur an initial sales load
and be subject to lower ongoing fees, as discussed below, or to have the entire
initial purchase price invested in the Fund with the investment thereafter being
subject to higher ongoing fees and either a CDSL for a six-year period with
automatic conversion to Class A shares after eight years or a CDSL for a
one-year period with no automatic conversion to Class A shares.
Investors who expect to maintain their investment for an extended period of
time might choose to purchase Class A shares because over time the accumulated
continuing distribution fees of Class B and Class D shares may exceed the
initial sales load and lower distribution fee of Class A shares. This
consideration must be weighed against the fact that the amount invested in the
Fund will be reduced by the initial sales load on Class A shares deducted at the
time of purchase. Furthermore, the higher distribution fees on Class B and Class
D will be offset to the extent any return is realized on the additional funds
initially invested therein that would have been equal to the amount of the
initial sales load on Class A shares.
Investors who qualify for reduced initial sales loads, as described under
"Purchase of Shares" below, might also choose to purchase Class A shares because
the sales load deducted at the time of purchase would be less or waived in full.
However, investors should consider the effect of the 1% CDSL imposed on shares
on which the initial sales load was waived in full because the amount of Class A
shares purchased reached $1,000,000 or more. In addition, Class B shares will be
converted automatically to Class A shares after a period of approximately eight
years, and thereafter investors will be subject to lower ongoing fees. Shares
purchased through reinvestment of dividends and distributions on Class B shares
also will convert automatically to Class A shares along with the underlying
shares on which they were earned.
Alternatively, some investors might choose to have all of their funds
invested initially in Class B or Class D shares although remaining subject to a
higher continuing distribution fee and for a six-year or one-year period, a CDSL
as described below. For example, an investor who does not qualify for reduced
sales loads would have to hold Class A shares for more than 6.33 years for the
Class B or Class D distribution fee to exceed the initial sales load plus the
distribution fee on Class A shares. This example does not take into account the
time value of money, which further reduces the impact of the Class B and Class D
shares' 1% distribution fee, other expenses charged to each class, fluctuations
in net asset value or the effect of the return on the investment over this
period of time.
Investors should bear in mind that total asset based sales charges (i.e.,
the higher continuing distribution fee plus the CDSL) on Class B shares that are
redeemed may exceed the total asset based sales charges that would be payable on
the same amount of Class A or Class D shares, particularly if the Class B shares
are redeemed shortly after purchase or if the investor qualifies for a reduced
sales load on the Class A shares.
Investors should understand that the purpose and function of the initial
sales load (and deferred sales load, when applicable) with respect to Class A
shares is the same as those of the deferred sales loads and higher distribution
fees with respect to Class B and Class D shares in that the sales loads and
distribution fees applicable to each class provide for the financing of the
distribution of the shares of the Fund.
Class B and Class D shares are subject to the same ongoing distribution
fees but Class D shares are subject to a CDSL for a shorter period of time (one
year as
5
<PAGE>
opposed to six years) than Class B shares. However, unlike Class D shares, Class
B shares automatically convert to Class A shares, which are subject to lower
ongoing distribution fees.
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, potentially, certain
other class expenses and has exclusive voting rights with respect to any matter
to which a separate vote of any class is required by the Investment Company Act
of 1940, as amended (the "1940 Act"), or Maryland law. The net income
attributable to each class and dividends payable on the shares of each class
will be reduced by the amount of distribution and other expenses to be paid by
each class. Class B and Class D shares bear higher distribution fees, which will
cause the Class B and Class D shares to pay lower dividends than the Class A
shares. The three classes also have separate exchange privileges.
The Directors of the Fund believe that no conflict of interest currently
exists between the Class A, Class B and Class D shares. On an ongoing basis, the
Directors, in the exercise of their fiduciary duties under the 1940 Act and
Maryland law, will seek to ensure that no such conflict arises. For this
purpose, the Directors will monitor the Fund for the existence of any material
conflict among the classes and will take such action as is reasonably necessary
to eliminate any such conflicts that may develop.
DIFFERENCES BETWEEN CLASSES. The primary differences between Class A, Class
B and Class D shares are their sales load structures and ongoing expenses as set
forth below. The primary differences between Class B and Class D shares are that
Class D shares are subject to a shorter CDSL period and a lower CDSL rate but
Class B shares automatically convert to Class A shares after eight years,
resulting in a reduction in ongoing fees. Investors in Class B shares should
take into account whether they intend to redeem their shares within the CDSL
period and, if not, whether they intend to remain invested until the end of the
conversion period and thereby take advantage of the reduction in ongoing fees
resulting from the conversion to Class A shares. Other investors, however, may
elect to purchase Class D shares if they determine that it is advantageous to
have all their assets invested initially and they are uncertain as to the length
of time they intend to hold their assets in the Fund or another mutual fund in
the Seligman Group for which the exchange privilege is available. Although Class
D shareholders are subject to a shorter CDSL period at a lower rate, they forego
the Class B automatic conversion feature, making their investment subject to
higher distribution fees for an indefinite period of time. Each class has
advantages and disadvantages for different investors, and investors should
choose the class that best suits their circumstances and their objectives.
ANNUAL 12B-1 FEES
(AS A % OF AVERAGE
SALES LOAD DAILY NET ASSETS) OTHER INFORMATION
---------- ------------------ -----------------
CLASS A Maximum initial Service fee of Initial sales load
sales load of 4.75% .25%. waived or reduced
of the public for certain
offering price. purchases. CDSL
of 1% on
redemptions within
18 months of
purchase on
shares on which
initial sales load
was waived in full
due to the size of
the purchase.
CLASS B None Service fee of CDSL of:
25%; 5% in 1st year
Distribution fee 4% in 2nd year
of .75% until 3% in 3rd and
conversion* 4th years
2% in 5th year
1% in 6th year
0% after 6th year.
CLASS D None Service fee of CDSL of 1% on
25%; Distribution redemptions within
fee of up to .75%. one year of
purchase.
* Conversion occurs at the end of the month which precedes the eighth
anniversary of the purchase date. If Class B shares of the Fund are exchanged
for Class B shares of another Seligman Mutual Fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and the
holding period of the shares exchanged will be tacked onto the holding period
of the shares acquired.
6
<PAGE>
INVESTMENT OBJECTIVE, POLICIES AND RISKS
The Fund is an open-end, diversified management investment company, as
defined in the 1940 Act, or mutual fund, incorporated in Maryland in 1984. The
Fund seeks to produce growth in capital value; income may be considered but will
be only incidental to the Fund's investment objective.
The Fund seeks to achieve its objective by investing in a portfolio
consisting of securities of companies selected for their growth prospects. The
Fund invests primarily in common stocks. It may also invest in securities that
may be exchanged for or converted into common stock, preferred stock and common
stock purchase warrants believed by the Manager to provide capital growth
opportunities. There can be no assurance that the Fund will achieve its
objective.
Under normal conditions, the Fund will invest at least 65% of the value of
its total assets in equity securities of companies with market capitalizations,
at the time of purchase by the Fund, of up to $1.25 billion. Stocks of companies
believed by the Manager to have special characteristics (such as a high growth
rate of unit sales, an important opportunity in a developing industry, or a
distinct competitive advantage) are favored. Securities of these companies may
be subject to above average market price fluctuation and business risk; however,
the Manager will seek to temper such risks by diversification of investments and
by avoiding concentration of investments in any one industry.
Investments other than in securities of the companies discussed above will
be substantially in securities issued or guaranteed by the United States
Government (such as Treasury bills, notes and bonds), its agencies,
instrumentalities or authorities; highly-rated corporate debt securities (rated
AA-, or better, by Standard & Poor's Corporation ("Standard & Poor's") or Aa3,
or better, by Moody's Investors Service, Inc. ("Moody's")); prime commercial
paper (rated A-1+/A-1 by Standard & Poor's or P-1 by Moody's); and certificates
of deposit of the 100 largest (based on assets) banks that are subject to
regulatory supervision by the U.S. Government or state governments and the 100
largest (based on assets) foreign banks with branches or agencies in the United
States.
ILLIQUID SECURITIES. The Fund may invest up to 15% of its net assets in
illiquid securities, including restricted securities (i.e., securities not
readily marketable without registration under the Securities Act of 1933 (the
"1933 Act")) and other securities that are not readily marketable. The Fund may
purchase restricted securities that can be offered and sold to "qualified
institutional buyers" under Rule 144A of the 1933 Act, and the Manager, acting
pursuant to procedures approved by the Fund's Board of Directors, may determine,
when appropriate, that specific Rule 144A securities are liquid and not subject
to the 15% limitation on illiquid securities. Should this determination be made,
the Manager, acting pursuant to such procedures, will carefully monitor the
security (focusing on such factors, among others, as trading activity and
availability of information) to determine that the Rule 144A security continues
to be liquid. It is not possible to predict with assurance exactly how the
market for Rule 144A securities will further evolve. This investment practice
could have the effect of increasing the level of illiquidity in the Fund, if and
to the extent that qualified institutional buyers become for a time uninterested
in purchasing Rule 144A securities.
FOREIGN SECURITIES. The Fund may invest in commercial paper and
certificates of deposit issued by foreign banks and may invest directly and
through American Depositary Receipts ("ADRs") in other securities of foreign
issuers. Foreign investments may be affected favorably or unfavorably by changes
in currency rates and exchange control regulations. There may be less
information available about a foreign company than about a U.S. company and
foreign companies may not be subject to reporting standards and requirements
comparable to those applicable to U.S. companies. Foreign securities may not be
as liquid as U.S. securities. Securities of foreign companies may involve
greater market risk than securities of U.S. companies, and foreign brokerage
commissions and custody fees are generally higher than those in the
7
<PAGE>
United States. Investments in foreign securities may also be subject to local
economic or political risks, political instability and possible nationalization
of issuers. ADRs, which are traded in dollars on U.S. exchanges or
over-the-counter, are issued by domestic banks and evidence ownership of
securities issued by foreign corporations. The Fund may invest up to 10% of its
total assets in foreign securities that it holds directly, but this 10% limit
does not apply to foreign securities held through ADRs or to commercial paper
and certificates of deposit issued by foreign banks.
REPURCHASE AGREEMENTS. The Fund may enter into repurchase agreements with
commercial banks and broker/dealers as a short-term cash management tool. A
repurchase agreement is an agreement under which the Fund acquires a money
market instrument subject to resale at an agreed upon price and date. The resale
price reflects an agreed upon interest rate effective for the period of time the
instrument is held by the Fund. Repurchase agreements could involve certain
risks in the event of bankruptcy or other default by the seller, including
possible delays and expenses in liquidating the securities underlying the
agreement, decline in value of the underlying securities and loss of interest.
Repurchase agreements are typically entered into for periods of one week or
less. The Fund will not enter into repurchase agreements of more than one week's
duration if more than 10% of its net assets would be invested in such agreements
and other illiquid securities.
LENDING OF PORTFOLIO SECURITIES. The Fund may lend portfolio securities to
broker/dealers or other institutions, if, in the opinion of the Manager, such
loans would be beneficial to the Fund. The borrower must maintain with the Fund
cash or equivalent collateral equal to at least 100% of the market value of the
securities loaned. During the time portfolio securities are on loan, the
borrower pays the Fund any dividend or interest paid on the securities. The Fund
may invest the cash collateral and earn additional income or receive an agreed
upon amount of interest income from the borrower.
BORROWING. The Fund may borrow money only from banks and only for temporary
or emergency purposes (but not for the purchase of portfolio securities) in an
amount not in excess of 15% of the value of its total assets. The Fund will not
purchase additional portfolio securities if the Fund has outstanding borrowings
in excess of 5% of the value of its total assets.
OPTIONS TRANSACTIONS. The Fund may purchase put options on portfolio
securities in an attempt to provide a hedge against a decrease in the price of a
security held by the Fund. The Fund will not purchase options for speculative
purposes. Purchasing a put option gives the Fund the right to sell, and
obligates the writer to buy, the underlying security at the exercise price at
any time during the option period.
When the Fund purchases an option, it is required to pay a premium to the
party writing the option and a commission to the broker selling the option. If
the option is exercised by the Fund, the premium and the commission paid may be
greater than the amount of the brokerage commission charged if the security were
to be purchased or sold directly. See "Investment Objective, Policies and Risks"
in the Statement of Additional Information.
GENERAL. Except as noted above, the foregoing investment policies are not
fundamental and the Board of Directors of the Fund may change them without the
vote of a majority of the Fund's outstanding voting securities. As a matter of
policy, the Board would not change the Fund's investment objective of seeking to
produce growth in capital value without such a vote. A more detailed description
of the Fund's investment policies, including a list of those restrictions on the
Fund's investment activities which cannot be changed without such a vote,
appears in the Statement of Additional Information. Under the 1940 Act, a "vote
of a majority of the outstanding voting securities" of the Fund means the
affirmative vote of the lesser of (1) more than 50% of the outstanding shares of
the Fund or (2) 67% or more of the shares present at a shareholders' meeting if
more than 50% of the outstanding shares are represented at the meeting in person
or by proxy.
8
<PAGE>
MANAGEMENT SERVICES
THE MANAGER. The Board of Directors provides broad supervision over the
affairs of the Fund. Pursuant to a Management Agreement approved by the Board
and the shareholders of the Fund, the Manager manages the investments of the
Fund and administers the business and other affairs of the Fund. The address of
the Manager is 100 Park Avenue, New York, NY 10017.
The Manager also serves as manager of seventeen other investment companies
which, together with the Fund, make up the "Seligman Group." These other
companies are: Seligman Capital Fund, Inc., Seligman Cash Management Fund, Inc.,
Seligman Common Stock Fund, Inc., Seligman Communications and Information Fund,
Inc., Seligman Growth Fund, Inc., Seligman Henderson Global Fund Series, Inc.,
Seligman High Income Fund Series, Seligman Income Fund, Inc., Seligman Municipal
Fund Series, Inc., Seligman Municipal Series Trust, Seligman New Jersey
Municipal Fund, Inc., Seligman Pennsylvania Municipal Fund Series, Seligman
Portfolios, Inc., Seligman Quality Municipal Fund, Inc., Seligman Select
Municipal Fund, Inc., Seligman Value Fund Series, Inc. and Tri-Continental
Corporation. The aggregate assets of the Seligman Group were approximately $18.0
billion at December 31, 1997. The Manager also provides investment management or
advice to institutional and other accounts having an aggregate value at December
31, 1997 of approximately $6.3 billion.
Mr. William C. Morris is Chairman of the Manager and Chairman of the Board
and Chief Executive Officer of the Fund. Mr. Morris owns a majority of the
outstanding voting securities of the Manager.
The Manager provides senior management for Seligman Data Corp., a
wholly-owned subsidiary of certain investment companies in the Seligman Group,
which performs, at cost, certain recordkeeping functions for the Fund, maintains
the records of shareholder accounts and furnishes dividend paying, redemption
and related services.
The Fund pays the Manager a management fee, calculated daily and payable
monthly. The management fee, which became effective on January 1, 1996, is equal
to an annual rate of .95% of the Fund's average daily net assets on the first
$750 million of net assets and .85% of the Fund's average daily net assets in
excess of $750 million. Although the management fee is higher than that paid by
most mutual funds, the Manager believes that such fee is comparable to the
management fee paid by a significant percentage of mutual funds with investment
objectives similar to that of the Fund. Prior to effectiveness of the new
management fee schedule, the management fee was .75% of the average daily net
assets of the Fund. The Fund pays all of its expenses other than those assumed
by the Manager. Total expenses of the Fund's Class A, Class B and Class D shares
for the year ended September 30, 1997 amounted to 1.52%, 2.30% and 2.30%,
respectively, of the average daily net assets of such class.
THE SUBADVISER. The Subadviser provides investment management services to
the Fund with respect to all or a portion of the Fund's foreign investments, as
designated by the Manager (the "Qualifying Assets"). The Fund has a
non-fundamental policy under which it may invest up to 10% of its total assets
in foreign securities that are held directly. The 10% limit does not apply to
foreign securities held through ADRs or to commercial paper and certificates of
deposit issued by foreign banks. The Subadviser serves the Fund pursuant to a
Subadvisory Agreement with the Manager (the "Subadvisory Agreement"), dated June
1, 1994 , as amended, January 1, 1996. Pursuant to the Subadvisory Agreement,
the Subadviser, with respect to the Qualifying Assets, provides investment
management services including investment research, advice and supervision,
determines which securities will be purchased or sold, makes purchases and sales
on behalf of the Fund and determines how voting and other rights with respect to
securities held by the Fund shall be exercised, subject in each case to the
control of the Board of Directors and in accordance with the Fund's investment
objective, policies and principles. For this service, the Subadviser receives a
fee from the Manager, payable monthly. The subadvisory fee rate, which is
applied to the average monthly net Qualifying Assets of the Fund (i.e., the
Qualifying Assets less any related liabilities as designated
9
<PAGE>
by the Manager), is the same as the overall rate paid to the Manager by the
Fund. For the fiscal year ended September 30, 1997, the Fund did not require the
services of the Subadviser and therefore, no fees were paid by the Manager to
the Subadviser.
The Subadviser was founded in 1991 as a joint venture between the Manager
and Henderson International, Inc., a controlled affiliate of Henderson plc. The
Subadviser, headquartered in New York, was created to provide international and
global investment advice to institutional and individual investors and
investment companies. The Subadviser also currently serves as subadviser to
Seligman Capital Fund, Inc., Seligman Common Stock Fund, Inc., Seligman
Communications and Information Fund, Inc., Seligman Growth Fund, Inc., Seligman
Henderson Global Fund Series, Inc., Seligman Income Fund, Inc., certain
portfolios of Seligman Portfolios, Inc., each series of Seligman Value Fund
Series, Inc. and Tri-Continental Corporation. The address of the Subadviser is
100 Park Avenue, New York, NY 10017.
PORTFOLIO MANAGEMENT. Mr. Arsen Mrakovcic, a Managing Director of the
Manager, is Vice President and Portfolio Manager of the Fund, a position he has
held since October 1, 1995. Mr. Mrakovcic joined the Manager in June 1992 as a
Portfolio Assistant, was named Vice President, Investment Officer on January 1,
1995 and Managing Director on January 1, 1996. Mr. Mrakovcic also serves as Vice
President of Seligman Henderson Global Fund Series, Inc. and Co-Portfolio
Manager of its Seligman Henderson Global Smaller Companies Fund and Vice
President of Seligman Portfolios, Inc. and Co-Portfolio Manager of its Seligman
Henderson Global Smaller Companies Portfolio.
Mr. Iain C. Clark is responsible for the Subadviser's day-to-day investment
activity with respect to the Qualifying Assets of the Fund. Mr. Clark has been a
Chief Investment Officer of Seligman Henderson Co. since April 1992. He has also
been a Director and Senior Portfolio Manager of Henderson plc since 1985.
The Manager's discussion of the Fund's performance as well as a line graph
illustrating comparative performance information between the Fund, the Lipper
Small Cap Growth Fund Index, the Russell 2000 Growth Index and the Russell 2000
Index is included in the Fund's 1997 Annual Report to Shareholders. Copies of
the 1997 Annual Report may be obtained, without charge, by calling or writing
the Fund at the telephone numbers or address listed on the cover page of this
Prospectus.
PORTFOLIO TRANSACTIONS. The Management Agreement and Subadvisory Agreement
each recognize that in the purchase and sale of portfolio securities for the
Fund, the Manager and the Subadviser will seek the most favorable price and
execution and, consistent with that policy, may give consideration to the
research, statistical and other services furnished by brokers or dealers to the
Manager or the Subadviser. The use of brokers who provide supplemental
investment and market research and securities and economic analysis may result
in a higher brokerage charge to the Fund than the use of brokers selected on the
basis of seeking the most favorable price and execution and such research and
analysis received may be useful to the Manager and the Subadviser in connection
with their services to other clients as well as to the Fund. In over-the-counter
markets, orders are placed with responsible primary market makers unless a more
favorable execution or price is believed to be obtainable.
Consistent with the Rules of the National Association of Securities
Dealers, Inc., and subject to seeking the most favorable price and execution
available and such other policies as the Directors of the Fund may determine,
the Manager may consider sales of shares of the Fund and, if permitted by
applicable laws, may consider sales of shares of the other Seligman Mutual Funds
as a factor in the selection of brokers or dealers to execute portfolio
transactions for the Fund.
PORTFOLIO TURNOVER. A change in securities held by the Fund is known as
"portfolio turnover." Portfolio turnover may result in the payment by the Fund
of dealer spreads or underwriting commissions and other transactions costs from
the sale of securities held by the Fund and the reinvestment of the proceeds in
other securities. While it is the policy of the Fund to hold securities for
investment, changes in the securities held
10
<PAGE>
by the Fund will be made from time to time when the Manager believes such
changes will strengthen the Fund's portfolio. The portfolio turnover of the Fund
may exceed 100%.
PURCHASE OF SHARES
Seligman Financial Services, Inc. ("SFSI"), an affiliate of the Manager,
acts as general distributor of the Fund's shares. Its address is 100 Park
Avenue, New York, NY 10017.
The Fund issues three classes of shares: Class A shares are sold to
investors choosing the initial sales load alternative; Class B shares are sold
to investors choosing to pay no initial sales load, a higher distribution fee
and a CDSL with respect to redemptions within six years of purchase and who
desire shares to convert automatically to Class A shares after eight years; and
Class D shares are sold to investors choosing no initial sales load, a higher
distribution fee and a CDSL on redemptions within one year of purchase. See
"Alternative Distribution System" above.
Shares of the Fund may be purchased through any authorized investment
dealer. All orders will be executed at the net asset value per share next
computed after receipt of the purchase order plus, in the case of Class A
shares, a sales load which, except for shares purchased under one of the reduced
sales load plans, will vary with the size of the purchase as shown in the
schedule under "Class A Shares--Initial Sales Load" below.
THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE FUND IS $1,000; SUBSEQUENT
INVESTMENTS MUST BE IN THE MINIMUM AMOUNT OF $100 (EXCEPT FOR INVESTMENT OF
DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS). THE FUND RESERVES THE RIGHT TO RETURN
INVESTMENTS THAT DO NOT SATISFY THESE MINIMUMS. EXCEPTIONS TO THESE MINIMUMS ARE
AVAILABLE FOR FUND ACCOUNTS BEING ESTABLISHED CONCURRENTLY WITH THE
INVEST-A-CHECK(R) SERVICE. THE MINIMUM AMOUNT FOR INITIAL INVESTMENT IN THE
SELIGMAN TIME HORIZON MATRIXSM ASSET ALLOCATION PROGRAM IS $10,000. FOR
INFORMATION ABOUT THIS PROGRAM, CONTACT YOUR FINANCIAL ADVISOR.
The minimum amount for initial investment in the Fund is $500 for investors
who purchase shares of the Fund through Merrill Lynch's MFA and MFA Select
programs.
There is no minimum investment required for investors who purchase shares
of the Fund through wrap fee programs.
Purchase orders placed for Class B shares must be for an amount [LESS THAN]
$250,000.
Orders received by an authorized dealer by the close of regular trading on
the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) and
accepted by SFSI before the close of business (5:00 p.m. Eastern time) on the
same day will be executed at the Fund's net asset value determined as of the
close of regular trading on the NYSE on that day plus, in the case of Class A
shares, any applicable sales load. Orders received by dealers after the close of
regular trading the NYSE, or accepted by SFSI after the close of business, will
be executed at the Fund's net asset value as next determined plus, in the case
of Class A shares, any applicable sales load. The authorized dealer through
which a shareholder purchases shares is responsible for forwarding the order to
SFSI promptly.
Payment for dealer purchases may be made by check or by wire. To wire
payment, dealer orders must first be placed through SFSl's order desk and
assigned a purchase confirmation number. Funds in payment of the purchase may
then be wired to Mellon Bank, N.A., ABA #043000261, A/C Seligman Frontier Fund,
Inc. (A, B or D), A/C #107-1011. WIRE TRANSFERS MUST INCLUDE THE PURCHASE
CONFIRMATION NUMBER AND CLIENT ACCOUNT REGISTRATION AND ACCOUNT NUMBER. Persons
other than dealers who wish to wire payment should contact Seligman Data Corp.
for specific wire instructions. Although the Fund makes no charge for this
service, the transmitting bank may impose a wire service fee.
Current shareholders may buy additional shares of the Fund at any time
through any authorized dealer or by sending a check payable to "Seligman Group
of Funds" in our postage-paid return envelope or directly
11
<PAGE>
to SELIGMAN DATA CORP., P.O. BOX 3947, NEW YORK, NY 10008-3947. Checks for
investment must be in U.S. dollars drawn on a domestic bank. Credit card
convenience checks and third party checks (i.e., checks made payable to someone
other than the "Seligman Group of Funds") may not be used to open a new fund
account or purchase additional shares of the Fund. The check should be
accompanied by an investment slip (provided on the bottom of shareholder account
statements) and include the shareholder's name, address, account number, fund
name and class of shares (A, B or D). IF A SHAREHOLDER DOES NOT PROVIDE THE
REQUIRED INFORMATION, SELIGMAN DATA CORP. WILL SEEK FURTHER CLARIFICATION AND
MAY BE FORCED TO RETURN THE CHECK TO THE SHAREHOLDER. IF ONLY THE CLASS
DESIGNATION IS MISSING, THE INVESTMENT WILL AUTOMATICALLY BE MADE IN CLASS A
SHARES. Orders sent directly to Seligman Data Corp. will be executed at the net
asset value next determined after the order is accepted plus, in the case of
Class A shares, any applicable sales load.
Seligman Data Corp. may charge a $10.00 service fee for checks returned to
it as uncollectable. This fee may be deducted from the shareholder's account.
For the protection of the Fund and its shareholders, no redemption of shares
will be permitted with respect to shares purchased by check (unless certified)
until the Fund receives notice that the check has cleared, which may be up to 15
days from the credit of such shares to the shareholder's account.
VALUATION. The net asset value of the Fund's shares is determined as of the
close of regular trading on the NYSE (normally, 4:00 p.m. Eastern time) each
day, Monday through Friday, except on days that the NYSE is closed. The net
asset value is calculated separately for each class. Securities are valued at
current market prices or, in the absence thereof, at fair value as determined in
accordance with procedures approved by the Fund's Board of Directors. Short-term
holdings maturing in 60 days or less are generally valued at amortized cost if
their original maturity was 60 days or less and securities purchased with
maturities in excess of 60 days which currently have maturities of 60 days or
less are valued by amortizing their fair market value on the 61st day prior to
maturity.
Although the legal rights of Class A, Class B and Class D shares are
substantially identical, the different expenses borne by each class will result
in different net asset values and dividends. The net asset value of Class B and
Class D shares will generally be lower than the net asset value of Class A
shares as a result of the higher distribution fee charged to Class B and Class D
shares. In addition, net asset value per share of the three classes will be
affected to the extent any other class expenses differ among classes.
CLASS A SHARES--INITIAL SALES LOAD. Class A shares are subject to an
initial sales load which varies with the size of the purchase as shown in the
following schedule, and an annual service fee of up to .25% of the average daily
net asset value of Class A shares. See "Administration, Shareholder Services and
Distribution Plan" below.
- --------------------------------------------------------------------------------
CLASS A SHARES -- SALES LOAD SCHEDULE
SALES LOAD AS A
PERCENTAGE OF REGULAR
------------------------ DEALER
NET AMOUNT DISCOUNT
INVESTED AS A % OF
OFFERING (NET ASSET OFFERING
AMOUNT OF PURCHASE PRICE VALUE) PRICE
- -------------------- -------- ----------- ---------
Less than $ 50,000 4.75% 4.99% 4.25%
$ 50,000- 99,999 4.00 4.17 3.50
100,000- 249,999 3.50 3.63 3.00
250,000- 499,999 2.50 2.56 2.25
500,000- 999,999 2.00 2.04 1.75
1,000,000- or more* 0 0 0
* Shares acquired at net asset value pursuant to the above schedule will be
subject to a CDSL of 1% if redeemed within 18 months of purchase. See
"Purchase of Shares--Contingent Deferred Sales Load."
- --------------------------------------------------------------------------------
There is no initial sales load on purchases of Class A shares of $1,000,000
or more ("NAV sales"); however, such shares are subject to a CDSL of 1% if
redeemed within eighteen months of purchase.
SFSI shall pay broker/dealers, from its own resources, a fee on NAV sales,
calculated as follows: 1.00% of NAV sales up to but not including $2 million;
.80% of NAV sales from $2 million up to but not including $3 million; .50% of
NAV sales from $3 million up to but not including $5 million; and .25% of NAV
sales from $5 million
12
<PAGE>
and above. The calculation of the fee will be based on assets held by a "single
person" as defined below.
SFSI shall also pay broker/dealers, from its own resources, a fee on assets
of certain investments in Class A shares of the Seligman Mutual Funds
participating in an "eligible employee benefit plan" (as defined below under
"Special Programs") that are attributable to the particular broker/dealer. The
shares eligible for the fee are those on which an initial sales load was not
paid because either the participating eligible employee benefit plan has at
least (i) $500,000 invested in the Seligman Mutual Funds or (ii) 50 eligible
employees to whom such plan is made available. Class A shares representing only
an initial purchase of Seligman Cash Management Fund are not eligible for the
fee. Such shares will become eligible for the fee once they are exchanged for
shares of another Seligman Mutual Fund. The payment is based on cumulative sales
for each Plan during a single calendar year, or portion thereof. The payment
schedule, for each calendar year, is as follows: 1.00% of sales up to but not
including $2 million; .80% of sales from $2 million up to but not including $3
million; .50% of sales from $3 million up to but not including $5 million; and
.25% of sales from $5 million and above.
REDUCED SALES LOADS. Reductions in sales loads apply to purchases of Class
A shares by a "single person," including an individual, members of a family unit
comprising husband, wife and minor children purchasing securities for their own
account, or a trustee or other fiduciary purchasing for a single fiduciary
account or single trust. Purchases made by a trustee or other fiduciary for a
fiduciary account may not be aggregated with purchases made on behalf of any
other fiduciary or individual account.
Shares purchased without an initial sales load in accordance with the sales
load schedule or pursuant to a Volume Discount, Right of Accumulation or Letter
of Intent are subject to a CDSL of 1% on redemptions within eighteen months of
purchase.
o VOLUME DISCOUNTS are provided if the total amount being invested in Class
A shares of the Fund alone, or in any combination of shares of the Seligman
Mutual Funds that are sold with an initial sales load reaches levels indicated
in the sales load schedule.
o THE RIGHT OF ACCUMULATION allows an investor to combine the amount being
invested in shares of any Seligman Mutual Fund sold with an initial sales load
with the total net asset value of shares sold with an initial sales load,
including shares of Seligman Cash Management Fund that were acquired by the
investor through an exchange of shares of another Seligman Mutual Fund on which
there was an initial sales load, to determine reduced sales loads in accordance
with the sales load schedule. An investor or a dealer purchasing shares on
behalf of an investor must indicate whether the investor has existing accounts
when making investments or opening new accounts.
o A LETTER OF INTENT allows an investor to purchase Class A shares over a
13-month period at reduced initial sales loads, based upon the total amount of
shares the investor expresses an interest in purchasing plus the total net asset
value of shares of the other Seligman Mutual Funds already owned by such
investor that were sold with an initial sales load and the total net asset value
of shares of Seligman Cash Management Fund that were acquired by an investor
through an exchange of shares of another Seligman Mutual Fund on which there was
an initial sales load. An investor or a dealer purchasing Class A shares on
behalf of an investor must indicate whether the investor has existing accounts
when making investments or opening new accounts. For more information concerning
terms of Letters of Intent, see "Terms and Conditions."
SPECIAL PROGRAMS. The Fund may sell Class A shares at net asset value to
present and retired directors, trustees, officers, employees and their spouses
(and family members of the foregoing) of the Fund, the other investment
companies in the Seligman Group, the Manager and other companies affiliated with
the Manager. Family members are defined to include lineal descendants and lineal
ancestors, siblings (and their spouses and children) and any company or
organization controlled by any of the foregoing. Such sales also may be
13
<PAGE>
made to employee benefit and thrift plans for such persons and to any investment
advisory, custodial, trust or other fiduciary account managed or advised by the
Manager or any affiliate.
Class A shares also may be issued without an initial sales load in
connection with the acquisition of cash and securities owned by other investment
companies; to any registered unit investment trust which is the issuer of
periodic payment plan certificates, the net proceeds of which are invested in
Fund shares; to separate accounts established and maintained by an insurance
company which are exempt from registration under Section 3(c)(11) of the 1940
Act; to registered representatives and employees (and their spouses and minor
children) of any dealer that has a sales agreement with SFSI; to financial
institution trust departments; to registered investment advisers exercising
discretionary investment authority with respect to the purchase of Fund shares;
to accounts of financial institutions or broker/dealers that charge account
management fees, provided the Manager or one of its affiliates has entered into
an agreement with respect to such accounts; pursuant to sponsored arrangements
with organizations which make recommendations to, or permit group solicitation
of, its employees, members or participants in connection with the purchase of
shares of the Fund; to other investment companies in the Seligman Group in
connection with a deferred fee arrangement for outside directors; and to
"eligible employee benefit plans" which have at least (i) $500,000 invested in
the Seligman Group of Mutual Funds or (ii) 50 eligible employees to whom such
plan is made available. "Eligible employee benefit plan" means any plan or
arrangement, whether or not tax qualified, which provides for the purchase of
Fund shares. Sales of shares to such plans must be made in connection with a
payroll deduction system of plan funding or other system acceptable to Seligman
Data Corp.
Section 403(b) plans sponsored by public educational institutions are not
eligible for net asset value purchases based on the aggregate investment made by
the plan or number of eligible employees. Employee benefit plans eligible for
net asset value sales, as described above, will be subject to a CDSL of 1% for
terminations at the plan level only, on redemptions of shares purchased within
eighteen months prior to plan termination. Sales pursuant to a 401(k) alliance
program which has an agreement with SFSI are available at net asset value and
are not subject to a CDSL.
CLASS B SHARES. Class B shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within six years of purchase at
rates set forth in the table below, charged as a percentage of the current net
asset value or the original purchase price, whichever is less.
YEARS SINCE PURCHASE CDSL
- ----------------- -----
less than 1 year ...................................................... 5%
1 year or more but less than 2 years................................... 4%
2 years or more but less than 3 years.................................. 3%
3 years or more but less than 4 years.................................. 3%
4 years or more but less than 5 years.................................. 2%
5 years or more but less than 6 years.................................. 1%
6 years or more........................................................ 0%
Class B shares are also subject to an annual distribution fee of 75% and an
annual service fee of up to .25% of the average daily net asset value of the
Class B shares. SFSI will make a 4% payment to dealers in respect of purchases
of Class B shares. Approximately eight years after purchase, Class B shares will
convert automatically into Class A shares, which are subject to an annual
service fee of .25% but no distribution fee. Shares purchased through
reinvestment of dividends and distributions on Class B shares also will convert
automatically to Class A shares along with the underlying shares on which they
were earned. Conversion occurs at the end of the month which precedes the eighth
anniversary of the purchase date. If Class B shares of the Fund are exchanged
for Class B shares of another Seligman Mutual Fund, the conversion period
applicable to the Class B shares acquired in the exchange will apply, and the
holding period of the shares exchanged will be tacked onto the holding period of
the shares acquired. Class B shareholders of the Fund exercising the exchange
privilege will continue to be subject to the Fund's CDSL schedule if such
schedule is higher or longer than the CDSL schedule relating to the new Class B
shares. In addition, Class B shares of the Fund acquired by exchange will be
subject to the Fund's CDSL schedule if such schedule is
14
<PAGE>
higher or longer than the CDSL schedule relating to the Class B shares of the
fund from which the exchange has been made.
CLASS D SHARES. Class D shares are sold without an initial sales load but
are subject to a CDSL if the shares are redeemed within one year, an annual
distribution fee of up to .75% and an annual service fee of up to .25%, of the
average daily net asset value of the Class D shares. SFSI will make a 1% payment
to dealers in respect of purchases of Class D shares. Unlike Class B shares,
Class D shares do not automatically convert to Class A shares after eight years.
CONTINGENT DEFERRED SALES LOAD. A CDSL will be imposed on redemptions of
Class B or Class D shares which were purchased during the preceding six years
(for Class B shares) or twelve months (for Class D shares). The amount of any
CDSL will initially be used by SFSI to defray the expense of the payment of 4%
(in the case of Class B shares) or 1% (in the case of Class D shares) made by it
to Service Organizations (as defined under "Administration, Shareholder Services
And Distribution Plan") at the time of sale. Pursuant to an agreement with FEP
Capital, L.P. ("FEP") to fund payments in respect of Class B shares, SFSI has
agreed to sell any Class B CDSL to FEP.
A CDSL of 1% will also be imposed on any redemption of Class A shares
purchased during the preceding eighteen months if such shares were acquired at
net asset value pursuant to the sales load schedule provided under "Class A
Shares--Initial Sales Load." Employee benefit plans eligible for net asset value
sales as described above under "Special Programs" may be subject to a CDSL of 1%
for terminations at the plan level only, on redemptions of shares purchased
within eighteen months prior to plan termination.
The 1% CDSL normally imposed on redemptions of certain Class A shares
(i.e., those purchased during the preceding eighteen months at net asset value
pursuant to the sales load schedule provided under "Class A Shares--Initial
Shares Load") will be waived on shares that were purchased through Dean Witter
Reynolds, Inc. ("Dean Witter") by certain Chilean institutional investors (i.e.
pension plans, insurance companies and mutual funds). Upon redemption of such
shares within an eighteen-month period, Dean Witter will reimburse SFSI a pro
rata portion of the fee it received from SFSI at the time of sale of such
shares.
To minimize the application of a CDSL to a redemption, shares acquired
pursuant to the investment of dividends and capital gain distributions (which
are not subject to a CDSL) will be redeemed first; followed by shares held for a
period of time longer than the applicable CDSL period. Shares held for the
longest period of time within the applicable CDSL period will then be redeemed.
Additionally, for those shares determined to be subject to a CDSL, the CDSL will
be assessed on the current net asset value or original purchase price, whichever
is less. No CDSL will be imposed on shares acquired through the investment of
dividends of distributions from any Class A, Class B or Class D shares of mutual
funds in the Seligman Group.
For example, assume an investor purchased 100 Class D shares in January at
a price of $10.00 per share. During the first year, 5 additional Class D shares
were acquired through investment of dividends and distributions. In January of
the following year, an additional 50 Class D shares are purchased at a price of
$12.00 per share. In March of that year, the investor chooses to redeem
$1,500.00 from the account which now holds 155 Class D shares with a total value
of $1,898.75 ($12.25 per share). The CDSL for this transaction would be
calculated as follows:
Total shares to be redeemed
(122.449 @ $12.25) as follows:.......................... $1,500.00
=========
Dividend/Distribution shares
(5 @ $12.25)............................................ $ 61.25
Shares over 1 year old
(100 @ $12.25).......................................... 1,225.00
Shares less than 1 year old subject to
CDSL (17.449 @ $12.25).................................. 213.75
---------
Gross proceeds of redemption................................ $1,500.00
Less CDSL (17.449 shares @ $12.00 =
$209.39 x 1% = $2.09)................................... (2.09)
---------
Net proceeds of redemption.................................. $1,497.91
=========
For federal income tax purposes, the amount of the CDSL will reduce the
gain or increase the loss, as the case may be, on the amount recognized on the
redemption of shares.
15
<PAGE>
The CDSL will be waived or reduced in the following instances:
(a) on redemptions following the death or disability (as defined in section
72(m)(7) of the Internal Revenue Code of 1986, as amended (the "Code")) of a
shareholder or beneficial owner; (b) in connection with (i) distributions from
retirement plans qualified under section 401(a) of the Code when such
redemptions are necessary to make distributions to plan participants (such
payments include, but are not limited to, death, disability, retirement, or
separation of service), (ii) distributions from a custodial account under
section 403 (b)(7) of the Code or an individual retirement account (an "IRA")
due to, death, disability, minimum distribution requirements after attainment of
age 701/2 or, for accounts established prior to January 1, 1998, attainment of
age 591/2, and (iii) a tax-free return of an excess contribution to an IRA; (c)
in whole or in part, in connection with shares sold to current and retired
Directors of the Fund; (d) in whole or in part, in connection with shares sold
to any state, county, or city or any instrumentality, department, authority, or
agency thereof, which is prohibited by applicable investment laws from paying a
sales load or commission in connection with the purchase of shares of any
registered investment management company; (e) in whole or in part, in connection
with automatic cash withdrawals; (f) in connection with participation in the
Merrill Lynch Small Market 401(k) Program; and (g) in connection with the
redemption of shares of the Fund if the Fund is combined with another mutual
fund in the Seligman Group, or another similar reorganization transaction.
If, with respect to a redemption of any Class A, Class B or Class D shares
sold by a dealer, the CDSL is waived because the redemption qualifies for a
waiver as set forth above, the dealer shall remit to SFSI promptly upon notice,
an amount equal to the payment or a portion of the payment made by SFSI at the
time of sale of such shares.
SFSI may from time to time assist dealers by, among other things, providing
sales literature to, and holding informational programs for the benefit of,
dealers' registered representatives. Dealers may limit the participation of
registered representatives in such informational programs by means of sales
incentive programs which may require the sale of minimum dollar amounts of
shares of Seligman Mutual Funds. SFSI may from time to time pay a bonus or other
incentive to dealers that sell shares of the Seligman Mutual Funds. In some
instances, these bonuses or incentives may be offered only to certain dealers
which employ registered representatives who have sold or may sell a significant
amount of shares of the Fund and/or certain other mutual funds managed by the
Manager during a specified period of time. Such bonus or other incentive may
take the form of payment for travel expenses, including lodging, incurred in
connection with trips taken by qualifying registered representatives and members
of their families to places within or outside the United States. The cost to
SFSI of such promotional activities and payments shall be consistent with the
rules of the National Association of Securities Dealers, Inc., as then in
effect.
TELEPHONE TRANSACTIONS
A shareholder with telephone transaction privileges, AND THE SHAREHOLDER'S
BROKER/DEALER REPRESENTATIVE, has the ability to effect the following
transactions via telephone: (i) redemption of Fund shares with proceeds sent to
address of record (up to $50,000 per day per fund account), (ii) exchange of
Fund shares for shares of the same class of another Seligman Mutual Fund, (iii)
change of a dividend and/or capital gain distribution option, and (iv) change of
address. All telephone transactions are effected through Seligman Data Corp. at
(800) 221-2450.
Unless an election is made otherwise on the Account Application, a
shareholder and the shareholder's broker/dealer of record, as designated on the
Account Application, will automatically receive telephone services.
FOR INVESTORS WHO PURCHASE SHARES THROUGH A BROKER/DEALER: Telephone
services for a shareholder and the shareholder's broker/dealer representative
may be elected by completing a supplemental election application available from
the broker-dealer of record.
FOR ACCOUNTS REGISTERED AS IRAS: Telephone services will include only
exchanges or address changes.
FOR CORPORATIONS OR GROUP RETIREMENT PLANS: Telephone redemptions are
16
<PAGE>
not permitted. Group retirement plans that may allow plan participants to place
telephone exchanges directly with the Fund must first provide a letter of
authorization signed by the plan custodian or trustee, and provide a telephone
services election form signed by each plan participant. Additionally, group
retirement plans are not permitted to change a dividend or gain distribution
option.
All Seligman Mutual Fund accounts with the same account number (i.e.,
registered exactly the same), including any new fund in which the shareholder
invests in the future, will automatically include telephone services if the
existing account has telephone services. Telephone services may also be elected
at any time on a supplemental telephone services election form.
For accounts registered jointly (such as joint tenancies, tenants in common
and community property registrations), each owner, by accepting or requesting
telephone services, authorizes each of the other owners to effect telephone
transactions on his or her behalf.
During times of drastic economic or market changes, a shareholder or the
shareholder's representative may experience difficulty in contacting Seligman
Data Corp. to request a redemption or exchange of Fund shares via telephone. In
these circumstances, the shareholder should consider using other redemption or
exchange procedures. (See "Redemption of Shares" below.) Use of these other
redemption or exchange procedures may result in the request being processed at a
later time than if a telephone transaction had been used, and the Fund's net
asset value may fluctuate during such periods.
The Fund and Seligman Data Corp. will employ reasonable procedures to
confirm that instructions communicated by telephone are genuine. These will
include recording all telephone calls requesting account activity, requiring
that the caller provide certain requested personal and/or account information at
the time of the call for the purpose of establishing the caller's identity, and
sending a written confirmation of redemptions, exchanges or address changes to
the address of record each time activity is initiated by telephone. As long as
the Fund and Seligman Data Corp. follow instructions communicated by telephone
that were reasonably believed to be genuine at the time of their receipt,
neither they nor any of their affiliates will be liable for any loss to the
shareholder caused by an unauthorized transaction. In any instance where the
Fund or Seligman Data Corp. is not reasonably satisfied that instructions
received by telephone are genuine, the requested transaction will not be
executed, and neither they nor any of their affiliates will be liable for any
losses which may occur due to a delay in implementing the transaction. If the
Fund or Seligman Data Corp. does not follow the procedures described above, the
Fund or Seligman Data Corp. may be liable for any losses due to unauthorized or
fraudulent instructions. Telephone transactions must be effected through a
representative of Seligman Data Corp., I.E., requests may not be communicated
via Seligman Data Corp.'s automated telephone answering system. Shareholders, of
course, may refuse or cancel telephone services. Telephone services may be
terminated by a shareholder at any time by sending a written request to Seligman
Data Corp. TELEPHONE SERVICES MAY NOT BE ESTABLISHED BY A SHAREHOLDER'S
BROKER/DEALER WITHOUT THE WRITTEN AUTHORIZATION OF THE SHAREHOLDER. Written
acknowledgment of the addition of telephone services to an existing account or
termination of telephone transaction services will be sent to the shareholder at
the address of record.
REDEMPTION OF SHARES
A shareholder may redeem shares held in book credit ("uncertificated") form
without charge, except a CDSL, if applicable, at any time by SENDING A WRITTEN
REQUEST to Seligman Data Corp., P.O. Box 3947, New York, NY 10008-3947; or if
request is being sent by overnight delivery service, to 100 Park Avenue, New
York, NY 10017. The redemption request must be signed by all persons in whose
name the shares are registered. A shareholder may redeem shares that are not in
book credit form without charge, except a CDSL, if applicable by surrendering
certificates in proper form to the same address. Certificates should be sent
certified or registered mail, return receipt is advisable (may increase mailing
time). Share certificates must be endorsed for transfer or accompanied by an
endorsed stock power signed by the person(s) whose name(s) appear(s) on the face
of the certificate. The shareholder's letter of instruction or en-
17
<PAGE>
dorsed stock power should specify the Fund name, account number, class of shares
(A, B or D) and the number of shares or dollar amount to be redeemed. The Fund
cannot accept conditional redemption requests (i.e., requests to sell shares at
a specific price or on a future date).
If the redemption proceeds are (i) $50,000 or more, (ii) to be paid to
someone other than the shareholder of record (regardless of the amount) or (iii)
to be mailed to other than the address of record (regardless of the amount), the
signature(s) of the shareholder(s) must be guaranteed by an eligible financial
institution including, but not limited to, the following: banks, trust
companies, credit unions, securities brokers and dealers, savings and loan
associations and participants in the Securities Transfer Association Medallion
Program (STAMP), the Stock Exchanges Medallion Program (SEMP) or the New York
Stock Exchange Medallion Signature Program (MSP). The Fund reserves the right to
reject a signature guarantee where it is believed that the Fund will be placed
at risk by accepting such guarantee. A signature guarantee is also necessary in
order to change the account registration. Notarization by a notary public is not
an acceptable signature guarantee. ADDITIONAL DOCUMENTATION MAY BE REQUIRED BY
SELIGMAN DATA CORP. IN THE EVENT OF A REDEMPTION BY A CORPORATION, EXECUTOR,
ADMINISTRATOR, TRUSTEE, CUSTODIAN OR RETIREMENT PLAN. FOR FURTHER INFORMATION
WITH RESPECT TO REDEMPTION REQUIREMENTS, PLEASE CONTACT THE SHAREHOLDER SERVICES
DEPARTMENT OF SELIGMAN DATA CORP. FOR ASSISTANCE.
In the case of Class A shares (except for shares purchased without an
initial sales load due to the size of the purchase), and in the case of Class B
shares redeemed after six years and of Class D shares redeemed after one year, a
shareholder will receive the net asset value per share next determined after
receipt of a request in good order. If Class A shares which were purchased
without an initial sales load because the purchase amount was $1,000,000 or more
are redeemed within eighteen months of purchase, a shareholder will receive the
net asset value per share next determined after receipt of a request in good
order, less a CDSL of 1% described under "Purchase Of Shares--Class A
shares--Initial Sales Load" above. If Class B shares are redeemed within six
years of purchase, a shareholder will receivE the net asset value per share next
determined after receipt of a request in good order less the applicable CDSL as
described under "Purchase Of Shares--Class B shares" above. If Class D shares
are redeemed within one year of purchase, a shareholder will receive the net
asset value per share next determined after receipt of a request in good order,
less a CDSL of 1% as described under "Purchase of Shares--Class D Shares" above.
A shareholder also may "sell" shares to the Fund through an investment
dealer and, in that way, be certain, providing the order is timely, of receiving
the net asset value established at the end of the day on which the dealer is
given the repurchase order (less any applicable CDSL in the case of Class D
shares). The Fund makes no charge for this transaction, but the unaffiliated
dealer may charge a service fee. "Sell" or repurchase orders received from an
authorized dealer before the close of regular trading on the NYSE (normally,
4:00 p.m. Eastern Time) and received by SFSI, the repurchase agent, before the
close of business on the same day will be executed at the net asset value per
share determined as of the close of the NYSE on that day, less any applicable
CDSL. Repurchase orders received from authorized dealers after the close of the
NYSE or not received by SFSI prior to the close of business will be executed at
the net asset value determined as of the close of the NYSE on the next trading
day, less any applicable CDSL. Shares held in a "street name" account with a
broker/dealer may be sold to the Fund only through a broker/dealer.
TELEPHONE REDEMPTIONS. Telephone redemptions of uncertificated shares may
be made once per day, in an amount of up to $50,000 per fund account. Proceeds
will be sent to the address of record. Telephone redemption requests received by
Seligman Data Corp. at (800) 221-2450 by the close of regular trading on the
NYSE (normally, 4:00 p.m. Eastern Time) will be processed at the Fund's net
asset value determined as of the close of business on that day. Redemption
requests by telephone will not be accepted within 30 days following an address
change. IRAs, group retirement plans, corporations and trusts for which the name
of the current trustee does not appear in the account registration are not
eligible for telephone redemptions. The Fund reserves the right to suspend or
terminate its telephone redemption service at any time without notice.
18
<PAGE>
For more information about telephone redemptions, and the circumstances
under which shareholders may bear the risk of loss for a fraudulent transaction,
see "Telephone Transactions" above.
GENERAL. With respect to shares redeemed, a check for the proceeds, less
any applicable CDSL, will be sent to the shareholder's address of record within
seven calendar days after acceptance of the redemption order and will be made
payable to all of the registered owners on the account. With respect to shares
repurchased by the Fund, a check for the proceeds will be sent to the investment
dealer within seven calendar days after acceptance of the repurchase order and
will be made payable to the investment dealer. Payment of redemption proceeds
will be delayed on redemptions of shares purchased by check (unless certified)
until Seligman Data Corp. receives notice that the check has cleared, which may
be up to 15 days from the credit of such shares to the shareholder's account. No
interest is paid on the redemption proceeds after the redemption but before the
funds are paid. The proceeds of a redemption or repurchase may be more or less
than the shareholder's cost.
The Fund reserves the right to redeem shares of the Fund owned by a
shareholder whose investment in the Fund has a value of less than a minimum
amount specified by the Fund's Board of Directors, which is presently $500.
Shareholders would be sent a notice before such redemption is processed stating
that the value of the investment in the Fund is less than the specified minimum
and that they have sixty days to make an additional investment.
REINSTATEMENT PRIVILEGE. If a shareholder redeems Class A shares and then
decides to reinvest them, or to shift the investment to one of the other
Seligman Mutual Funds, the shareholder may, within 120 calendar days of the date
of redemption, use all or any part of the proceeds of the redemption to
reinstate, free of an initial sales load, all or any part of the investment in
Class A shares of the Fund or any of the other Seligman Mutual Funds. If a
shareholder redeems shares and the redemption was subject to a CDSL, the
shareholder may reinstate the investment in shares of the same class of the Fund
or any of the other Seligman Mutual Funds within 120 calendar days of the date
of redemption and receive a credit for the applicable CDSL paid. Such investment
will be reinstated at the net asset value per share established as of the close
of the NYSE on the day the request is received. Seligman Data Corp. must be
informed that the purchase represents a reinstated investment. REINSTATED SHARES
MUST BE REGISTERED EXACTLY AND BE OF THE SAME CLASS AS THE SHARES PREVIOUSLY
REDEEMED; AND THE FUND'S MINIMUM INITIAL INVESTMENT AMOUNT MUST BE MET AT THE
TIME OF REINSTATEMENT.
Generally, exercise of the Reinstatement Privilege does not alter the
federal income tax status of any capital gain realized on a sale of Fund shares,
but to the extent that any shares are sold at a loss and the proceeds are
reinvested in shares of the same fund, some or all of the loss will not be
allowed as a deduction, depending upon the percentage of the proceeds
reinvested.
ADMINISTRATION, SHAREHOLDER SERVICES
AND DISTRIBUTION PLAN
Under the Fund's Administration, Shareholder Services and Distribution Plan
(the "Plan") the Fund may pay to SFSI an administration, shareholder services
and distribution fee in respect of the Fund's Class A, Class B and Class D
shares. Payments under the Plan may include, but are not limited to: (i)
compensation to securities dealers and other organizations ("Service
Organizations") for providing distribution assistance with respect to assets
invested in the Fund, (ii) compensation to Service Organizations for providing
administration, accounting and other shareholder services with respect to Fund
shareholders, and (iii) otherwise promoting the sale of shares of the Fund,
including paying for the preparation of advertising and sales literature and the
printing and distribution of such promotional materials and prospectuses to
prospective investors and defraying SFSl's costs incurred in connection with its
marketing efforts with respect to shares of the Fund. The Manager, in its sole
discretion, may also make similar payments to SFSI from its own resources, which
may include the management fee that the Manager receives from the Fund.
Under the Plan, the Fund reimburses SFSI for its expenses with respect to
Class A shares at an annual rate of up to .25% of the average daily net asset
value
19
<PAGE>
of Class A shares. It is expected that the proceeds from the fee in respect of
Class A shares will be used primarily to compensate Service Organizations which
enter into agreements with SFSI. Such Service Organizations will receive from
SFSI a continuing fee of up to .25% on an annual basis, payable quarterly, of
the average daily net assets of Class A shares attributable to the particular
Service Organization for providing personal service and/or the maintenance of
shareholder accounts. The fee payable from time to time is, within such limit,
determined by the Directors of the Fund.
The Plan, as it relates to Class A shares, was approved by the Directors on
March 19, 1992 and by the shareholders of the Fund at a special meeting held on
May 1,1992. The Plan became effective on June 1,1992. The total amount paid for
the year ended September 30, 1997 in respect of the Fund's Class A shares
pursuant to the Plan was equal to .22% of the Class A shares' average daily net
assets.
Under the Plan, the Fund reimburses SFSI for its expenses with respect to
Class B and Class D shares at an annual rate of up to 1% of the average daily
net asset value of the Class B and Class D shares. Proceeds from the Class B
distribution fees are used to pay Service Organizations a continuing fee of up
to .25% on an annual basis of the average net asset value of Class B shares
attributable to particular Service Organizations for providing personal service
and/or the maintenance of shareholder accounts and will also be used by SFSI to
defray the expense of the payment of 4% made by it to Service Organizations at
the time of sale of Class B shares. Proceeds from the Class D distribution fees
are used primarily to compensate Service Organizations for administration,
shareholder services and distribution assistance (including a continuing fee of
up to .25% on an annual basis of the average daily net asset value of Class D
shares attributable to particular Service Organizations for providing personal
service and/or the maintenance of shareholder accounts) and will initially be
used by SFSI to defray the expense of the payment or 1% made by it to Service
Organizations at the time of sale of Class D shares. The amounts expended by
SFSI in any one year upon the initial purchase of Class B and Class D shares may
exceed the amounts received by it from Plan payments retained. Expenses of
administration, shareholder services and distribution of Class B and Class D
shares in one fiscal year of the Fund may be paid from Class B and Class D Plan
fees, respectively, received from the Fund in any other fiscal year.
The Plan, as it relates to Class B shares was approved by the Directors on
March 21, 1996 and became effective April 22, 1996. The Plan as it relates to
Class D shares, was approved by the Directors on March 18, 1993 and became
effective May 1, 1993. The total amount paid for the year ended September 30,
1997 by the Fund's Class B and Class D shares pursuant to the Plan was 1% per
annum of the average daily net assets of Class B and Class D shares. The Plan is
reviewed by the Directors annually.
Seligman Services, Inc. ("SSI"), an affiliate of the Manager, is a limited
purpose broker/dealer. SSI acts as a broker/dealer of record for shareholder
accounts that do not have a designated broker/dealer of record and receives
compensation from the Fund pursuant to the Plan for providing personal services
and account maintenance to such accounts and other distribution services.
EXCHANGE PRIVILEGE
A shareholder of the Fund may, without charge, exchange at net asset value
any part or all of an investment in the Fund for shares of any of the other
mutual funds in the Seligman Group. Exchanges may be made by mail, or by
telephone if the shareholder has telephone services.
Class A, Class B and Class D shares may be exchanged only for Class A,
Class B and Class D shares, respectively, of another Seligman Mutual Fund on the
basis of relative net asset value.
If shares that are subject to a CDSL are exchanged for shares of another
Seligman Mutual Fund, then for purposes of assessing the CDSL payable upon
disposition of the exchanged shares, the applicable holding period shall be
reduced by the period for which the original shares were held.
Class B shareholders of the Fund exercising the exchange privilege will
continue to be subject to the
20
<PAGE>
Fund's CDSL schedule if such schedule is higher or longer than the CDSL schedule
relating to the new Class B shares. In addition, Class B shares of the Fund
acquired by exchange will be subject to the Fund's CDSL schedule if such
schedule is higher or longer than the CDSL schedule relating to the Class B
shares of the fund from which such shares were exchanged.
The Seligman Mutual Funds available under the Exchange Privilege are:
o SELIGMAN CAPITAL FUND, INC. seeks aggressive capital appreciation.
Current income is not an objective.
o SELIGMAN CASH MANAGEMENT FUND, INC. invests in high-quality money market
instruments. Shares are sold at net asset value.
o SELIGMAN COMMON STOCK FUND, INC. seeks favorable current income and
long-term growth of both income and capital value without exposing capital to
undue risk.
o SELIGMAN COMMUNICATIONS AND INFORMATION FUND, INC. invests in shares of
companies in the communications, information and related industries to produce
capital gain. Income is not an objective.
o SELIGMAN GROWTH FUND, INC. seeks longer term growth in capital value and
an increase in future income.
o SELIGMAN HENDERSON GLOBAL FUND SERIES, INC. consists of the Seligman
Henderson Emerging Markets Growth Fund, Seligman Henderson Global Growth
Opportunities Fund, the Seligman Henderson Global Smaller Companies Fund, the
Seligman Henderson Global Technology Fund and the Seligman Henderson
International Fund, all of which seek long-term capital appreciation primarily
through investing in companies either globally or internationally.
o SELIGMAN HIGH INCOME FUND SERIES seeks high current income by investing
in debt securities. The Fund consists of the Seligman U.S. Government Securities
Series and the Seligman High-Yield Bond Series.
o SELIGMAN INCOME FUND, INC. seeks high current income and the possibility
of improvement of future income and capital value.
o SELIGMAN MUNICIPAL FUND SERIES, INC. consists of several State Series and
a National Series. The National Municipal Series seeks to provide maximum income
exempt from regular federal income taxes; individual state series, each seeking
to maximize income exempt from regular federal income taxes and from personal
income taxes in designated states, are available for Colorado, Georgia,
Louisiana, Maryland, Massachusetts, Michigan, Minnesota, Missouri, New York,
Ohio, Oregon and South Carolina. (Does not currently offer Class B shares.)
o SELIGMAN MUNICIPAL SERIES TRUST includes the Seligman California
Municipal Quality Series, the Seligman California Municipal High-Yield Series,
the Seligman Florida Municipal Series and the Seligman North Carolina Municipal
Series, each of which invests in municipal securities of its designated state.
(Does not currently offer Class B shares.)
o SELIGMAN NEW JERSEY MUNICIPAL FUND, INC. invests in investment grade New
Jersey municipal securities. (Does not currently offer Class B shares.)
o SELIGMAN PENNSYLVANIA MUNICIPAL FUND SERIES invests in investment grade
Pennsylvania municipal securities. (Does not currently offer Class B shares.)
o SELIGMAN VALUE FUND SERIES, INC. consists of the Seligman Large-Cap Value
Fund and the Seligman Small-Cap Value Fund, each of which seeks long-term
capital appreciation by investing in equity securities of value companies
primarily located in the U.S.
All permitted exchanges will be based on the net asset values of the
respective funds determined at the close of the NYSE on that day. Telephone
requests for exchanges received by the close of regular trading on the NYSE
(normally, 4:00 p.m. Eastern Time) by Seligman Data Corp. at (800) 221-2450 will
be processed as of the close of business on that day. Requests received after
the close of regular trading on the NYSE (normally, 4:00 p.m. Eastern Time) will
be processed at the net asset values per share calculated the following business
day. The registration of an account into which an exchange is made must be
identical to the registration of the account from which shares are exchanged.
When establishing a new account by an exchange of shares, the shares being
exchanged must have a value of at
21
<PAGE>
least the minimum initial investment required by the fund into which the
exchange is being made. THE METHOD OF RECEIVING DISTRIBUTIONS, UNLESS OTHERWISE
INDICATED, WILL BE CARRIED OVER TO THE NEW FUND ACCOUNT, AS WILL TELEPHONE
SERVICES. ACCOUNT SERVICES, SUCH AS INVEST-A-CHECK(R) SERVICE, DIRECTED
DIVIDENDS AND AUTOMATIC CASH WITHDRAWAL SERVICE WILL NOT BE CARRIED OVER TO THE
NEW FUND ACCOUNT UNLESS SPECIFICALLY REQUESTED AND PERMITTED BY THE NEW FUND.
Exchange orders may be placed to effect an exchange of a specific number of
shares, an exchange of shares equal to a specific dollar amount or an exchange
of all shares held. Shares for which certificates have been issued may not be
exchanged via telephone and may be exchanged only upon receipt of an exchange
request together with certificates representing shares to be exchanged in proper
form.
The Exchange Privilege via mail is generally applicable to investments in
group retirement plans, although some restrictions may apply. The terms of the
exchange offer described herein may be modified at any time; and not all of the
mutual funds in the Seligman Group are available to residents of all states.
Before making any exchange, a shareholder should contact an authorized
investment dealer or Seligman Data Corp. to obtain prospectuses of any of the
Seligman Mutual Funds.
A broker/dealer representative of record will be able to effect exchanges
on behalf of a shareholder only if the shareholder has telephone services or the
broker/dealer has entered into a Telephone Exchange Agreement with SFSI wherein
the broker/dealer must agree to indemnify SFSI and the Seligman Mutual Funds
from any loss or liability incurred as a result of the acceptance of telephone
exchange orders.
Written confirmation of all exchanges will be forwarded to the shareholder
to whom the exchanged shares are registered and a duplicate confirmation will be
sent to the broker/dealer of record listed on the account. SFSI reserves the
right to reject any telephone exchange request. Any rejected telephone exchange
order may be processed by mail. For more information about telephone exchange
privileges, which, unless objected to, are assigned to certain shareholders
automatically, and the circumstances under which shareholders may bear the risk
of loss for a fraudulent transaction, see "Telephone Transactions" above.
Exchanges of shares are sales and may result in a gain or loss for federal
income tax purposes.
FURTHER INFORMATION ABOUT TRANSACTIONS IN THE FUND
Because excessive trading (including short-term, "market timing" trading)
can hurt the Fund's performance, the Fund may refuse any exchange (1) from any
shareholder account from which there have been two exchanges in the preceding
three month period, or (2) where the exchanged shares equal in value the lesser
of $1,000,000 or 1% of the Fund's net assets. The Fund may also refuse any
exchange or purchase order from any shareholder account if the shareholder or
the shareholder's broker/dealer has been advised that previous patterns of
purchases and redemptions or exchanges have been considered excessive. Accounts
under common ownership or control, including those with the same taxpayer ID
number and those administered so as to redeem or purchase shares based upon
certain predetermined market indicators, will be considered one account for this
purpose. Additionally, the Fund reserves the right to refuse any order for the
purchase of shares.
DIVIDENDS AND GAIN DISTRIBUTIONS
Dividends payable from the Fund's net investment income, if any, are
distributed annually. Payments vary in amount depending on income received from
portfolio securities and the cost of operations. The Fund distributes
substantially all of any taxable net long-term and short-term gain realized on
investments to shareholders at least annually; such distributions will generally
be taxable to shareholders in the year in which they are declared by the Fund if
paid before February 1 of the following year.
Shareholders may elect: (1) to receive both dividends and gain
distributions in shares; (2) to receive dividends in cash and gain distributions
in shares; or (3) to receive both dividends and gain distributions in cash.
22
<PAGE>
Cash dividends and gain distributions are paid by check. In the case of
prototype retirement plans, dividends and capital gain distributions are
reinvested in additional shares. Unless another election is made, dividends and
capital gain distributions will be credited to shareholder accounts in
additional shares of the Fund. Shares acquired through a dividend or gain
distribution and credited to a shareholder's account are not subject to an
initial sales load or a CDSL. Dividends and gain distributions paid in shares
are invested on the payable date using the net asset value of the ex-dividend
date. Shareholders may elect to change their dividend and gain distribution
options by writing Seligman Data Corp. at the address listed below. If the
shareholder has telephone services, changes may also be telephoned to Seligman
Data Corp. between 8:30 a.m. and 6:00 p.m. Eastern time, by either the
shareholder or the broker/dealer of record on the account. For information about
telephone services, see "Telephone Transactions." These elections must be
received by Seligman Data Corp. before the record date for the dividend or
distribution in order to be effective for such dividend or gain distribution.
The per share dividends from net investment income on Class B and Class D
shares will be lower than the per share dividends on Class A shares as a result
of the higher distribution fee applicable with respect to Class B and Class D
shares. Per share dividends of the three classes may also differ as a result of
differing class expenses, if any. Distributions of net capital gains, if any,
will be paid in the same amount for Class A, Class B and Class D shares. See
"Purchase of Shares--Valuation."
Shareholders exchanging shares of a mutual fund for shares of another
Seligman Mutual Fund will continue to receive dividends and gains as elected
prior to such exchange unless otherwise specified. In the event that a
shareholder redeems all shares in an account between the record date and the
payable date, the value of dividends or gain distributions declared and payable
will be paid in cash regardless of the existing election. A transfer or exchange
of all shares (closing an account), between the record date and payable date,
will result in the value of dividends or gain distributions being paid to the
new fund account in accordance with the option on the closed account, unless
Seligman Data Corp. is instructed otherwise.
FEDERAL INCOME TAXES
The Fund intends to continue to qualify as a regulated investment company
under the Code. For each year so qualified, the Fund will not be subject to
federal income taxes on its net investment income and capital gains, if any,
realized during any taxable year, which it distributes to its shareholders,
provided that at least 90% of its net investment income and net short-term
capital gains are distributed to shareholders each year.
Dividends from net investment income and distributions from net short-term
capital gains are taxable as ordinary income to shareholders, whether received
in cash or reinvested in additional shares. To the extent designated as derived
from the Fund's dividend income that would be eligible for the dividends
received deduction if the Fund were not a regulated investment company, they are
eligible, subject to certain restrictions, for the 70% dividends received
deduction for corporations.
Distributions of net capital gains (I.E., the excess of net long-term
capital gains over any net short-term losses) are taxable as long-term capital
gain, whether received in cash or invested in additional shares, regardless of
how long shares have been held by a shareholder. Such distributions are not
eligible for the dividends received deduction allowed to corporate shareholders.
Shareholders receiving distributions in the form of additional shares issued by
the Fund will be treated for federal income tax purposes as having received a
distribution in an amount equal to the fair market value on the date of
distribution of the shares received. Individual shareholders will be subject to
federal tax on distributions of net capital gains at a maximum rate of 28% if
designated as derived from the Fund's capital gains from property held for more
than one year and at a maximum rate of 20% if designated as derived from the
Fund's capital gains from property held for more than eighteen months.
Any gain or loss realized upon a sale or redemption of shares in the Fund
by a shareholder who is not a dealer in securities will generally be treated as
a long- term capital gain or loss if the shares have been held for more than one
year and otherwise as a short-term
23
<PAGE>
capital gain or loss. Individual shareholders will be subject to federal income
tax on net capital gains at a maximum rate of 28% in respect of shares held for
more than one year and at a maximum rate of 20% in respect of shares held for
more than eighteen months. Net capital gain of a corporate shareholder is taxed
at the same rate as ordinary income. However, if shares on which a long- term
capital gain distribution has been received are subsequently sold or redeemed
and such shares have been held for six months or less, any loss realized will be
treated as long-term capital loss to the extent that it offsets the long-term
capital gain distribution. In addition, no loss will be allowed on the sale or
other disposition of shares of the Fund if, within a period beginning 30 days
before the date of such sale or disposition and ending 30 days after such date,
the holder acquires (such as through dividend reinvestment) securities that are
substantially identical to the shares of the Fund.
In determining gain or loss on shares of the Fund that are sold or
exchanged within 90 days after acquisition, a shareholder generally will not be
permitted to include in the tax basis attributable to such shares the sales load
incurred in acquiring such shares to the extent of any subsequent reduction of
the sales load by reason of the Exchange or Reinstatement Privilege offered by
the Fund. Any sales load not taken into account in determining the tax basis of
shares sold or exchanged within 90 days after acquisition will be added to the
shareholder's tax basis in the shares acquired pursuant to the Exchange or
Reinstatement Privilege.
The Fund will generally be subject to an excise tax of 4% on the amount of
any income or capital gains, above certain permitted levels, distributed to
shareholders on a basis such that such income or gain is not taxable to
shareholders in the calendar year in which it was earned by the Fund.
Furthermore, dividends declared in October, November or December, payable to
shareholders of record on a specified date in such a month and paid in the
following January will be treated as having been paid by the Fund and received
by each shareholder in December. Under this rule, therefore, shareholders may be
taxed in one year on dividends or distributions actually received in January of
the following year.
Shareholders are urged to consult their tax advisors concerning the effect
of federal income taxes in their individual circumstances.
UNLESS A SHAREHOLDER INCLUDES A CERTIFIED TAXPAYER IDENTIFICATION NUMBER
(SOCIAL SECURITY NUMBER FOR INDIVIDUALS) ON THE ACCOUNT APPLICATION AND
CERTIFIES THAT THE SHAREHOLDER IS NOT SUBJECT TO BACKUP WITHHOLDING, THE FUND IS
REQUIRED TO WITHHOLD AND REMIT TO THE U.S. TREASURY A PORTION OF DISTRIBUTIONS
AND OTHER REPORTABLE PAYMENTS TO THE SHAREHOLDER. THE RATE OF BACKUP WITHHOLDING
IS 31%. SHAREHOLDERS SHOULD BE AWARE THAT, UNDER REGULATIONS PROMULGATED BY THE
INTERNAL REVENUE SERVICE, THE FUND MAY BE FINED $50 ANNUALLY FOR EACH ACCOUNT
FOR WHICH A CERTIFIED TAXPAYER IDENTIFICATION NUMBER IS NOT PROVIDED. IN THE
EVENT THAT SUCH A FINE IS IMPOSED, THE FUND MAY CHARGE A SERVICE FEE OF UP TO
$50 THAT MAY BE DEDUCTED FROM THE SHAREHOLDER'S ACCOUNT AND OFFSET AGAINST ANY
UNDISTRIBUTED DIVIDENDS AND CAPITAL GAIN DISTRIBUTIONS. THE FUND ALSO RESERVES
THE RIGHT TO CLOSE ANY ACCOUNT WHICH DOES NOT HAVE A CERTIFIED TAXPAYER
IDENTIFICATION NUMBER.
SHAREHOLDER INFORMATION
Shareholders will be sent reports semi-annually regarding the Fund. General
information about the Fund may be requested by writing the Corporate
Communications/Investor Relations Department, J. & W. Seligman & Co.
Incorporated, 100 Park Avenue, New York, NY 10017 or telephoning the Corporate
Communications/Investor Relations Department toll-free by dialing (800) 221-7844
from all continental United States, except New York or (212) 850-1864 in New
York State and the Greater New York City area. Information about a shareholder
account (other than a retirement plan account), may be requested by writing the
Shareholder Services Department, Seligman Data Corp. at the same address or by
toll-free telephone by dialing (800) 221-2450 from all continental United
States, or (212) 682-7600 outside the continental United States. For information
about a retirement account, call Pension Plan Services toll-free by dialing
(800) 445-1777 or write Pension Plan Services, Seligman Data Corp. at the
address above. Seligman Data Corp. may be telephoned Monday
24
<PAGE>
through Friday (except holidays) between the hours of 8:30 a.m. and 6:00 p.m.
Eastern time and calls will be answered by a service representative.
24 HOUR TELEPHONE ACCESS IS AVAILABLE BY DIALING (800) 622-4597 ON A
TOUCHTONE PHONE, WHICH PROVIDES INSTANT ACCESS TO PRICE, YIELD, ACCOUNT BALANCE,
MOST RECENT TRANSACTION AND OTHER INFORMATION. IN ADDITION, ACCOUNT STATEMENTS
AND FORM 1099-DIV CAN BE ORDERED. TO INSURE PROMPT DELIVERY OF DISTRIBUTION
CHECKS, ACCOUNT STATEMENTS AND OTHER INFORMATION, SELIGMAN DATA CORP. SHOULD BE
NOTIFIED IMMEDIATELY IN WRITING OF ANY ADDRESS CHANGE. ADDRESS CHANGES MAY BE
TELEPHONED TO SELIGMAN DATA CORP. IF THE SHAREHOLDER HAS TELEPHONE SERVICES. FOR
MORE INFORMATION ABOUT TELEPHONE SERVICES, SEE "TELEPHONE TRANSACTIONS" ABOVE.
ACCOUNT SERVICES. Shareholders are sent confirmation of financial
transactions. Special investor services are available. These include:
o INVEST-A-CHECK(R) SERVICE enables a shareholder to authorize additional
purchases of shares automatically by electronic funds transfer from a savings oR
checking account if the bank that maintains the account is a member of the
Automated Clearing House ("ACH"), or by preauthorized checks to be drawn on the
shareholder's checking account at regular monthly intervals in fixed amounts of
$100 or more per fund, or regular quarterly intervals in fixed amounts of $250
or more per fund, to purchase shares. Accounts may be established concurrently
with the Invest-A-Check(R) Service only if accompanied by a check for at least
$100 in conjunction with the monthly investment option, or a check for at least
$250 in conjunction with the quarterly investment option. For investments into
the Seligman Time Horizon MatrixSM Asset Allocation Program, the minimum amount
is $500 at regular monthly intervals or $1,000 at regular quarterly intervals.
By utilizing the Invest-A-Check Service to establish an account, you are
agreeing to continue the service until the Fund's minimum investment amount is
met. If you elect to cancel the service prior to meeting the minimum, your
account may be subject to closure. (See "Terms and Conditions.")
o AUTOMATIC DOLLAR-COST-AVERAGING SERVICE permits a shareholder of Seligman
Cash Management Fund to exchange a specified amount at regular monthly intervals
in fixed amounts of $100 or more per fund, or regular quarterly intervals in
fixed amounts of $250 or more per fund, from shares of any class of the Cash
Management Fund, into shares of the same class of any other Seligman Mutual
Fund, registered in the same name. For exchanges into the Seligman Time Horizon
MatrixSM Asset Allocation Program, the minimum amount is $500 at regular monthly
intervals or $1,000 at regular quarterly intervals. The shareholder's Cash
Management Fund account must have a dollar value of at least $5,000 at the
initiation of the service and all shares must be in "book credit" form.
Exchanges will be made at the public offering price.
o DIVIDENDS FROM OTHER INVESTMENTS permits a shareholder to order dividends
payable on shares of other companies to be paid to and invested in additional
shares of the Fund or another Seligman Mutual Fund. (Dividend checks must
include the shareholder's name, account number, the name of the fund and the
class of shares in which the investment is to be made.) If the dividends are to
be invested in a new fund account, the first investment must meet the required
minimum purchase amount for such fund.
o AUTOMATIC CD TRANSFER SERVICE permits a shareholder to instruct a bank to
invest the proceeds of a maturing bank certificate of deposit ("CD") in shares
of any designated Seligman Mutual Fund. Shareholders who wish to use this
service should contact Seligman Data Corp. or a broker to obtain the necessary
documentation. Banks may charge a penalty on CD assets withdrawn prior to
maturity. Accordingly, it will not normally be advisable to liquidate a CD
before its maturity.
o AUTOMATIC CASH WITHDRAWAL SERVICE permits payments in fixed amounts of
$50 or more at regular intervals to be made to a shareholder who owns or
purchases shares worth $5,000 or more held as book credits. Holders of Class A
shares purchased at net asset value because the purchase amount was $1,000,000
or more should bear in mind that withdrawals may be subject to a 1% CDSL if made
within eighteen months of purchase of such shares. Holders of Class B and Class
D shares may elect to use this service immediately, although certain withdrawals
may be subject to CDSL. (See "Terms and Conditions.")
25
<PAGE>
o DIRECTED DIVIDENDS allows a shareholder to pay dividends to another
person or to direct the payment of such dividends to another Seligman Mutual
Fund for purchase at net asset value. Dividends on Class A, Class B and Class D
shares may be directed only to shares of the same class of another Seligman
Mutual Fund.
o OVERNIGHT DELIVERY to service shareholder requests is available for a
$15.00 fee which will be deducted from a shareholder's account, if requested.
o COPIES OF ACCOUNT STATEMENTS will be sent to each shareholder free of
charge for the current year and most recent prior year. Copies of year-end
statements for prior years are available for a fee of $10.00 per year, per
account, with a maximum charge of $150 per account. Statement requests should be
forwarded, along with a check, to Seligman Data Corp.
TAX-DEFERRED RETIREMENT PLANS. Shares of the Fund may be purchased for all
types of tax-deferred retirement plans. SFSI makes available plans, plan forms
and custody agreements for:
--Individual Retirement Accounts (IRAs);
--Savings Incentive Match Plans for Employees (Simple IRAs);
--Simplified Employee Pension Plans (SEPs);
--Section 401(k) Plans for corporations and their employees;
--Section 403(b)(7) Plans for employees of public school systems and
certain non-profit organizations who wish to make deferred compensation
arrangements; and
--Money Purchase Pension and Profit Sharing Plans for sole proprietorships,
corporations and partnerships.
These types of plans may be established only upon receipt of a written
application form. The Fund may register an IRA investment for which an account
application has not been received as an ordinary taxable account.
For more information, write Retirement Plan Services, Seligman Data Corp.,
100 Park Avenue, New York, NY 10017 or telephone toll-free (800) 445-1777 from
all continental United States. You also may receive information through an
authorized dealer.
ADVERTISING THE FUND'S PERFORMANCE
From time to time the Fund advertises its "total return" and "average
annual total return," each of which is calculated separately for Class A, Class
B and Class D shares. THESE FIGURES ARE BASED ON HISTORICAL EARNINGS AND ARE NOT
INTENDED TO INDICATE FUTURE PERFORMANCE. The "total return" shows what an
investment in shares of Class A, Class B and Class D of the Fund would have
earned over a specified period of time (for example, one, five and ten year
periods or since inception) assuming the payment of the maximum sales load, if
any (or CDSL upon redemption, if applicable), when the investment was made and
that all distributions and dividends paid by the Fund were reinvested on the
reinvestment dates during the period. The "average annual total return" is the
annual rate required for the initial payment to grow to the amount which would
be received at the end of the specified period (one, five and ten year periods
or since inception); I.E., the average annual compound rate of return. The total
return and average annual total return of Class A shares quoted from time to
time including periods through June 1,1992, do not reflect the deduction of the
administration, shareholder services and distribution fee, which if reflected
would reduce the performance quoted. The total return and average annual return
quoted from time to time for both Class A and Class D shares for periods prior
to January 1, 1996 do not reflect the increase in the management fee payable by
the Fund effective on such date, which if reflected would reduce the performance
quoted. Total return and average annual total return may also be presented
without the effect of the initial sales load or CDSL, as applicable.
From time to time, reference may be made in advertising or promotional
material to performance information, including mutual fund rankings, prepared by
Lipper Analytical Service, Inc. ("Lipper"), an independent reporting service
which monitors the performance of mutual funds. In calculating the total return
of the Fund's Class A, Class B and Class D shares, the Lipper analysis assumes
investment of all dividends and distributions paid but does not take into
account applicable sales loads. The Fund may also refer in advertisements
26
<PAGE>
or in other promotional material to articles, comments, listings and columns in
the financial press pertaining to the Fund's performance. Examples of such
financial and other press publications include BARRON'S, BUSINESS WEEK, CDA/
WIESENBERGER MUTUAL FUNDS INVESTMENT REPORT, CHRISTIAN SCIENCE MONITOR,
FINANCIAL PLANNING, FINANCIAL TIMES, FINANCIAL WORLD, FORBES, FORTUNE,
INDIVIDUAL INVESTOR, INVESTMENT ADVISOR, INVESTORS BUSINESS DAILY, KIPLINGER'S,
LOS ANGELES TIMES, MONEY MAGAZINE, MORNINGSTAR, INC., PENSION AND INVESTMENTS,
SMART MONEY, THE NEW YORK TIMES, THE WALL STREET JOURNAL, USA TODAY, U.S. NEWS
AND WORLD REPORT, WORTH MAGAZINE, WASHINGTON POST AND YOUR MONEY.
ORGANIZATION AND CAPITALIZATION
The Fund is an open-end investment company incorporated under the laws of
the state of Maryland on July 9, 1984. The Fund is authorized to issue
500,000,000 shares of capital stock, each with a par value of $0.10 divided into
three classes. Each share of the Fund's Class A, Class B and Class D common
stock is equal as to earnings, assets and voting privileges, except that each
class bears its own separate distribution and, potentially, certain other class
expenses and has exclusive voting rights with respect to any matter to which a
separate vote of any class is required by the 1940 Act or Maryland law. The Fund
has adopted a plan (the "Multiclass Plan") pursuant to Rule 18f-3 under the 1940
Act permitting the issuance and sale of multiple classes of common stock. In
accordance with the Articles of Incorporation, the Board of Directors may
authorize the creation of additional classes of common stock with such
characteristics as are permitted by the Multiclass Plan and Rule 18f-3. The 1940
Act requires that where more than one class exists, each class must be preferred
over all other classes in respect of assets specifically allocated to such
class. All shares have noncumulative voting rights for the election of
directors. Each outstanding share is fully paid and non-assessable, and each is
freely transferable. There are no liquidation, conversion or preemptive rights.
27
<PAGE>
TERMS AND CONDITIONS
GENERAL ACCOUNT INFORMATION
Investments will be made in as many shares, including fractions to the
third decimal place, as can be purchased at the net asset value plus a sales
load, if applicable, at the close of business on the day payment is received. If
a check in payment of a purchase of shares is dishonored for any reason,
Seligman Data Corp. will cancel the purchase and may redeem additional shares,
if any, held in the shareholder's account in an amount sufficient to reimburse
the Fund for any loss it may have incurred and charge a $10.00 return check fee.
Shareholders will receive dividends from investment income and any distributions
from gain realized on investments in shares or in cash according to the option
elected. Dividend and gain options may be changed by notice to Seligman Data
Corp. These option changes must be received by Seligman Data Corp. before the
record date for the dividend or distribution in order to be effective for such
dividend or distribution. Stock certificates will not be issued, unless
requested. Replacement stock certificates and certain waiver of probate
procedures will be subject to a surety fee.
INVEST-A-CHECK(R) SERVICE
The Invest-A-Check(R) Service is available to all shareholders. The
application is subject to acceptance by the shareholder's bank and Seligman Data
Corp. ThE electronic funds transfer ("ACH debit") or preauthorized check in the
amount specified will be invested in the shareholder's account on the fifth day
(unless otherwise specified) of each month (or on the prior business day if such
day of the month falls on a weekend or holiday) in which an investment is
scheduled and invested at the close of business on the same date. By utilizing
the Invest-A-Check(R) Service to establish an account, you are agreeing to
continue the Service until the Fund's minimuM investment amount is met. If you
elect to cancel the service prior to meeting the minimum, your account may be
subject to closure. If an ACH debit or preauthorized check is not honored by the
shareholder's bank, or if the value of shares held falls below the required
minimum, the Invest-A-Check(R) Service may be suspended. In thE event that a
check or ACH debit is returned uncollectable, Seligman Data Corp. will cancel
the purchase, redeem shares held in the shareholder's account for an amount
sufficient to reimburse the Fund for any loss it may have incurred as a result,
and charge a $10.00 return check fee. This fee will be deducted from the
shareholder's Account. The Invest-A-Check(R) Service may be reinstated upon
written request indicating that the cause of interruption has been corrected.
The Invest-A-Check(R) ServIce may be terminated by the shareholder or Seligman
Data Corp. at any time by written notice. The shareholder agrees to hold the
Fund and its agents free from all liability which may result from acts done In
good faith and pursuant to these terms. Instructions for establishing
Invest-A-Check(R) Service are given on the AccounT Application. In the event a
shareholder exchanges all of the shares from one Seligman Mutual Fund to
another, the Invest-A-Check(R) Service will be terminated in thE Seligman Mutual
Fund that was closed as a result of the exchange of all shares and the
shareholder must re-apply for the Invest-A-Check(R) Service in the Seligman
Mutual Fund into which the exchange was made. In the event of a partial
exchange, the Invest-A-Check(R) Service will be continued, subject to the above
conditions, in the Seligman Mutual Fund from which the exchange was made.
Accounts established in conjunction with the Invest-A-Check(R) Service must be
accompanied by a check for at least $100 in connection with the monthly
investment option or a check for at least $250 in connection with the quarterly
investment option. If the shareholder uses the Invest-A-Check(R) Service to make
an IRA or group retirement plan investment, the purchase will be credited as a
current year contribution.
AUTOMATIC CASH WITHDRAWAL SERVICE
A sufficient number of full and fractional shares will be redeemed to
provide the amount required for a scheduled payment and any applicable CDSL.
Redemptions will be made at the asset value at the close of business on the
specific day designated by the shareholder of each month (or on the prior
business day if the day specified falls on a weekend or holiday), less, in the
case of Class B or Class D shares, any applicable CDSL. Automatic withdrawal of
Class A shares which were purchased at net asset value because the purchase
amount was $1,000,000 or more may be subject to a CDSL if made within 18 months
of purchase of such shares. Under this Service, a Class B or Class D shareholder
who requests both dividends and capital gain distributions in additional shares
may withdraw up to 12%, or 10%, respectively, of the value of the Shareholder's
fund account (at the time of election) per annum, without the imposition of a
CDSL. A minimum payment amount of $50 per cycle is needed to establish this
Service. A shareholder may change the amount of scheduled payments or may
suspend payments by written notice to Seligman Data Corp. at least ten days
prior to the effective date of such a change or suspension. The service may be
terminated by the shareholder or Seligman Data Corp. at any time by written
notice. It will be terminated upon proper notification of the death or legal
incapacity of the shareholder. Continued payments in excess of dividend income
invested will reduce and ultimately exhaust capital. Withdrawals, concurrent
with purchases of shares of this or any other investment company, will be
disadvantageous to you because of the payment of duplicative sales loads, if
applicable. For this reason, additional purchases of Fund shares are discouraged
when the Withdrawal Service is in effect.
LETTER OF INTENT--CLASS A SHARES ONLY
Seligman Financial Services, Inc. will hold in escrow shares equal to 5% of
the minimum purchase amount specified. Dividends and distributions on the
escrowed shares will be paid to the shareholder or credited to the shareholder's
account. Upon completion of the specified minimum purchase within the
thirteen-month period, all shares held in escrow will be deposited into the
shareholder's account or delivered to the shareholder. A shareholder may include
toward completion of a Letter of Intent the total asset value of shares of the
Seligman Mutual Funds on which an initial sales load was paid as of the date of
the Letter. If the total amount invested within the thirteen-month period does
not equal or exceed the specified minimum purchase, the shareholder will be
requested to pay the difference between the amount of the sales load paid and
the amount of the sales load applicable to the total purchase made if
applicable. If, within 20 days following the mailing of a written request, the
shareholder has not paid this additional sales load to Seligman Financial
Services, Inc., sufficient escrowed shares will be redeemed for payment of the
additional sales load. Shares remaining in escrow after this payment will be
released to the shareholder's Account. The intended purchase amount may be
increased at any time during the thirteen-month period by filing a revised
Agreement for the same period, provided that the shareholder's Dealer furnishes
evidence that an amount representing the reduction in sales load under the new
Agreement which becomes applicable on purchases already made under the original
Agreement, will be refunded to the Fund and that the required additional
escrowed shares will be purchased by the shareholder.
Shares of Seligman Cash Management Fund, Inc. which have been acquired by
an exchange of shares of another mutual fund in the Seligman Group on which
there is a front-end sales load may be taken into account in completing a Letter
of Intent, or for Right of Accumulation. However, shares of the Seligman Cash
Management Fund which have been purchased directly may not be used for purposes
of determining reduced sales loads on additional purchases of the other Seligman
Mutual Funds.
2/98
28
<PAGE>
SELIGMAN
FRONTIER
FUND, INC.
- --------------------------------------------------------------------------------
100 Park Avenue
New York, New York 10017
INVESTMENT MANAGER
J. & W. Seligman & Co. Incorporated
100 Park Avenue
New York, New York 10017
GENERAL DISTRIBUTOR
Seligman Financial Services, Inc.
100 Park Avenue
New York, New York 10017
SHAREHOLDER SERVICE AGENT
Seligman Data Corp.
100 Park Avenue
New York, New York 10017
PORTFOLIO SECURITIES CUSTODIAN
Investors Fiduciary Trust Company
801 Pennsylvania
Kansas City, Missouri 64105
GENERAL COUNSEL
Sullivan & Cromwell
125 Broad Street
New York, New York 10004
EQFR1 2/98
