N-CSR 1 c55667nvcsr.txt N-CSR ================================================================================ UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-05221 SELIGMAN PORTFOLIOS, INC. ------------------------------------------------- (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 ---------------------------------------------------------------- (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 ------------------------------------------------------------------------------ (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 -------------- Date of fiscal year end: 12/31 ------ Date of reporting period: 12/31 ----- ================================================================================ Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN CAPITAL PORTFOLIO SELIGMAN CAPITAL PORTFOLIO SEEKS CAPITAL APPRECIATION. Seligman Capital Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 12 Portfolio of Investments........... 14 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 23 Notes to Financial Statements...... 25 Report of Independent Registered Public Accounting Firm........... 36 Federal Income Tax Information..... 38 Board Members and Officers......... 39 Proxy Voting....................... 43
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Capital Portfolio (the Fund) Class 1 shares advanced 48.70% for the 12 months ended Dec. 31, 2009. > The Fund outperformed its benchmark, the Russell Midcap(R) Growth Index, which rose 46.29% during the 12-month period. > The Fund also outperformed its peer group, as represented by the Lipper Mid- Cap Growth Funds Index, which rose 42.65% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 8/30/00 --------------------------------------------------------------------------------- Seligman Capital Portfolio --------------------------------------------------------------------------------- Class 1 +48.70% -3.37% +1.49% -0.28% N/A --------------------------------------------------------------------------------- Class 2 +48.45% -3.60% +1.24% N/A -4.01% --------------------------------------------------------------------------------- Russell Midcap Growth Index (unmanaged) +46.29% -3.18% +2.40% -0.52% -2.31% --------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Index +42.65% -1.04% +3.35% -1.47% -2.60% ---------------------------------------------------------------------------------
* For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the Russell MidCap Growth Index does not reflect the effect of expenses. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. Investments in mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, Seligman Capital Portfolio (the Fund) Class 1 shares advanced 48.70% for the 12 months ended Dec. 31, 2009. The Fund outperformed its benchmark, the Russell Midcap(R) Growth Index (Russell Index), which advanced 46.29% during the same period. The Fund also outperformed its peer group, as represented by the Lipper Mid-Cap Growth Funds Index, which rose 42.65% during the same period. SIGNIFICANT PERFORMANCE FACTORS In the information technology sector, where the Fund's stock selection was particularly strong, leading contributors included digital entertainment technology company ROVI, semiconductor stock MARVELL TECHNOLOGY GROUP, APPLE, maker of the iPhone and other personal computer devices, and SAVVIS, which provides Internet infrastructure services. Rovi has continued to grow its subscription services, particularly in Europe. Marvell Technology Group, maker of controllers for disk drives, also benefited from demand for its wireless chips which are used in
SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 16.1% ------------------------------------------------ Consumer Staples 3.9% ------------------------------------------------ Energy 3.2% ------------------------------------------------ Financials 5.3% ------------------------------------------------ Health Care 13.0% ------------------------------------------------ Industrials 13.4% ------------------------------------------------ Information Technology 31.9% ------------------------------------------------ Materials 3.7% ------------------------------------------------ Telecommunication Services 2.4% ------------------------------------------------ Utilities 1.6% ------------------------------------------------ Other(2) 5.5% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- Blackberries and iPhones. Our research on the Apple product line, including the iPhone and iMac, led to a large position in the stock, whose stock price more than doubled in price during the year. SAVVIS performed poorly in 2008, but was more effective at managing earnings expectations in 2009 and, consequently performed better. The Fund's telecommunication services exposure contributed positively to relative return, largely due to positions in wireless services provider NII HOLDINGS, which experienced strong growth in South America, and SBA COMMUNICATIONS, a cell phone tower company that has benefited from competition between cell phone service providers. Energy positioning also had a positive effect on return relative to the Russell Index. Favorable performance came from both oil and gas service companies and from exploration and production companies. Two key contributors were NOBLE ENERGY, an exploration and production company that saw big discoveries last year, and NOBLE CORP., an energy services company. The Fund's positioning in the consumer discretionary sector detracted from relative return, despite strong performance from stocks such as TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Rovi 4.7% ------------------------------------------------ MasterCard Cl A 3.8% ------------------------------------------------ Marvell Technology Group 3.7% ------------------------------------------------ SAVVIS 3.6% ------------------------------------------------ Cognizant Technology Solutions Cl A 3.1% ------------------------------------------------ Medicis Pharmaceutical Cl A 2.6% ------------------------------------------------ Blue Coat Systems 2.4% ------------------------------------------------ Microsemi 2.3% ------------------------------------------------ Coinstar 2.2% ------------------------------------------------ Dole Food 2.1% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- ROYAL CARIBBEAN CRUISES and homebuilder NVR. Not having meaningful exposure to some stronger performing areas of the consumer discretionary sector, including media, specialty retail, textiles and internet retail was disadvantageous. Positioning in consumer staples also detracted from relative return, primarily because the portfolio was underweight overall, and, therefore, had minimal exposure to better performing stocks in the sector. However, underweighting consumer staples was an effective decision because it allowed us to put more emphasis on sectors such as information technology which performed much better for the year. Within consumer staples, CAMPBELL SOUP was a key detractor. CHANGES TO THE FUND'S PORTFOLIO We reduced the Fund's information technology overweight, though the position is still larger than that of the Russell Index. Some technology stocks appreciated to the point where their prices were getting close to the targets we had set for them, so we took profits in selected holdings. We still see attractive growth potential in the technology sector. After substantial cost-cutting through much of the recession, we believe an increase in corporate technology spending is overdue. We have focused the Fund's technology position on areas we think will benefit from higher spending. These include computers and peripherals, information technology services and software. By year-end, the Fund's energy weighting was slightly larger than that of the Russell Index, after being slightly underweight during 2009. We are starting to see more evidence that the energy sector is on the verge of a capital spending cycle. This gives us more confidence in the earning streams of energy companies, particularly those in the oil services group. We moved the consumer staples weighting closer to that of the Russell Index, though it was still underweight at year end. We believe the severe underperformance of consumer staples stocks created some very strong valuation opportunities within that sector. We believe the outlook for consumer spending remains challenging, given the unemployment rate and sporadic improvements in the housing market. Consequently, the Fund's consumer discretionary holdings favored retailers that we believe will appeal to frugal consumers. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- As of year-end, the Fund's weighting in cyclically-driven industrial firms was focused on both companies poised to grow as manufacturing improves and on those that we believe will benefit as the housing market strengthens. OUR FUTURE STRATEGY We expect the economy to improve markedly in 2010, as we expect manufacturing to pick up, business spending to improve and the employment picture to brighten. However, after the sharp rally in 2009, we believe much of the good news is already priced into stocks. Therefore, we expect investors to be more selective, rewarding specific companies that have top line growth and strong earnings. We also anticipate selected companies will benefit from increased merger and acquisition activity as firms emerging from the crisis period with excess cash may try to grow their businesses through acquisition. In this environment, betting for or against particular industry sectors is likely to be less rewarding than choosing individual stocks that can maintain or increase their growth rate. Though stock market performance is probably not going to be as robust as it was last year, we still believe there will be opportunities, particularly among companies with attractive valuations, good free cash flow and definable catalysts to drive their results. (PHOTO - ERIK VOSS) Erik Voss, CFA(R) Portfolio Manager -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Capital Portfolio Class 1 shares (from 1/1/2000 to 12/31/2009) as compared to the performance of the Russell Midcap Growth Index, the Lipper Mid-Cap Growth Funds Index and the Lipper Mid-Cap Growth Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN CAPITAL PORTFOLIO Class 1 Cumulative value of $10,000 $14,870 $9,022 $10,767 $9,718 ------------------------------------------------------------------------------------------ Average annual total return +48.70% -3.37% +1.49% -0.28% ------------------------------------------------------------------------------------------ RUSSELL MIDCAP GROWTH INDEX(1) Cumulative value of $10,000 $14,629 $9,075 $11,258 $9,490 ------------------------------------------------------------------------------------------ Average annual total return +46.29% -3.18% +2.40% -0.52% ------------------------------------------------------------------------------------------ LIPPER MID-CAP GROWTH FUNDS INDEX(2) Cumulative value of $10,000 $14,265 $9,692 $11,791 $8,622 ------------------------------------------------------------------------------------------ Average annual total return +42.65% -1.04% +3.35% -1.47% ------------------------------------------------------------------------------------------ LIPPER MID-CAP GROWTH FUNDS AVERAGE(3) Cumulative value of $10,000 $14,073 $9,051 $10,842 $10,800 ------------------------------------------------------------------------------------------ Average annual total return +40.73% -3.27% +1.63% +0.11% ------------------------------------------------------------------------------------------
Results for Class 2 shares can be found on page 3. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN CAPITAL PORTFOLIO LINE GRAPH)
SELIGMAN CAPITAL LIPPER MID-CAP LIPPER MID-CAP PORTFOLIO CLASS RUSSELL MIDCAP GROWTH FUNDS GROWTH FUNDS 1 GROWTH INDEX(1) INDEX(2) AVERAGE(3) ---------------- --------------- ----------------- -------------------- 1/1/00 $ 10,000 $ 10,000 $ 10,000 $ 10,000 3/00 12,126 12,112 11,426 11,577 6/00 12,867 11,215 10,430 11,008 9/00 14,565 11,498 10,761 11,695 12/00 10,850 8,825 8,387 10,064 3/01 8,388 6,611 6,459 8,142 6/01 10,305 7,681 7,342 9,220 9/01 7,157 5,546 5,554 7,146 12/01 9,117 7,047 6,620 8,544 3/02 8,615 6,922 6,431 8,455 6/02 7,046 5,658 5,470 7,320 9/02 5,638 4,686 4,522 6,090 12/02 6,110 5,116 4,735 6,401 3/03 5,881 5,115 4,659 6,280 6/03 6,743 6,074 5,482 7,395 9/03 7,230 6,509 5,778 7,811 12/03 8,313 7,301 6,412 8,687 3/04 8,806 7,653 6,663 9,070 6/04 8,872 7,734 6,751 9,156 9/04 8,187 7,399 6,426 8,725 12/04 9,028 8,431 7,312 9,874 3/05 9,020 8,290 7,024 9,586 6/05 9,293 8,574 7,244 9,910 9/05 9,934 9,136 7,771 10,556 12/05 10,155 9,451 8,012 10,881 3/06 10,819 10,170 8,772 11,900 6/06 10,059 9,692 8,364 11,221 9/06 10,214 9,778 8,258 11,088 12/06 10,774 10,458 8,895 11,853 3/07 11,451 10,872 9,317 12,377 6/07 12,424 11,605 10,203 13,412 9/07 13,359 11,854 10,802 13,988 12/07 12,548 11,653 10,799 13,843 3/08 10,950 10,377 9,418 12,057 6/08 12,467 10,859 9,889 12,687 9/08 9,173 8,932 8,192 10,554 12/08 6,535 6,488 6,043 7,708 3/09 6,499 6,269 5,780 7,404 6/09 7,766 7,565 6,884 8,691 9/09 9,320 8,895 8,161 10,206 12/09 9,718 9,490 8,622 10,800
(1) The Russell Midcap Growth Index, an unmanaged index, measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values, as determined by the Frank Russell Company. The stocks are also members of the Russell 1000 Growth Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Mid-Cap Growth Funds Index (the Lipper Index) includes the 30 largest mid-cap growth funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Mid-Cap Growth Funds Average (the Lipper Average) is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity large-cap floor. Mid-cap growth funds typically have an above-average price-to-earnings ratio, price- to-book ratio, and three-year sales-per-share growth value, compared to the S&P MidCap 400 Index. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as the Fund's secondary benchmark. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,251.40 $7.60(c) 1.34% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.45 $6.82(c) 1.34% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,250.00 $9.02(c) 1.59% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.19 $8.08(c) 1.59% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Dec. 31, 2009: +25.14% for Class 1 and +25.00% for Class 2. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.99% for Class 1 and 1.24% for Class 2. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $5.62 for Class 1 and $7.03 for Class 2 and the hypothetical expenses paid would have been $5.04 for Class 1 and $6.31 for Class 2. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.0%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.9%) Goodrich 860 $55,255 ITT 1,000 49,740 Precision Castparts 1,100 121,385 --------------- Total 226,380 ------------------------------------------------------------------------------------- AIRLINES (0.8%) Delta Air Lines 5,760(b) 65,549 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.4%) Alexion Pharmaceuticals 830(b) 40,521 Dendreon 2,580(b,e) 67,802 Vertex Pharmaceuticals 1,800(b) 77,130 --------------- Total 185,453 ------------------------------------------------------------------------------------- CAPITAL MARKETS (0.7%) Invesco 2,300 54,027 ------------------------------------------------------------------------------------- CHEMICALS (1.8%) Celanese Series A 1,300 41,730 Ecolab 800 35,664 Potash Corp of Saskatchewan 560(c) 60,760 --------------- Total 138,154 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.5%) Avery Dennison 1,090 39,774 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (3.6%) Blue Coat Systems 6,060(b,e) 172,952 Brocade Communications Systems 4,690(b,e) 35,785 F5 Networks 1,320(b) 69,934 --------------- Total 278,671 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (0.9%) Seagate Technology 3,790(c) 68,940 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.6%) Fluor 800 36,032 Foster Wheeler 4,060(b) 119,526 Quanta Services 1,990(b) 41,472 --------------- Total 197,030 ------------------------------------------------------------------------------------- CONSUMER FINANCE (1.0%) Capital One Financial 2,020 77,447 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (2.0%) Coinstar 5,697(b,e) 158,263 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (0.5%) Interactive Brokers Group Cl A 2,340(b,e) 41,465 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.7%) Qwest Communications Intl 13,500 56,835 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.6%) ITC Holdings 2,400(e) 125,016 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.8%) General Cable 2,010(b,e) 59,134 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (2.6%) Cameron Intl 1,160(b) 48,488 Natl Oilwell Varco 2,670 117,720 Noble 910(c) 37,037 --------------- Total 203,245 ------------------------------------------------------------------------------------- FOOD PRODUCTS (2.0%) Dole Food 12,575(b,e) 156,056 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.7%) Alcon 580(c) 95,323 Intuitive Surgical 120(b) 36,398 --------------- Total 131,721 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (1.5%) Express Scripts 850(b) $73,483 WellPoint 690(b) 40,220 --------------- Total 113,703 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (1.0%) Cerner 920(b,e) 75,845 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.8%) Bally Technologies 2,440(b,e) 100,747 Scientific Games Cl A 2,430(b,e) 35,357 --------------- Total 136,104 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (2.7%) Lennar Cl A 4,850 61,935 Meritage Homes 5,500(b,e) 106,314 NVR 60(b) 42,643 --------------- Total 210,892 ------------------------------------------------------------------------------------- INSURANCE (3.1%) AFLAC 1,610 74,463 Principal Financial Group 1,619 38,921 Prudential Financial 2,535 126,141 --------------- Total 239,525 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (4.4%) Equinix 690(b,e) 73,244 SAVVIS 18,876(b) 265,207 --------------- Total 338,451 ------------------------------------------------------------------------------------- IT SERVICES (6.5%) Cognizant Technology Solutions Cl A 4,970(b) 225,141 MasterCard Cl A 1,090 279,018 --------------- Total 504,159 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (3.2%) Illumina 3,110(b,e) 95,321 Millipore 1,010(b) 73,074 Waters 1,220(b) 75,591 --------------- Total 243,986 ------------------------------------------------------------------------------------- MACHINERY (2.0%) Cummins 950 43,567 Joy Global 2,190(e) 112,982 --------------- Total 156,549 ------------------------------------------------------------------------------------- MEDIA (0.9%) CBS Cl B 4,870(e) 68,424 ------------------------------------------------------------------------------------- METALS & MINING (1.9%) Agnico-Eagle Mines 1,350(c) 72,900 United States Steel 1,400(e) 77,168 --------------- Total 150,068 ------------------------------------------------------------------------------------- MULTILINE RETAIL (3.7%) Big Lots 2,110(b,e) 61,148 Dollar General 5,913(b) 132,629 Kohl's 1,740(b) 93,838 --------------- Total 287,615 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.2%) Atlas Energy 3,570 107,708 Massey Energy 1,340 56,293 Noble Energy 570 40,595 Southwestern Energy 820(b) 39,524 --------------- Total 244,120 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (1.9%) Avon Products 4,660 146,790 ------------------------------------------------------------------------------------- PHARMACEUTICALS (3.4%) Medicis Pharmaceutical Cl A 7,110 192,325 Perrigo 1,670(e) 66,533 --------------- Total 258,858 ------------------------------------------------------------------------------------- ROAD & RAIL (1.9%) CSX 2,130 103,284 JB Hunt Transport Services 1,260(e) 40,660 --------------- Total 143,944 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (7.3%) Intersil Cl A 7,600(e) 116,584 Marvell Technology Group 12,960(b,c) 268,919 Microsemi 9,430(b,e) 167,383 --------------- Total 552,886 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SOFTWARE (6.8%) Activision Blizzard 6,510(b) $72,326 Citrix Systems 1,800(b) 74,898 McAfee 820(b) 33,267 Rovi 10,902(b) 347,446 --------------- Total 527,937 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (5.0%) American Eagle Outfitters 9,190 156,047 Dick's Sporting Goods 4,220(b) 104,951 GUESS? 2,980 126,054 --------------- Total 387,052 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (2.0%) Aegean Marine Petroleum Network 5,540(c) 152,239 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.7%) NII Holdings 2,770(b) 93,017 SBA Communications Cl A 1,100(b,e) 37,576 --------------- Total 130,593 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $5,929,596) $7,332,900 ------------------------------------------------------------------------------------- MONEY MARKET FUND (5.5%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 425,232(d) $425,232 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $425,232) $425,232 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (21.3%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 1,645,551 $1,645,551 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $1,645,551) $1,645,551 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $8,000,379)(f) $9,403,683 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2009, the value of foreign securities, excluding short-term securities, represented 9.79% of net assets. (d) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (e) At Dec. 31, 2009, security was partially or fully on loan. See Note 6 to the financial statements. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $8,183,369 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $1,344,826 Unrealized depreciation (124,512) ---------------------------------------------------------- Net unrealized appreciation $1,220,314 ----------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $7,332,900 $-- $-- $7,332,900 -------------------------------------------------------------------------------------------- Total Equity Securities 7,332,900 -- -- 7,332,900 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(b) 425,232 -- -- 425,232 Investments of Cash Collateral Received for Securities on Loan 1,645,551 -- -- 1,645,551 -------------------------------------------------------------------------------------------- Total Other 2,070,783 -- -- 2,070,783 -------------------------------------------------------------------------------------------- Total $9,403,683 $-- $-- $9,403,683 --------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $5,929,596) $ 7,332,900 Affiliated money market fund (identified cost $425,232) 425,232 Investments of cash collateral received for securities on loan (identified cost $1,645,551) 1,645,551 ------------------------------------------------------------------------------------- Total investments in securities (identified cost $8,000,379) 9,403,683 Capital shares receivable 95 Dividends and accrued interest receivable 2,797 ------------------------------------------------------------------------------------- Total assets 9,406,575 ------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 5,854 Payable upon return of securities loaned 1,645,551 Accrued investment management services fees 2,271 Accrued distribution fees 1,017 Accrued transfer agency fees 384 Accrued administrative services fees 384 Other accrued expenses 28,212 ------------------------------------------------------------------------------------- Total liabilities 1,683,673 ------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 7,722,902 ------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 594 Additional paid-in capital 15,790,608 Excess of distributions over net investment income (6,911) Accumulated net realized gain (loss) (9,464,693) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,403,304 ------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 7,722,902 ------------------------------------------------------------------------------------- *Value of securities on loan $ 1,595,620 -------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $2,794,644 211,823 $13.19 Class 2 $4,928,258 381,965 $12.90 ---------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends 46,873 Interest 3,694 Income distributions from affiliated money market fund 416 Income from securities lending -- net 2,135 Less foreign taxes withheld (993) ----------------------------------------------------------------------------- Total income 52,125 ----------------------------------------------------------------------------- Expenses: Investment management services fees 24,523 Distribution fees -- Class 2 10,460 Transfer agency fees Class 1 3,030 Class 2 4,554 Administrative services fees 2,792 Compensation of board members 203 Custodian fees 18,601 Printing and postage 13,833 Professional fees 23,731 Other 1,033 ----------------------------------------------------------------------------- Total expenses 102,760 ----------------------------------------------------------------------------- Investment income (loss) -- net (50,635) ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (112,012) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,820,116 ----------------------------------------------------------------------------- Net gain (loss) on investments 2,708,104 ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $2,657,469 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS Investment income (loss) -- net $ (50,635) $ (72,460) Net realized gain (loss) on investments (112,012) (3,182,383) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,820,116 (1,775,876) ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,657,469 (5,030,719) ------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 41,379 68,375 Class 2 shares 760,536 1,804,456 Payments for redemptions Class 1 shares (506,596) (913,055) Class 2 shares (1,009,101) (998,243) ------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (713,782) (38,467) ------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 1,943,687 (5,069,186) Net assets at beginning of year 5,779,215 10,848,401 ------------------------------------------------------------------------------------------- Net assets at end of year $ 7,722,902 $ 5,779,215 ------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ (6,911) $ (541) -------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges.
YEAR ENDED DEC. 31, CLASS 1 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.87 $17.03 $14.62 $13.78 $12.25 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.07) (.10) (.14) (.05) (.06) Net gains (losses) (both realized and unrealized) 4.39 (8.06) 2.55 .89 1.59 ---------------------------------------------------------------------------------------------------------- Total from investment operations 4.32 (8.16) 2.41 .84 1.53 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.19 $8.87 $17.03 $14.62 $13.78 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 48.70% (47.92%) 16.48% 6.10% 12.49% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.43% 1.32% 1.18% 1.05% 1.03% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.63%) (.71%) (.83%) (.33%) (.50%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $2 $5 $6 $8 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 144% 240% 196% 203% 174% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 23 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED DEC. 31, CLASS 2 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.69 $16.74 $14.40 $13.61 $12.13 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.09) (.13) (.18) (.08) (.09) Net gains (losses) (both realized and unrealized) 4.30 (7.92) 2.52 .87 1.57 ---------------------------------------------------------------------------------------------------------- Total from investment operations 4.21 (8.05) 2.34 .79 1.48 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.90 $8.69 $16.74 $14.40 $13.61 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 48.45% (48.09%) 16.25% 5.80% 12.20% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.63% 1.57% 1.43% 1.30% 1.28% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.85%) (.96%) (1.08%) (.58%) (.75%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $5 $3 $5 $5 $5 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 144% 240% 196% 203% 174% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Capital Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, opened-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund primarily invests in the common stock of medium sized U.S. companies. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. The two 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 class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received an annual fee equal to 0.40% of the Fund's average daily net assets. The management fee for the year ended Dec. 31, 2009 was 0.37% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.04% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $40. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*), will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 0.99% Class 2............................................. 1.24
* In addition to the fees and expenses which each Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $8,996,985 and $9,532,008, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008 --------------------------------------------------------------- CLASS 1 Sold 3,383 4,505 Redeemed (49,615) (63,152) --------------------------------------------------------------- Net increase (decrease) (46,232) (58,647) --------------------------------------------------------------- CLASS 2 Sold 74,072 146,298 Redeemed (93,782) (70,421) --------------------------------------------------------------- Net increase (decrease) (19,710) 75,877 ---------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $1,595,620 were on loan, secured by cash collateral of $1,645,551 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $2,135 earned from securities lending for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $2,847,237 and $2,422,005, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of passive foreign investment company (PFIC) holdings, investments in partnerships, post-October losses and losses deferred due to wash sales. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $44,265 and accumulated net realized loss has been increased by $3,459 resulting in a net reclassification adjustment to decrease paid-in capital by $40,806. At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows:
Undistributed ordinary income.................. $ -- Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(9,288,464) Unrealized appreciation (depreciation)......... $ 1,220,164
For federal income tax purposes, the Fund had a capital loss carry-over of $9,244,901 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2016 2017 $6,090,929 $1,961,725 $1,192,247
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $43,563 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 35 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF SELIGMAN CAPITAL PORTFOLIO We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Capital Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and the financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 19, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Capital Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 37 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Fiscal year ended Dec. 31, 2009 The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 39 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 41 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 ANNUAL REPORT 43 SELIGMAN CAPITAL PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9914 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN COMMON STOCK PORTFOLIO SELIGMAN COMMON STOCK PORTFOLIO SEEKS TOTAL RETURN THROUGH A COMBINATION OF CAPITAL APPRECIATION AND CURRENT INCOME. Seligman Common Stock Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 12 Portfolio of Investments........... 14 Statement of Assets and Liabilities...................... 20 Statement of Operations............ 21 Statements of Changes in Net Assets........................... 22 Financial Highlights............... 23 Notes to Financial Statements...... 24 Report of Independent Registered Public Accounting Firm........... 38 Federal Income Tax Information..... 40 Board Members and Officers......... 41 Proxy Voting....................... 45
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Common Stock Portfolio (the Fund) shares advanced 20.72% for the 12 months ended Dec. 31, 2009. > The Fund underperformed its benchmark, the Standard & Poor's 500 Index (S&P 500 Index), which rose 26.46% during the 12-month period. > The Fund also underperformed its peer group, as represented by the Lipper Large-Cap Core Funds Index, which rose 28.15% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------- Seligman Common Stock Portfolio +20.72% -13.27% -4.89% -4.46% --------------------------------------------------------------------- S&P 500 Index (unmanaged) +26.46% -5.63% +0.42% -0.95% --------------------------------------------------------------------- Lipper Large-Cap Core Funds Index +28.15% -4.91% +0.61% -1.20% ---------------------------------------------------------------------
The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the S&P 500 Index does not reflect the effect of expenses. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, Seligman Common Stock Portfolio (the Fund) shares advanced 20.72% for the 12 months ended Dec. 31, 2009. The Fund underperformed its benchmark, the Standard & Poor's 500 Index (S&P 500 Index), which rose 26.46% during the 12-month period. The Fund also underperformed its peer group, as represented by the Lipper Large-Cap Core Funds Index, which rose 28.15% during the same period. SIGNIFICANT PERFORMANCE FACTORS The fiscal year began amid fears that the U.S. economy would remain mired in the economic downturn and that the country's banking system would become insolvent. However, the extraordinary policy response by the Federal Reserve Board (the Fed) and the U.S. government managed to stabilize the financial system, and the economy once again began to grow. In response, financial markets staged a powerful rally that regained much, but not all, of the value lost in the downturn. Because we believe no single measure of investment potential can be successful all of the time, we use multiple quantitative models to select SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 9.3% ------------------------------------------------ Consumer Staples 6.9% ------------------------------------------------ Energy 13.5% ------------------------------------------------ Financials 19.4% ------------------------------------------------ Health Care 16.7% ------------------------------------------------ Industrials 5.0% ------------------------------------------------ Information Technology 16.3% ------------------------------------------------ Materials 5.1% ------------------------------------------------ Telecommunication Services 5.0% ------------------------------------------------ Utilities 1.0% ------------------------------------------------ Other(2) 1.8% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- portfolio holdings. Our strategy incorporates value, quality and momentum themes, providing style diversification that may help reduce risk and improve potential for return consistency. During the year, we enhanced our value approach by introducing a quality-adjusted multi-factor theme which includes more quality factors in an effort to reduce volatility. During this past fiscal year, the momentum and quality themes underperformed the S&P 500 Index, while the value theme outperformed. In terms of sector positioning, both allocations and security selection had an unfavorable effect on return relative to the S&P 500 Index. Security selection was the primary factor, as we would expect from our bottom-up investment approach. Stock selection in the materials, energy and industrials sectors added value, while selection among consumer discretionary, financial and information technology stocks detracted. The Fund's weightings in utilities and telecommunications were smaller than those of the S&P 500 Index, which was advantageous. Having a larger weighting in consumer discretionary stocks also helped. However, other sector weightings were less favorable. TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Chevron 5.9% ------------------------------------------------ Pfizer 4.9% ------------------------------------------------ Apple 4.8% ------------------------------------------------ Bank of America 3.5% ------------------------------------------------ IBM 3.4% ------------------------------------------------ Goldman Sachs Group 3.2% ------------------------------------------------ Johnson & Johnson 2.8% ------------------------------------------------ AT&T 2.8% ------------------------------------------------ Cisco Systems 2.7% ------------------------------------------------ Coca-Cola 2.3% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Among the largest individual contributors were DOW CHEMICAL, which was preferred by our value and quality themes, IBM, which was favored by our momentum theme, pharmaceutical firm MERCK & CO, which was initially favored by our quality theme and then by both our momentum and quality-adjusted multi-factor value themes, health insurance company CIGNA, which was first preferred by our value and quality themes and then by all themes, and financial services company MORGAN STANLEY, which was initially selected by our value theme and then also by momentum. Notable detractors included CITIGROUP, chosen by our value theme, pharmaceutical firm PFIZER, chosen by our value and quality themes, oil company CHEVRON, which was preferred by our momentum and quality themes, MCDONALD'S, selected by our momentum theme, and WAL-MART STORES, which was initially preferred by the momentum and quality models, and then just by quality later in the year. CHANGES TO THE FUND'S PORTFOLIO Because we use a disciplined, quantitative process to select stocks for the Fund, we do not emphasize or de-emphasize particular sectors based on economic or equity market outlooks. However, individual stock selection by our quantitative-based themes can lead to preferences for some sectors over others. During the year, the Fund's weightings in the industrials and consumer staples sectors moved from being about equal to those of the S&P 500 Index to being significantly smaller. The Fund's consumer discretionary weighting shifted from a small overweight to an underweight, relative to the S&P 500 Index. The Fund's financials weighting was larger than that of the S&P 500 Index and the overweight increased during the year. The Fund's weighting in information technology moved closer to that of the S&P 500 Index, though it is still slightly smaller than the index weighting. The telecommunications services weighting went from an underweight to an overweight. OUR FUTURE STRATEGY 2009 was a rewarding year for investors. Both U.S. and global stocks advanced strongly, with riskier areas like emerging market equities and high-yield bonds gaining even more. The broad-based rally was largely fueled by fiscal and monetary policies put in place to reignite the global economy. Going forward, we expect returns to be more modest and -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- potentially more volatile as performance becomes more dependent on economic factors. We think continued stabilization of the housing market and increased business investment are needed to drive short-term growth. Longer term, we think consumers will have to play a bigger role in order to sustain an economic recovery. We are also mindful that the global economy has shifted away from debt-fueled growth toward new growth drivers such as consumers in emerging nations and innovation in the biotechnology and alternative energy areas. Overall, our strategy has been showing greater preference for stocks in developed and emerging markets as the global economy picks up steam. We believe stocks will outpace fixed-income and cash over the near term and we are optimistic that 2010 can deliver solid equity performance, though we expect it to be significantly lower than what we saw in 2009. (PHOTO - DIMITRIS BERTSIMAS) (PHOTO - GINA MOURTZINOU) Dimitris Bertsimas, Ph.D. Gina Mourtzinou, Ph.D. Senior Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Common Stock Portfolio (from 1/1/2000 to 12/31/2009) as compared to the performance of the S&P 500 Index, the Lipper Large-Cap Core Funds Index and the Lipper Large-Cap Core Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN COMMON STOCK PORTFOLIO Cumulative value of $10,000 $12,072 $6,525 $7,784 $6,331 ------------------------------------------------------------------------------------------ Average annual total return +20.72% -13.27% -4.89% -4.46% ------------------------------------------------------------------------------------------ S&P 500 INDEX(1) Cumulative value of $10,000 $12,646 $8,405 $10,211 $9,091 ------------------------------------------------------------------------------------------ Average annual total return +26.46% -5.63% +0.42% -0.95% ------------------------------------------------------------------------------------------ LIPPER LARGE-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $12,815 $8,598 $10,307 $8,858 ------------------------------------------------------------------------------------------ Average annual total return +28.15% -4.91% +0.61% -1.20% ------------------------------------------------------------------------------------------ LIPPER LARGE-CAP CORE FUNDS AVERAGE(3) Cumulative value of $10,000 $12,713 $8,487 $10,232 $9,671 ------------------------------------------------------------------------------------------ Average annual total return +27.13% -5.32% +0.46% -0.49% ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN COMMON STOCK PORTFOLIO LINE GRAPH)
SELIGMAN COMMON LIPPER LARGE-CAP LIPPER LARGE-CAP STOCK PORTFOLIO S&P 500 CORE FUNDS CORE FUNDS INDEX(1) INDEX(2) AVERAGE(3) --------------- ----------------- ----------------- ------------------- 1/1/00 $10,000 $10,000 $10,000 $10,000 3/00 10,078 10,229 10,427 10,345 6/00 9,975 9,958 10,189 10,104 9/00 9,860 9,861 10,151 10,229 12/00 8,946 9,090 9,263 9,692 3/01 7,947 8,012 8,109 8,609 6/01 8,444 8,481 8,541 9,063 9/01 7,035 7,236 7,320 7,745 12/01 7,851 8,009 8,074 8,570 3/02 7,960 8,031 8,080 8,605 6/02 6,924 6,955 7,076 7,543 9/02 5,635 5,754 5,963 6,289 12/02 5,719 6,239 6,360 6,750 3/03 5,535 6,043 6,162 6,495 6/03 6,290 6,973 7,005 7,480 9/03 6,473 7,157 7,160 7,660 12/03 7,222 8,029 7,937 8,571 3/04 7,438 8,165 8,017 8,707 6/04 7,527 8,305 8,115 8,800 9/04 7,385 8,150 7,923 8,628 12/04 8,135 8,902 8,595 9,413 3/05 7,880 8,711 8,401 9,253 6/05 7,999 8,830 8,509 9,375 9/05 8,142 9,149 8,831 9,751 12/05 8,300 9,340 9,087 9,953 3/06 8,696 9,733 9,467 10,371 6/06 8,414 9,593 9,284 10,189 9/06 9,025 10,136 9,682 10,685 12/06 9,703 10,815 10,303 11,365 3/07 9,804 10,884 10,392 11,450 6/07 10,445 11,567 11,058 12,177 9/07 10,553 11,802 11,263 12,395 12/07 9,548 11,409 10,986 12,041 3/08 8,404 10,332 9,943 10,891 6/08 8,216 10,050 9,800 10,707 9/08 7,065 9,209 8,881 9,732 12/08 5,244 7,188 6,913 7,610 3/09 4,554 6,396 6,247 6,856 6/09 5,194 7,415 7,283 7,958 9/09 6,019 8,573 8,395 9,161 12/09 6,331 9,091 8,858 9,671
(1) The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Core Funds Index (the Lipper Index) includes the 30 largest large-cap core funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Large-Cap Core Funds Average (the Lipper Average) is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper's U.S. Diversified large-cap floor. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P 500 Index. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as the Fund's secondary benchmark. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,219.00 $7.05(c) 1.26% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.85 $6.41(c) 1.26% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +21.90% for the six months ended Dec. 31, 2009. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.91%. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $5.09 and the hypothetical expenses paid would have been $4.63. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.6%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.7%) General Dynamics 322 $21,951 Northrop Grumman 253 14,130 Raytheon 197 10,149 --------------- Total 46,230 ------------------------------------------------------------------------------------- BEVERAGES (3.4%) Coca-Cola 1,120 63,841 Coca-Cola Enterprises 467 9,900 PepsiCo 334 20,307 --------------- Total 94,048 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.2%) Biogen Idec 96(b) 5,136 ------------------------------------------------------------------------------------- CAPITAL MARKETS (5.2%) Charles Schwab 518(e) 9,749 Franklin Resources 53 5,584 Goldman Sachs Group 518 87,458 Morgan Stanley 1,340 39,664 --------------- Total 142,455 ------------------------------------------------------------------------------------- CHEMICALS (1.3%) Air Products & Chemicals 102 8,268 Dow Chemical 945 26,110 --------------- Total 34,378 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.8%) BB&T 312(e) 7,915 Fifth Third Bancorp 633 6,172 PNC Financial Services Group 465 24,547 SunTrust Banks 469(e) 9,516 Wells Fargo & Co 1,060 28,610 --------------- Total 76,760 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (2.7%) Cisco Systems 3,119(b) 74,669 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (9.6%) Apple 623(b) 131,367 Dell 920(b) 13,211 IBM 701 91,761 NetApp 411(b) 14,134 Western Digital 311(b) 13,731 --------------- Total 264,204 ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.4%) Capital One Financial 303(e) 11,617 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (5.0%) Bank of America 6,287 94,683 Citigroup 10,759 35,612 IntercontinentalExchange 64(b,e) 7,187 --------------- Total 137,482 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (4.7%) AT&T 2,676 75,008 CenturyTel 131 4,744 Verizon Communications 1,494 49,496 --------------- Total 129,248 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (0.5%) FirstEnergy 160 7,432 Progress Energy 129 5,290 --------------- Total 12,722 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (1.2%) Corning 1,346 25,991 Tyco Electronics 298(c) 7,316 --------------- Total 33,307 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (1.5%) Baker Hughes 323(e) 13,075 Ensco Intl ADR 245(c) 9,785 Natl Oilwell Varco 389 17,151 --------------- Total 40,011 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (2.0%) Walgreen 264 $9,694 Wal-Mart Stores 825 44,096 --------------- Total 53,790 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.8%) Archer-Daniels-Midland 681 21,322 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.3%) CareFusion 88(b) 2,201 St. Jude Medical 141(b) 5,186 --------------- Total 7,387 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.7%) Aetna 440 13,948 Cardinal Health 375 12,090 CIGNA 799 28,181 McKesson 122 7,625 UnitedHealth Group 1,596 48,646 WellPoint 322(b) 18,769 --------------- Total 129,259 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (2.1%) McDonald's 616 38,463 Starbucks 861(b) 19,855 --------------- Total 58,318 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (0.5%) Procter & Gamble 238 14,430 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (2.6%) General Electric 4,007 60,625 Tyco Intl 267(c) 9,527 --------------- Total 70,152 ------------------------------------------------------------------------------------- INSURANCE (5.8%) AFLAC 145 6,706 Allstate 1,474 44,280 Chubb 194 9,541 Hartford Financial Services Group 463 10,769 Lincoln Natl 305 7,588 MetLife 350 12,373 Principal Financial Group 476(e) 11,443 Progressive 582(b) 10,470 Prudential Financial 234 11,644 Torchmark 134(e) 5,889 Travelers Companies 573 28,570 --------------- Total 159,273 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (1.0%) Amazon.com 212(b) 28,518 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.5%) eBay 598(b,e) 14,077 ------------------------------------------------------------------------------------- IT SERVICES (1.1%) Automatic Data Processing 149 6,380 Cognizant Technology Solutions Cl A 350(b) 15,856 Computer Sciences 146(b) 8,399 --------------- Total 30,635 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.2%) Life Technologies 123(b) 6,424 ------------------------------------------------------------------------------------- MACHINERY (0.8%) Illinois Tool Works 207 9,934 Ingersoll-Rand 365(c) 13,045 --------------- Total 22,979 ------------------------------------------------------------------------------------- MEDIA (1.8%) CBS Cl B 921 12,940 News Corp Cl A 1,544 21,137 Viacom Cl B 497(b) 14,776 --------------- Total 48,853 ------------------------------------------------------------------------------------- METALS & MINING (3.9%) Alcoa 1,333 21,488 Allegheny Technologies 151(e) 6,760 Freeport-McMoRan Copper & Gold 469(b) 37,656 Newmont Mining 351 16,606 Nucor 140(e) 6,531 United States Steel 325(e) 17,914 --------------- Total 106,955 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.6%) JC Penney 339(e) 9,020 Kohl's 162(b) 8,737 --------------- Total 17,757 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MULTI-UTILITIES (0.6%) Consolidated Edison 134 $6,088 PG&E 209 9,331 --------------- Total 15,419 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (12.1%) Chevron 2,085 160,525 ConocoPhillips 1,179 60,212 Hess 224 13,552 Marathon Oil 1,119 34,935 Murphy Oil 181 9,810 Occidental Petroleum 433 35,225 Valero Energy 1,128 18,894 --------------- Total 333,153 ------------------------------------------------------------------------------------- PHARMACEUTICALS (11.4%) Abbott Laboratories 430 23,216 Allergan 85 5,356 Forest Laboratories 352(b) 11,303 Johnson & Johnson 1,202 77,421 Merck & Co 1,725 63,032 Pfizer 7,331 133,350 --------------- Total 313,678 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.1%) Broadcom Cl A 478(b) 15,033 NVIDIA 827(b,e) 15,448 --------------- Total 30,481 ------------------------------------------------------------------------------------- SOFTWARE (0.1%) Intuit 123(b) 3,777 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (2.9%) Bed Bath & Beyond 159(b) 6,142 Best Buy 163 6,432 Gap 369 7,731 Home Depot 1,981 57,310 Sherwin-Williams 55(e) 3,391 --------------- Total 81,006 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.8%) Coach 353 12,895 Nike Cl B 137 9,052 --------------- Total 21,947 ------------------------------------------------------------------------------------- TOBACCO (0.3%) Lorillard 93 7,461 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.4%) Sprint Nextel 2,810(b) 10,285 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,438,536) $2,709,603 -------------------------------------------------------------------------------------
EQUITY-LINKED NOTES (0.4%)(h) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) Lehman Brothers Holdings Sr Unsecured 09-14-08 53.31% $33,000(b,d,f,g) $4,568 10-02-08 39.50 33,000(b,d,f,g) 5,068 --------------- Total 9,636 ------------------------------------------------------------------------------------- TOTAL EQUITY-LINKED NOTES (Cost: $66,000) $9,636 -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 50,094(i) $50,094 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $50,094) $50,094 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (4.8%) SHARES VALUE(a) JPMorgan Prime Money Market Fund 132,735 $132,735 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $132,735) $132,735 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,687,365)(j) $2,902,068 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depository Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2009, the value of foreign securities represented 1.44% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Dec. 31, 2009, the value of these securities amounted to $9,636 or 0.35% of net assets. (e) At Dec. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (f) This position is in bankruptcy. (g) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at Dec. 31, 2009 was $9,636 representing 0.35% of net assets. Information concerning such security holdings at Dec. 31, 2009 is as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------- Lehman Brothers Holdings Sr Unsecured 53.31% 2008 03-07-08 $33,000 39.50% 2008 03-26-08 33,000
(h) Equity-Linked Notes (ELNs) are notes created by a counterparty, typically an investment bank, that may bear interest at a fixed or floating rate. At maturity, the notes must be exchanged for an amount based on the value of one or more equity securities of third party issuers or the value of an index. The exchanged value may be limited to an amount less than the actual value of the underlying stocks or value of an index at the maturity date. Any difference between the exchange amount and the original cost of the notes will be a gain or loss. (i) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (j) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $2,702,498 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $400,059 Unrealized depreciation (200,489) --------------------------------------------------------- Net unrealized appreciation $199,570 ---------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $2,709,603 $-- $-- $2,709,603 -------------------------------------------------------------------------------------------- Total Equity Securities 2,709,603 -- -- 2,709,603 -------------------------------------------------------------------------------------------- Other Equity-Linked Notes -- 9,636 -- 9,636 Affiliated Money Market Fund(b) 50,094 -- -- 50,094 Investments of Cash Collateral Received for Securities on Loan 132,735 -- -- 132,735 -------------------------------------------------------------------------------------------- Total Other 182,829 9,636 -- 192,465 -------------------------------------------------------------------------------------------- Total $2,892,432 $9,636 $-- $2,902,068 --------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 19 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $2,504,536) $ 2,719,239 Affiliated money market fund (identified cost $50,094) 50,094 Investments of cash collateral received for securities on loan (identified cost $132,735) 132,735 ------------------------------------------------------------------------------ Total investments in securities (identified cost $2,687,365) 2,902,068 Dividends and accrued interest receivable 2,707 ------------------------------------------------------------------------------ Total assets 2,904,775 ------------------------------------------------------------------------------ LIABILITIES Payable upon return of securities loaned 132,735 Accrued investment management services fees 825 Accrued transfer agency fees 140 Accrued administrative services fees 140 Other accrued expenses 21,663 ------------------------------------------------------------------------------ Total liabilities 155,503 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 2,749,272 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.001 par value $ 379 Additional paid-in capital 5,982,270 Undistributed net investment income 28,138 Accumulated net realized gain (loss) (3,476,218) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 214,703 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 2,749,272 ------------------------------------------------------------------------------ Shares outstanding 379,079 ------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 7.25 ------------------------------------------------------------------------------ *Value of securities on loan $ 128,740 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS ------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends $ 60,484 Interest 311 Income distributions from affiliated money market fund 51 Income from securities lending -- net 1,311 ---------------------------------------------------------------------------- Total income 62,157 ---------------------------------------------------------------------------- Expenses: Investment management services fees 9,201 Transfer agency fees 1,011 Administrative services fees 1,011 Compensation of board members 201 Custodian fees 8,598 Printing and postage 8,461 Professional fees 23,102 Other 490 ---------------------------------------------------------------------------- Total expenses 52,075 Expenses waived/reimbursed by the Investment Manager and its affiliates (18,885) ---------------------------------------------------------------------------- Total net expenses 33,190 ---------------------------------------------------------------------------- Investment income (loss) -- net 28,967 ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (132,313) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 571,126 ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 438,813 ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 467,780 ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 28,967 $ 101,862 Net realized gain (loss) on security transactions (132,313) (2,445,408) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 571,126 27,510 ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 467,780 (2,316,036) ------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (100,000) (186,201) ------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 37,584 130,290 Net asset value of shares issued for reinvestment of distributions 100,000 186,201 Payments for redemptions of shares (403,209) (866,634) ------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (265,625) (550,143) ------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 102,155 (3,052,380) Net assets at beginning of year 2,647,117 5,699,497 ------------------------------------------------------------------------------------------ Net assets at end of year $2,749,272 $ 2,647,117 ------------------------------------------------------------------------------------------ Undistributed net investment income $ 28,138 $ 100,700 ------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of the Fund held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $6.23 $12.19 $12.56 $10.87 $10.84 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .24 .34 .14 .10 Net gains (losses) (both realized and unrealized) 1.22 (5.73) (.54) 1.70 .12 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.29 (5.49) (.20) 1.84 .22 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.27) (.47) (.17) (.15) (.19) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.25 $6.23 $12.19 $12.56 $10.87 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 20.72% (45.07%) (1.60%) 16.92% 2.03% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.09% 1.26% 1.12% .90% .86% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.33% 1.26% 1.12% .90% .86% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.16% 2.45% 2.64% 1.14% .95% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $6 $8 $8 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 77% 131% 117% 96% 70% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Common Stock Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund usually invests in the common stock of larger U.S. companies (e.g. companies with market capitalizations over $3 billion at the time of investment); however, it may invest in companies of any size. The Fund may also invest in fixed-income securities and cash equivalents. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61(st) day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. ILLIQUID SECURITIES At Dec. 31, 2009, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at Dec. 31, 2009 was $9,636 representing 0.35% of net assets. Certain illiquid securities may be valued, in good faith, by management at fair value according to procedures approved, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. OPTION TRANSACTIONS The Fund may buy and write options traded on any U.S. or foreign exchange, or in the over-the-counter (OTC) market to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments. The Fund may also buy and sell put and call options and write covered call options on portfolio securities. Options are contracts which entitle the holder to purchase or sell securities or other financial instruments at a specified price, or in the case of index options, to receive or pay the difference between the index value and the strike price of the index option. Completion of transactions for options traded in the OTC market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain OTC options trades. Cash collateral held or posted by the Fund for such option trades must be returned to the counterparty or the Fund upon closure, exercise or expiration of the contract. Option contracts purchased are recorded as investments and options contracts written are recorded as liabilities of the Fund. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The Fund's maximum payout in the case of written put option contracts represents the maximum potential amount of future payments -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (undiscounted) that the Fund could be required to make as a guarantor for written put options. For OTC option contracts, the transaction is also subject to counterparty credit risk. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained upon the exercise of the put options by holders of the option contracts or proceeds received upon entering into the contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT DEC. 31, 2009 At Dec. 31, 2009, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DEC. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY OPTIONS ----------------------------------------------------------------- Equity contracts $(31,478) ----------------------------------------------------------------- Total $(31,478) -----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------- RISK EXPOSURE CATEGORY OPTIONS ----------------------------------------------------------------- Equity contracts $30,878 ----------------------------------------------------------------- Total $30,878 -----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY OPTIONS At Dec. 31, 2009, the Fund had no outstanding options contracts. During the year ended Dec. 31, 2009, the Fund's transactions in options contracts were limited to the expiration of those contracts open at the beginning of the year. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received an annual fee equal to 0.40% of the Fund's average daily net assets. The management fee for the year ended Dec. 31, 2009 was 0.37% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. For the period from May 11, 2009 to Dec. 31, 2009, the fee was 0.04% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $17. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records and provides Fund shareholder services. Effective May 11, 2009 the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 1.33% of the Fund average daily net assets. The management fees and other expenses waived/reimbursed at the Fund level were $18,885. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.26% of the class average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.91% of the class average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,910,573 and $2,251,692, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* --------------------------------------------------------------- Sold 5,553 12,217 Reinvested distributions 13,661 29,603 Redeemed (65,041) (84,322) --------------------------------------------------------------- Net increase (decrease) (45,827) (42,502) ---------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. 7. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $128,740 were on loan, secured by cash collateral of $132,735 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- services provided and any other securities lending expenses. Net income of $1,311 earned from securities lending for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $278,661 and $228,567, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 9. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 10. LEHMAN BROTHERS HOLDINGS INC. EQUITY-LINKED NOTES At Dec. 31, 2009, the Fund held two Lehman Brothers Holdings Inc. (Lehman Brothers) equity-linked notes that went into default as of their respective maturity dates, Sept. 14, 2008 and Oct. 2, 2008, each with a principal amount of $33,000. Lehman Brothers filed a Chapter 11 bankruptcy petition on Sept. 15, 2008. It is likely that the Fund will receive less than the maturity value of the notes (amounting to $46,439) pending the outcome of the bankruptcy proceedings. These holding have been determined to be illiquid. The notes are being valued by the Investment Manager at an estimate of the amount recoverable based on the maturity value of the notes discounted by the observable price of Lehman Brothers senior notes. At Dec. 31, 2009, the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- aggregate value of the notes was $9,636 which represented 0.35% of the Fund's net assets. 11. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, re- characterization of real estate investment trust (REIT) distributions, post- October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $1,529 and accumulated net realized loss has been decreased by $1,529. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED DEC. 31 2009 2008 ---------------------------------------------------------------- Ordinary income $100,000 $186,201
At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................... $ 28,195 Undistributed accumulated long-term gain......... $ -- Accumulated realized loss........................ $(3,461,085) Unrealized appreciation (depreciation)........... $ 199,513
For federal income tax purposes, the Fund had a capital loss carry-over of $3,443,755 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $519,960 $366,561 $632,912 $1,924,322
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- had a post-October loss of $17,330 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN COMMON STOCK PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Common Stock Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 27, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Common Stock Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 39 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Dec. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Dividends Received Deduction for corporations................ 100.00%
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 41 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 43 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 45 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 44 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 ANNUAL REPORT 45 SELIGMAN COMMON STOCK PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9921 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO SEEKS CAPITAL GAIN. Seligman Communications and Information Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by participating in a qualified pension or retirement plan or by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 16 Statement of Assets and Liabilities...................... 21 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 23 Financial Highlights............... 24 Notes to Financial Statements...... 26 Report of Independent Registered Public Accounting Firm........... 40 Federal Income Tax Information..... 42 Board Members and Officers......... 43 Proxy Voting....................... 47
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Communications and Information Portfolio (the Fund) Class 1 shares gained 59.89% for the 12 months ended Dec. 31, 2009. > The Fund underperformed its benchmark, the S&P North American Technology Sector Index, which rose 63.19% during the 12-month period. > The Fund outperformed its peer group, as represented by the Lipper Science & Technology Funds Index, which increased 57.90% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 -------------------------------------------------------------------------- Seligman Communications and Information Portfolio Class 1 +59.89% +5.57% +9.19% +0.68% N/A -------------------------------------------------------------------------- Class 2 +59.38% +5.29% +8.90% N/A -0.96% -------------------------------------------------------------------------- S&P North American Technology Sector Index (unmanaged) +63.19% +2.64% +3.75% -6.59% -7.47% -------------------------------------------------------------------------- Lipper Science & Technology Funds Index +57.90% +1.01% +3.00% -6.94% -8.10% --------------------------------------------------------------------------
* For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the S&P North American Technology Sector Index does not reflect the effect of expenses. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations, government regulation, and limited liquidity as compared to other investments. In addition, investments in one economic sector, such as technology, may result in greater price fluctuations than owning a portfolio of diversified investments. Investments in small- and mid-capitalization companies involve greater risks and potential volatility than investments in larger, more established companies. See the Fund's prospectus for information on these and other risks associated with the Fund. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholders, Seligman Communications and Information Portfolio (the Fund) Class 1 shares gained 59.89% for the 12 months ended Dec. 31, 2009. The Fund underperformed its benchmark, the S&P North American Technology Sector Index (the S&P NATS Index), which increased 63.19% during the 12-month period. The Fund outperformed its peer group, as measured by the Lipper Science & Technology Funds Index, which returned 57.90% for the same period. SIGNIFICANT PERFORMANCE FACTORS The economic environment firmed as the year progressed. The technology industry was not as adversely affected by the economic malaise as many had expected. Business spending, on software in particular, proved to be fairly resilient, attributable to the fact that so many business processes are mission critical. The software industry was also supported by the necessity of ongoing maintenance payments for continued product use. Further supporting the technology industry in 2009 was the unexpected strength of personal computers (PCs) and cell phones sales. While the final figures of worldwide sales are not yet available, it is estimated that PC unit sales ended down only 8% in 2009, a figure much better than analysts expected. PC demand in emerging economies -- which fared better, overall, than developed economies in the recession -- is surging where penetration levels are still low. The cell phone market also held up SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 1.1% ------------------------------------------------ Health Care 5.3% ------------------------------------------------ Information Technology 85.5% ------------------------------------------------ Telecommunication Services 1.9% ------------------------------------------------ Other(2) 6.2% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- well, due mainly to the ongoing move to smart phones with greater functionality and Internet features. Multitudinous product launches and innovations have prompted consumers to replace their phones in greater frequency than was perhaps seen only a few years ago. The electronics industry was a prime beneficiary of the improvement we saw in PC and cell phone sales as the year progressed. Inventories were rebuilt throughout the electronics industry supply chain, which gave rise to significant positive earnings surprises within semiconductors in particular, but also through many areas of electronics, beginning in June and extending through year-end. Semiconductors had been negatively impacted the most in 2008 and returned as the strongest performing industry in 2009. Overall, IT spending was in the negative single digits, not a cataclysmic decline, as compared to other market sectors. TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Synopsys 6.6% ------------------------------------------------ Check Point Software Technologies 5.6% ------------------------------------------------ Microsoft 5.6% ------------------------------------------------ Amdocs 5.4% ------------------------------------------------ Symantec 5.3% ------------------------------------------------ Oracle 5.3% ------------------------------------------------ Apple 5.1% ------------------------------------------------ Cisco Systems 5.1% ------------------------------------------------ Open Text 4.5% ------------------------------------------------ BMC Software 4.2% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Software was the Fund's largest weighting, considerably overweight, relative to the S&P NATS Index during the year and stock selection, particularly within systems software was a significant contributor to the Fund's investment results, on an absolute and relative basis. Notable names within software included CHECK POINT SOFTWARE TECHNOLOGIES, SYMANTEC, MCAFEE, SYNOPSYS, AMDOCS, OPEN TEXT, MICROSOFT, BMC SOFTWARE, and PARAMETRIC TECHNOLOGY. The semiconductor industry also contributed significantly to the Fund's results during the year. The Fund maintained a sizable underweight, relative to the S&P NATS Index during the year, but stock selection led the Fund to substantially outperform the index. Most outstanding was the Fund's holding in chip manufacturer MARVELL TECHNOLOGY GROUP. The Fund was underweight in computer and peripherals, an industry that outperformed for the year. While the allocation detracted from relative performance, stock selection more than overcame the detraction, with strong results from APPLE, NETAPP, EMC and HEWLETT-PACKARD. The Fund also maintained an underweight in communications equipment. Strong contributions from RIVERBED TECHNOLOGY (which the Fund no longer owns), QUALCOMM and CISCO SYSTEMS added to the Fund's results. Within the health care sector, an area which is not represented in the S&P NATS Index, the Fund benefited from its investment in LIFE TECHNOLOGIES as well as from ADVANCED MEDICAL OPTICS, which was acquired in Feb. 2009 by ABBOT LABORATORIES, a company which the Fund also owns. The largest areas of relative detraction came from areas in which the Fund was not invested, or was late to the game. The Fund had little exposure to contract manufacturing services, an area that rallied strongly during the year. Commodity semiconductor companies, such as those that produce flash memory and DRAM chips, which were among the top performing semiconductor companies in 2009 was also an area of missed opportunity. Certain travel-related Internet sites and online retailers that garnered strong returns were also missed opportunities for the Fund. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- The Fund was also modestly involved with disk drive stocks, which proved to be extremely strong during the year. The Fund did own WESTERN DIGITAL and SEAGATE TECHNOLOGY, which returned disappointing results. CHANGES TO THE FUND'S PORTFOLIO The only notable change to our allocations was with regard to the semiconductor capital equipment. The Fund had minimal exposure to the area at the start of the year. We added positions in this industry to the Fund, such as NOVELLUS SYSTEMS, in response to the dramatically improving capital spending environment as fundamentals in the electronics industry improved and balance sheets of chip companies strengthened. We've also seen a great improvement in pricing (more than doubling from their lows) for commodity semiconductors, especially for DRAM memory chips and band flash chips, which further supports our rationale for increasing the Fund's exposure to this industry. While we continue to maintain a significant overweight in software, we pared back considerably our exposure to video game software during the year. Given the rise of social networking websites, as well as the advent of casual games on platforms such as the iPhone and iPod touch, we saw declining prospects for this niche of the software industry. This tactical move proved advantageous as video game stocks delivered disappointing results on the whole in 2009. While we did not implement any significant industry re-allocations, we took advantage of opportunities present in the market to add to return. For example, we added to our position in Marvell Technology at an attractive price, which proved fortuitous when Marvell rallied strongly from the bottom. We also added to the Fund's position in Apple at the nadir early in 2009 when CEO and co- founder Steve Jobs announced he was taking a medical leave of absence. Apple's stock price rebounded, more than doubling from the level at which we added to the position. OUR FUTURE STRATEGY We currently view the technology sector as a rising tide that's lifting all boats. IT budgets are showing signs of improving in 2010. It appears that global enterprise spending, or at least budgetary intentions, for 2010 indicate a 4-5% growth in IT budgets. There seems to be pent-up demand -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- for storage and servers, so data center equipment certainly may be on the upswing. We are anticipating strong results from companies whose businesses focus on data centers as earnings results are announced in the first quarter of 2010. We also anticipate meaningful improvement in software projects that have been held on pause for some time now that the recovery is showing some legs and we have experienced some stabilization. We anticipate a nice recovery in enterprise software demand for new licenses and for new products as 2010 unfolds. Within semiconductors, we anticipate a significant increase in capital spending. Semiconductors are coming off very depressed levels. Factoring in the rising prices of commodity chips and the high utilization rates in existing chip factory facilities, we believe current forecasts of 50-60% growth in capital spending within semiconductors may be proven correct. We are seeing vast improvements in the financing environment. We anticipate a marked increase in initial public offering activity within the technology sector in 2010. Valuations among technology companies are running a wide spectrum currently. While many technology companies are at frothy levels, we believe there are still many companies out there with reasonable valuations. We are finding more value in larger companies, as companies with smaller floats (small capitalization structure) are pricing in at the expensive end of the spectrum. We plan to navigate carefully, likely underweighting smaller, more expensive companies, as we anticipate secondary offerings with many of these companies, many of which are in the software and Internet-related areas. We are fairly positive about the prospects for software and plan to continue to overweight the industry. We believe there are still a lot of technology companies that are flush with cash, which lends to our anticipation of a step-up in acquisition activity, as well as increased share repurchases. We also anticipate that, as the semiconductor industry continues to improve, chip companies may start hiring once again, increasing spending on design tools and engineers. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- (PHOTO - PAUL WICK) (PHOTO - REEMA SHAH) (PHOTO - AJAY DIWAN) Paul Wick Reema Shah Ajay Diwan Portfolio Manager Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Communications and Information Portfolio Class 1 shares (from 1/1/2000 to 12/31/2009) as compared to the performance of the Standard & Poor's North American Technology Sector Index, the Lipper Science & Technology Funds Index and the Lipper Science & Technology Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN COMMUNICATION AND INFORMATION PORTFOLIO Class 1 Cumulative value of $10,000 $15,989 $11,766 $15,518 $10,707 --------------------------------------------------------------------------------------- Average annual total return +59.89% +5.57% +9.19% +0.68% --------------------------------------------------------------------------------------- STANDARD & POOR'S NORTH AMERICAN TECHNOLOGY SECTOR INDEX(1) Cumulative value of $10,000 $16,319 $10,814 $12,023 $5,059 --------------------------------------------------------------------------------------- Average annual total return +63.19% +2.64% +3.75% -6.59% --------------------------------------------------------------------------------------- LIPPER SCIENCE & TECHNOLOGY FUNDS INDEX(2) Cumulative value of $10,000 $15,790 $10,306 $11,591 $4,872 --------------------------------------------------------------------------------------- Average annual total return +57.90% +1.01% +3.00% -6.94% --------------------------------------------------------------------------------------- LIPPER SCIENCE & TECHNOLOGY FUNDS AVERAGE(3) Cumulative value of $10,000 $15,697 $9,886 $11,188 $5,059 --------------------------------------------------------------------------------------- Average annual total return +60.34% +0.41% +2.63% -6.93% ---------------------------------------------------------------------------------------
Results for Class 2 shares can be found on page 3. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN COMMUNICATION AND INFORMATION PORTFOLIO LINE GRAPH)
SELIGMAN COMMUNICATION S&P NORTH LIPPER SCIENCE LIPPER SCIENCE AND INFORMATION AMERICAN TECHNOLOGY AND TECHNOLOGY AND TECHNOLOGY PORTFOLIO CLASS(1) SECTOR INDEX(1) FUNDS INDEX(2) FUNDS AVERAGE(3) ---------------------- ------------------- -------------- ---------------- 1/1/00 $10,000 $10,000 $10,000 $10,000 3/00 11,682 11,582 12,178 11,918 6/00 10,483 10,565 10,892 10,617 9/00 8,866 9,539 10,663 10,337 12/00 6,383 6,216 6,973 6,848 3/01 5,943 4,503 4,846 4,763 6/01 7,201 5,163 5,431 5,337 9/01 5,009 3,327 3,434 3,400 12/01 6,724 4,440 4,551 4,577 3/02 6,371 4,116 4,228 4,294 6/02 4,801 2,974 3,065 3,117 9/02 3,792 2,168 2,301 2,316 12/02 4,300 2,652 2,668 2,732 3/03 4,198 2,638 2,661 2,725 6/03 5,314 3,230 3,268 3,385 9/03 5,512 3,599 3,596 3,706 12/03 6,207 4,088 4,037 4,201 3/04 6,580 4,044 4,081 4,252 6/04 6,596 4,119 4,058 4,284 9/04 5,843 3,665 3,631 3,836 12/04 6,900 4,207 4,203 4,450 3/05 6,473 3,841 3,856 4,079 6/05 6,660 3,899 3,983 4,211 9/05 7,344 4,172 4,278 4,528 12/05 7,440 4,293 4,429 4,685 3/06 8,369 4,482 4,740 5,004 6/06 7,786 4,069 4,300 4,560 9/06 8,395 4,368 4,461 4,731 12/06 9,101 4,678 4,727 4,979 3/07 9,261 4,678 4,795 5,048 6/07 10,041 5,165 5,216 5,490 9/07 10,660 5,496 5,600 5,814 12/07 10,500 5,470 5,519 5,659 3/08 9,069 4,656 4,654 4,802 6/08 9,726 4,805 4,829 4,966 9/08 8,534 4,203 4,111 4,234 12/08 6,697 3,100 3,085 3,168 3/09 7,397 3,247 3,220 3,300 6/09 8,539 3,913 3,843 3,949 9/09 9,831 4,574 4,518 4,664 12/09 10,707 5,059 4,872 5,059
(1) The Standard & Poor's North American Technology Sector Index (S&P NATS Index) is composed of equity benchmarks of U.S. technology-related stocks. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Science & Technology Funds Index (the Lipper Index) includes the 30 largest science and technology funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Science & Technology Funds Average (the Lipper Average) is an average of funds that invest at least 65% of their equity portfolios in science and technology stocks. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as the Fund's secondary benchmark. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts, life insurance policies and/or pension or retirement plans. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract or expenses associated with an investment through a qualified pension or retirement plan. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount, the contract or the plan were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,253.90 $5.62 .99% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.21 $5.04 .99% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,251.80 $6.98 1.23% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.00 $6.26 1.23% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Dec. 31, 2009: +25.39% for Class 1 and +25.18% for Class 2. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (94.3%) ISSUER SHARES VALUE(a) COMMUNICATIONS EQUIPMENT (9.0%) Cisco Systems 113,200(b) $2,710,008 Nortel Networks 16(b,c,e) -- Polycom 6,600(b) 164,802 QUALCOMM 46,800 2,164,968 --------------- Total 5,039,778 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (15.0%) Apple 12,900(b) 2,720,094 Dell 20,500(b) 294,380 Electronics for Imaging 66,200(b) 861,262 EMC 57,000(b) 995,790 Hewlett-Packard 28,300 1,457,733 NetApp 27,921(b) 960,203 Teradata 21,800(b) 685,174 Western Digital 9,400(b) 415,010 --------------- Total 8,389,646 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.9%) Deutsche Telekom ADR 36,600(c) 538,020 Qwest Communications Intl 62,700 263,967 Telecom Italia 161,300(c) 251,251 --------------- Total 1,053,238 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (3.2%) AGA Medical Holdings 13,273(b) 196,042 Inverness Medical Innovations 3,200(b) 132,832 Medtronic 6,200 272,676 St. Jude Medical 32,700(b) 1,202,706 --------------- Total 1,804,256 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.1%) Emdeon Cl A 3,811(b) 58,118 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (6.6%) eBay 22,328(b) 525,601 Open Text 58,071(b,c) 2,360,586 VeriSign 34,700(b,d) 841,128 --------------- Total 3,727,315 ------------------------------------------------------------------------------------- IT SERVICES (6.0%) Amdocs 100,587(b,c) 2,869,747 Fidelity Natl Information Services 20,900 489,896 --------------- Total 3,359,643 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.4%) Life Technologies 4,562(b) 238,273 ------------------------------------------------------------------------------------- MEDIA (1.2%) DreamWorks Animation SKG Cl A 16,600(b) 663,170 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS (1.0%) Xerox 61,800 522,828 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.5%) Abbott Laboratories 16,000 863,840 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (5.5%) Avago Technologies 18,800(b,c) 343,852 Lam Research 4,400(b) 172,524 Marvell Technology Group 21,159(b,c,d) 439,049 Microchip Technology 6,200 180,172 Natl Semiconductor 18,700(d) 287,232 Novellus Systems 45,900(b) 1,071,306 Teradyne 31,300(b,d) 335,849 Xilinx 11,100 278,166 --------------- Total 3,108,150 ------------------------------------------------------------------------------------- SOFTWARE (42.9%) Adobe Systems 12,200(b) 448,716 Aspen Technology 34,400(b) 337,292 BMC Software 55,700(b) 2,233,570 Check Point Software Technologies 88,165(b,c) 2,987,031 McAfee 10,700(b) 434,099 Mentor Graphics 106,200(b) 937,746 Micro Focus Intl 26,700(c) 195,353 Microsoft 97,800 2,981,922 NICE Systems ADR 5,500(b,c) 170,720 Nuance Communications 116,800(b) 1,815,072 Oracle 113,200 2,777,928 Parametric Technology 134,607(b) 2,199,478 Solar Winds 5,294(b) 121,815
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SOFTWARE (CONT.) SonicWALL 16,700(b) $127,087 Symantec 157,223(b) 2,812,719 Synopsys 156,000(b) 3,475,681 --------------- Total 24,056,229 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $47,694,848) $52,884,484 ------------------------------------------------------------------------------------- MONEY MARKET FUND (6.3%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 3,512,809(f) $3,512,809 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $3,512,809) $3,512,809 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (12.0%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 6,704,191 $6,704,191 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $6,704,191) $6,704,191 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $57,911,848)(g) $63,101,484 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depository Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2009, the value of foreign securities, excluding short-term securities, represented 18.11% of net assets. (d) At Dec. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Negligible market value. (f) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (g) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $58,322,302 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $6,402,137 Unrealized depreciation (1,622,955) ---------------------------------------------------------- Net unrealized appreciation $4,779,182 ----------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) Diversified Telecommunication Services $801,987 $251,251 $-- $1,053,238 Software 23,860,876 195,353 -- 24,056,229 All Other Industries(b) 27,775,017 -- -- 27,775,017 -------------------------------------------------------------------------------------------- Total Equity Securities 52,437,880 446,604 -- 52,884,484 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 3,512,809 -- -- 3,512,809 Investments of Cash Collateral Received for Securities on Loan 6,704,191 -- -- 6,704,191 -------------------------------------------------------------------------------------------- Total Other 10,217,000 -- -- 10,217,000 -------------------------------------------------------------------------------------------- Total $62,654,880 $446,604 $-- $63,101,484 --------------------------------------------------------------------------------------------
(a) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (b) All industry classifications are identified in the Portfolio of Investments. (c) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $47,694,848) 52,884,484 Affiliated money market fund (identified cost $3,512,809) 3,512,809 Investments of cash collateral received for securities on loan (identified cost $6,704,191) 6,704,191 ------------------------------------------------------------------------------- Total investments in securities (identified cost $57,911,848) 63,101,484 Foreign currency holdings (identified cost $15) 15 Capital shares receivable 53,191 Dividends and accrued interest receivable 10,835 Receivable for investment securities sold 129,524 ------------------------------------------------------------------------------- Total assets 63,295,049 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 15,279 Payable for investment securities purchased 421,195 Payable upon return of securities loaned 6,704,191 Accrued investment management services fees 32,901 Accrued distribution fees 6,022 Accrued transfer agency fees 2,800 Accrued administrative services fees 2,800 Other accrued expenses 32,808 ------------------------------------------------------------------------------- Total liabilities 7,217,996 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 56,077,053 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 2,835 Additional paid-in capital 66,982,251 Excess of distributions over net investment income (1,113) Accumulated net realized gain (loss) (16,096,564) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 5,189,644 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 56,077,053 ------------------------------------------------------------------------------- *Value of securities on loan $ 6,453,184 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class A $26,653,931 1,329,584 $20.05 Class B $29,423,122 1,505,482 $19.54 ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends 164,293 Interest 4,196 Income distributions from affiliated money market fund 6,448 Income from securities lending -- net 5,804 Less foreign taxes withheld (669) ------------------------------------------------------------------------------ Total income 180,072 ------------------------------------------------------------------------------ Expenses: Investment management services fees 305,415 Distribution fees -- Class 2 47,901 Transfer agency fees Class 1 18,761 Class 2 7,756 Administrative services fees 18,678 Compensation of board members 1,317 Custodian fees 34,405 Printing and postage 26,322 Professional fees 41,239 Other 5,932 ------------------------------------------------------------------------------ Total expenses 507,726 ------------------------------------------------------------------------------ Investment income (loss) -- net (327,654) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 1,247,400 Foreign currency transactions (2,670) ------------------------------------------------------------------------------ Net realized gain (loss) on investments 1,244,730 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,625,606 ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 19,870,336 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $19,542,682 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS Investment income (loss) -- net $ (327,654) $ (382,458) Net realized gain (loss) on investments 1,244,730 (3,689,499) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 18,625,606 (15,112,469) -------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 19,542,682 (19,184,426) -------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 292,196 1,342,451 Class 2 shares 17,154,202 4,018,842 Payments for redemptions Class 1 shares (4,542,598) (7,143,629) Class 2 shares (6,445,241) (5,959,598) -------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 6,458,559 (7,741,934) -------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 26,001,241 (26,926,360) Net assets at beginning of year 30,075,812 57,002,172 -------------------------------------------------------------------------------------------- Net assets at end of year $56,077,053 $ 30,075,812 -------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (1,113) $ (811) --------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 23 FINANCIAL HIGHLIGHTS ---------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, CLASS 1 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $12.54 $19.66 $17.04 $13.93 $12.92 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.11) (.13) (.11) (.08) (.10) Net gains (losses) (both realized and unrealized) 7.62 (6.99) 2.73 3.19 1.11 ---------------------------------------------------------------------------------------------------------- Total from investment operations 7.51 (7.12) 2.62 3.11 1.01 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $20.05 $12.54 $19.66 $17.04 $13.93 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 59.89% (36.22%) 15.37% 22.33% 7.82% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.10% 1.15% 1.10% 1.05% 1.10% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.68%) (.78%) (.59%) (.54%) (.77%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $27 $20 $38 $42 $47 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 147% 129% 199% 181% 133% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED DEC. 31, CLASS 2 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $12.26 $19.27 $16.74 $13.72 $12.76 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.14) (.17) (.15) (.12) (.13) Net gains (losses) (both realized and unrealized) 7.42 (6.84) 2.68 3.14 1.09 ---------------------------------------------------------------------------------------------------------- Total from investment operations 7.28 (7.01) 2.53 3.02 .96 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $19.54 $12.26 $19.27 $16.74 $13.72 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 59.38% (36.38%) 15.11% 22.01% 7.52% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.31% 1.40% 1.35% 1.30% 1.35% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.87%) (1.03%) (.84%) (.79%) (1.02%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $29 $10 $19 $16 $12 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 147% 129% 199% 181% 133% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Communications and Information Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, opened-end management investment company. The Fund has 150 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in securities of companies operating in the communications, information and related industries. The Fund offers Class 1 and Class 2 shares. - Class 1 shares are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. - Class 2 shares are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies and qualified pension or retirement plans. The two 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 class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. Shares are also offered through certain qualified pension or retirement plans. You invest by purchasing a variable annuity contract or life insurance policy or through a qualified pension or retirement plan and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager), as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At Dec. 31, 2009, foreign currency holdings were entirely comprised of Taiwan dollars. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At Dec. 31, 2009, the Fund had no outstanding forward foreign currency contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT DEC. 31, 2009 At Dec. 31, 2009, the Fund had no outstanding derivatives. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DEC. 31, 2009 AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME --------------------------------------------------------------------------------
FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------- Foreign exchange contracts $5,378 ---------------------------------------------------------------- Total $5,378 ----------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------- Foreign exchange contracts $-- ---------------------------------------------------------------- Total $-- ----------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Dec. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $4,000 for the year ended Dec. 31, 2009. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.705% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received an annual fee equal to 0.75% of the Fund's average daily net assets. The management fee for the year ended Dec. 31, 2009 was 0.72% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.04% of the Fund's average -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $213. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records. Effective May 11, 2009 the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 0.99% Class 2............................................. 1.24
-------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $61,671,602 and $57,640,362, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* ---------------------------------------------------------------- CLASS 1 Sold 17,383 78,101 Redeemed (281,750) (437,386) ---------------------------------------------------------------- Net increase (decrease) (264,367) (359,285) ---------------------------------------------------------------- CLASS 2 Sold 1,096,161 232,317 Redeemed (413,492) (374,650) ---------------------------------------------------------------- Net increase (decrease) 682,669 (142,333) ----------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. 7. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $6,453,184 were on loan, secured by cash collateral of $6,704,191 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $5,804 earned from securities lending for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $25,777,588 and $22,264,779, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing the prior credit facilities. The credit facility agreement, which is a -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to the Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. For the period from June 17, 2009 through to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to the Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings during the year ended Dec. 31, 2009. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- from the year that the income or realized gains (losses) were recorded by the Fund. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $327,352 and accumulated net realized loss has been increased by $1,688 resulting in a net reclassification adjustment to decrease paid-in capital by $325,664. At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ -- Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(15,686,110) Unrealized appreciation (depreciation)......... $ 4,778,077
For federal income tax purposes, the Fund had a capital loss carry-over of $15,686,110 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $7,829,524 $5,578,202 $2,165,560 $112,824
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 12. RISKS RELATING TO CERTAIN INVESTMENTS CONCENTRATION RISK. The Fund concentrates its investments in companies in the communications, information and related industries. Therefore, the Fund may be susceptible to factors affecting these industries and the Fund's net asset value may fluctuate more than a fund that invests in a wider range of industries. In addition, the rapid -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- pace of change within many of these industries tends to create a more volatile operating environment than in other industries. 13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Communications & Information Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 19, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Communications & Information Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, the changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 41 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Fiscal year ended Dec. 31, 2009 The fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 70 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 43 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 44 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 45 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009 Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 46 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 ANNUAL REPORT 47 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9915 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Global Technology Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 6 The Fund's Long-term Performance... 12 Fund Expenses Example.............. 14 Portfolio of Investments........... 16 Statement of Assets and Liabilities...................... 22 Statement of Operations............ 23 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 25 Notes to Financial Statements...... 27 Report of Independent Registered Public Accounting Firm........... 42 Federal Income Tax Information..... 44 Board Members and Officers......... 45 Proxy Voting....................... 49
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Global Technology Portfolio (the Fund) Class 1 shares gained 62.38% for the 12 months ended Dec. 31, 2009. > The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) World IT Index, which rose 50.88% during the same period. > The Fund also underperformed its peer group, as represented by the Lipper Global Science & Technology Funds Index, which increased 72.12% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 -------------------------------------------------------------------------- Seligman Global Technology Portfolio Class 1 +62.38% +3.85% +7.39% -1.95% N/A -------------------------------------------------------------------------- Class 2 +62.13% +3.67% +7.20% N/A -3.39% -------------------------------------------------------------------------- MSCI World IT Index (unmanaged) +50.88% -1.37% +1.67% -8.51% -9.03% -------------------------------------------------------------------------- MSCI World Index (unmanaged) +30.79% -5.09% +2.57% +0.23% +0.50% -------------------------------------------------------------------------- Lipper Global Science & Technology Funds Index +72.12% +2.35% +4.18% N/A N/A --------------------------------------------------------------------------
* For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations, government regulation, and limited liquidity as compared to other investments. In addition, the Fund is a narrowly-focused sector fund and it may exhibit higher volatility than funds with broader investment objectives. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholders, Seligman Global Technology Portfolio (the Fund) Class 1 shares gained 62.38% for the 12 month period ending Dec. 31, 2009. The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) World Information Technology (IT) Index (MSCI World IT Index), which increased 50.88%. The MSCI World Index returned 30.79% for the period. The Fund underperformed its peer group, as represented by the Lipper Global Science & Technology Funds Index, which rose 72.12% for the same period. SIGNIFICANT PERFORMANCE FACTORS International equities staged an impressive rally during the annual period overall, but the rebound was one marked by significant volatility. Over the first few months of the fiscal year, countries around the globe were mired in a deep economic downturn. In turn, international equity markets experienced an unprecedented sell-off. Governments of many countries acted jointly and intervened quickly to inject stimulus in an effort to help stabilize the global economy and calm investor fears. Largely as a result of such government programs, economic results slowly improved during the period, and international equity markets welcomed the news by rallying ahead of the official end of the recession in the third quarter of 2009. At the same time, the sheer size of the government intervention caused the U.S. dollar to weaken, providing a further boost to SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 0.9% ------------------------------------------------ Financials 1.1% ------------------------------------------------ Health Care 1.1% ------------------------------------------------ Information Technology 92.4% ------------------------------------------------ Telecommunication 2.2% ------------------------------------------------ Other(2) 2.3% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- international equity returns. The rally in emerging market equities outpaced the solid rally of their developed counterparts. Still, concerns lingered at the end of the annual period. Corporate profitability and earnings exceeded expectations but were primarily driven by aggressive cost cutting rather than actual top-line growth. Unemployment continued to rise, and more importantly perhaps, incomes continued to decline globally. The strength and duration of the potential economic recovery remained uncertain. The rally staged in early 2009 by technology companies gained momentum and spread across sectors as 2009 unfolded. Equity markets worldwide began to revive late in the first quarter in a swift and sweeping recovery that continued through year-end as investor confidence found positive ground and risk appetite returned. Within technology, inventory replenishment was a predominant theme driving the recovery. The Fund's largest allocation during the period was to software, specifically application software and systems software. The Fund's weighting in systems software was in-line with that of the MSCI World IT Index during the period, but the weighting in application software was considerably higher than that of the MSCI World IT Index. TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Check Point Software Technologies 4.8% ------------------------------------------------ Amdocs 4.5% ------------------------------------------------ Synopsys 4.5% ------------------------------------------------ Symantec 4.2% ------------------------------------------------ Open Text 3.9% ------------------------------------------------ Apple 3.7% ------------------------------------------------ Micro Focus Intl 3.6% ------------------------------------------------ Hewlett-Packard 3.6% ------------------------------------------------ Cisco Systems 3.4% ------------------------------------------------ Parametric Technology 3.3% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Strong stock selection within software resulted in significant outperformance versus the MSCI World IT Index. A standout individual contributor within software included SOLARWINDS (United States), an application software manufacturer that produces software for monitoring and repairing networks came to market with its initial public offering in May 2009 and performed strongly through year end. The Fund enjoyed strong gains in the communications equipment industry, both on an absolute basis as well as compared to the MSCI World IT Index. Stock selection enabled the Fund to outstrip the MSCI World IT Index despite a sizable underweighting in the industry compared to the MSCI World IT Index. Semiconductors was another area that proved beneficial to the Fund's results. Though the Fund maintained an underweight in the industry, relative to the MSCI World IT Index, stock selection resulted in significant relative outperformance. MEMC ELECTRONIC MATERIALS (United States) and SUMCO (Japan), which produces silicon wafers used in the manufacture of semiconductors were notable standouts for the Fund during the year. Within computer storage and peripherals, the effect of the Fund's allocation had a much stronger impact on the Fund's relative outperformance than stock selection. This area was the strongest performing within the MSCI World IT Index -- up approximately 100% for the year -- and while the Fund's overweight compared to the MSCI World IT Index was rewarded, stock selection caused performance to lag the performance of the MSCI World IT Index within the computer storage and peripherals industry for the period. Internet software and services was another area in which the Fund lagged the MSCI World IT Index as a result of stock selection. Having an underweight in GOOGLE (United States), relative to the MSCI World IT Index, proved detrimental to relative results. Google, which maintains an index of websites and other online content providing automated search technology enabling users to access information via its online index, saw its stock price surge through much of 2009. ROLTA INDIA (India), within the IT consulting and other services industry was also a notable detractor during the year. QWEST COMMUNICATIONS INTERNATIONAL (United States), within the telecommunication services sector, also detracted from Fund -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- results during the year. Qwest saw its stock price suffer in 2009 as a result of steadily declining subscriber base. CHANGES TO THE FUND'S PORTFOLIO From a regional perspective, the U.S. continued to be the largest geographical allocation for the Fund. The Fund continued to maintain allocations in emerging Asia, an area which is not represented in the MSCI World IT Index, though such allocations were decreased slightly. From an industry perspective, the allocation to application and systems software remained the largest weighting, increasing minimally throughout the course of the fiscal year. Within an environment of tight corporate spending, we continued to focus on software as an area that would benefit as IT managers sought lower cost projects with demonstrable returns on investment. Themes such as data security and tighter regulation and compliance drew us to security software. Exposure to computer hardware was increased, while the Fund's semiconductor allocation decreased. OUR FUTURE STRATEGY We are cautiously optimistic as we gauge the longer-term prospects of the current recovery. We believe consumer spending, especially related to the big- ticket items that have helped drive growth in previous years, will likely continue to remain under pressure. Corporate budgets have been tight, and we expect project spending to remain extremely selective. Telecommunications companies are suffering in the low consumer demand environment as well. We do see the potential for growth in government tech spending, but we expect it will be modest at best. We believe there will be select opportunities to take advantage of current volatility to add stocks at attractive prices. Historically, technology has performed relatively well when the economy is recovering, and because of the sector's strong relative fundamental health, we believe it is poised to benefit if the market continues to recover. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 9 MANAGER COMMENTARY (continued) ------------------------------------------------- (PHOTO - RICHARD PAROWER) (PHOTO - PAUL WICK) (PHOTO - REEMA SHAH) Richard Parower, CFA Paul Wick Reema Shah Portfolio Manager Portfolio Manager Portfolio Manager (PHOTO - AJAY DIWAN) (PHOTO - BENJAMIN LU) Ajay Diwan Benjamin Lu, CFA Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Global Technology Portfolio Class 1 shares (from 1/1/2000 to 12/31/2009) as compared to the performance of the MSCI World IT Index, the MSCI World Index, the Lipper Global Science and Technology Funds Index and the Lipper Global Science & Technology Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO Class 1 Cumulative value of $10,000 $16,238 $11,201 $14,282 $8,214 ------------------------------------------------------------------------------------------ Average annual total return +62.38% +3.85% +7.39% -1.95% ------------------------------------------------------------------------------------------ MSCI WORLD IT INDEX(1) Cumulative value of $10,000 $15,088 $9,594 $10,862 $4,109 ------------------------------------------------------------------------------------------ Average annual total return +50.88% -1.37% +1.67% -8.51% ------------------------------------------------------------------------------------------ MSCI WORLD INDEX(2) Cumulative value of $10,000 $13,079 $8,550 $11,350 $10,235 ------------------------------------------------------------------------------------------ Average annual total return +30.79% -5.09% +2.57% +0.23% ------------------------------------------------------------------------------------------ LIPPER GLOBAL SCIENCE & TECHNOLOGY FUNDS INDEX(3) Cumulative value of $10,000 $17,212 $10,720 $12,272 N/A ------------------------------------------------------------------------------------------ Average annual total return +72.12% +2.35% +4.18% N/A ------------------------------------------------------------------------------------------ LIPPER GLOBAL SCIENCE & TECHNOLOGY FUNDS AVERAGE(4) Cumulative value of $10,000 $16,851 $10,227 $11,831 $5,377 ------------------------------------------------------------------------------------------ Average annual total return +68.51% +0.75% +3.42% -4.90% ------------------------------------------------------------------------------------------
Results for Class 2 shares can be found on page 3. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO LINE GRAPH)
LIPPER GLOBAL LIPPER GLOBAL SELIGMAN GLOBAL SCIENCE AND SCIENCE AND TECHNOLOGY PORTFOLIO MSCI WORLD MSCI WORLD TECHNOLOGY FUNDS TECHNOLOGY FUNDS CLASS 1 IT INDEX(1) INDEX(2) INDEX(3) AVERAGE(4) -------------------- ----------- ------------------ ----------------- ------------------- 1/1/99 $10,000 $10,000 $10,000 $10,000 $10,000 3/00 11,791 11,005 10,110 10,000 11,758 6/00 10,577 9,950 9,759 10,000 10,521 9/00 9,556 8,342 9,275 10,000 10,307 12/00 7,626 5,829 8,708 10,000 6,706 3/01 6,065 4,221 7,596 7,191 4,524 6/01 6,687 4,573 7,806 7,938 5,209 9/01 4,543 3,102 6,690 5,266 3,217 12/01 5,944 4,101 7,270 6,775 4,482 3/02 6,008 3,833 7,301 6,287 4,127 6/02 4,577 2,864 6,644 4,678 2,977 9/02 3,472 2,102 5,428 3,576 2,217 12/02 4,063 2,510 5,849 4,110 2,607 3/03 3,889 2,459 5,560 4,102 2,599 6/03 4,536 2,945 6,519 5,108 3,346 9/03 4,957 3,306 6,841 5,681 3,792 12/03 5,530 3,706 7,824 6,307 4,259 3/04 5,696 3,733 8,036 6,435 4,369 6/04 5,581 3,728 8,120 6,369 4,338 9/04 4,921 3,339 8,047 5,677 3,823 12/04 5,751 3,782 9,016 6,650 4,522 3/05 5,370 3,517 8,926 6,084 4,091 6/05 5,485 3,555 8,980 6,246 4,242 9/05 6,017 3,770 9,616 6,734 4,613 12/05 6,218 3,942 9,920 7,014 4,825 3/06 6,883 4,126 10,586 7,683 5,264 6/06 6,319 3,768 10,552 6,923 4,695 9/06 6,750 4,015 11,034 7,119 4,900 12/06 7,333 4,282 11,969 7,612 5,259 3/07 7,453 4,257 12,280 7,732 5,313 6/07 8,113 4,674 13,104 8,476 5,872 9/07 8,567 4,974 13,426 9,156 6,308 12/07 8,466 4,897 13,114 9,005 6,221 3/08 7,310 4,174 11,941 7,438 5,181 6/08 7,710 4,271 11,770 7,647 5,281 9/08 6,604 3,617 9,987 6,382 4,387 12/08 5,059 2,723 7,825 4,741 3,198 3/09 5,481 2,737 6,903 4,914 3,322 6/09 6,384 3,290 8,356 6,278 4,176 9/09 7,508 3,807 9,824 7,512 4,984 12/09 8,214 4,109 10,235 8,160 5,377
(1) The MSCI World IT Index is a free float-adjusted market capitalization index designed to measure information technology stock performance in the global developed equity markets. The index reflects reinvestment of all distributions and changes in market prices. (2) The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed equity performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Global Science and Technology Funds Index (the Lipper Index) includes the 10 largest global science and technology funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper Global Science & Technology Funds Average (the Lipper Average) is an average of funds that invest primarily in the equity securities of domestic and foreign companies engaged in science and technology. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's secondary benchmarks. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,286.60 $10.95(c) 1.90% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.63 $ 9.65(c) 1.90% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,285.70 $12.39(c) 2.15% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.37 $10.92(c) 2.15% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Dec. 31, 2009: +28.66% for Class 1 and +28.57% for Class 2. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.99% for Class 1 and 1.24% for Class 2. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $5.71 for Class 1 and $7.14 for Class 2 and the hypothetical expenses paid would have been $5.04 for Class 1 and $6.31 for Class 2. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.3%) ISSUER SHARES VALUE(a) APPLICATION SOFTWARE (21.3%) Adobe Systems 1,600(b) $58,848 AsiaInfo Holdings 560(b,c,d) 17,063 Aspen Technology 6,341(b) 62,173 JDA Software Group 3,800(b) 96,786 Longtop Financial Technologies ADR 2,000(b,c,d) 74,040 Mentor Graphics 9,495(b,d) 83,841 Micro Focus Intl 31,215(c) 228,388 Misys 9,500(b,c) 32,986 NICE Systems ADR 1,100(b,c,d) 34,144 Nuance Communications 11,300(b,d) 175,602 Parametric Technology 12,600(b,d) 205,884 SolarWinds 674(b) 15,509 Synopsys 12,600(b,d) 280,728 --------------- Total 1,365,992 ------------------------------------------------------------------------------------- AUTO COMPONENTS (0.5%) NGK Spark Plug 3,000(c) 34,061 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (6.5%) Cisco Systems 9,000(b) 215,460 QUALCOMM 4,300 198,918 --------------- Total 414,378 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (16.4%) Acer 12,130(c) 36,439 Apple 1,100(b) 231,946 Dell 2,500(b) 35,900 Electronics for Imaging 3,400(b) 44,234 EMC 7,600(b) 132,772 Hewlett-Packard 4,400 226,644 IBM 700 91,630 NetApp 4,693(b) 161,392 Netezza 6,800(b,d) 65,960 Teradata 700(b) 22,001 --------------- Total 1,048,918 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.1%) BM&FBOVESPA 9,700(c) 68,173 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (2.2%) Deutsche Telekom ADR 4,400(c) 64,680 Koninklijke (Royal) KPN 2,624(c) 44,536 Telecom Italia 19,000(c) 29,596 --------------- Total 138,812 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (5.2%) Hon Hai Precision Industry 20,000(c) 93,635 Ibiden 1,000(c) 35,893 Kyocera 400(c) 35,257 Murata Mfg 900(c) 44,953 Nidec 500(c) 46,248 TDK 600(c) 36,697 Tripod Technology 11,000(c) 37,155 --------------- Total 329,838 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.5%) Hologic 2,100(b,d) 30,450 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (0.1%) Emdeon Cl A 360(b) 5,490 ------------------------------------------------------------------------------------- HOME ENTERTAINMENT SOFTWARE (0.5%) NCSoft 240(c) 30,768 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.4%) Sharp 2,000(c) 25,277 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (7.4%) eBay 2,271(b) 53,459 Open Text 6,100(b,c) 247,966 SINA 1,000(b,c,d) 45,180 TelecityGroup 5,100(b,c) 31,445 VeriSign 3,800(b,d) 92,112 --------------- Total 470,162 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) IT SERVICES (9.3%) Amdocs 9,900(b,c) $282,447 Fidelity Natl Information Services 2,700 63,288 Mphasis 2,500(c) 38,713 Rolta India 16,400(c) 68,449 Tivit Terceirizacao de Tecnologia e Servicos 13,188(c) 121,136 Xchanging 6,524(c) 21,709 --------------- Total 595,742 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS (1.1%) Konica Minolta Holdings 3,500(c) 36,097 Xerox 4,100 34,686 --------------- Total 70,783 ------------------------------------------------------------------------------------- PHARMACEUTICALS (0.5%) Abbott Laboratories 600 32,394 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (5.2%) Avago Technologies 3,138(b,c) 57,394 Marvell Technology Group 2,600(b,c) 53,950 Microchip Technology 700 20,342 MPI 6,000(c) 16,126 Natl Semiconductor 2,700(d) 41,472 Novellus Systems 2,600(b) 60,684 ON Semiconductor 8,200(b,d) 72,242 SUMCO 400(c) 7,074 --------------- Total 329,284 ------------------------------------------------------------------------------------- SYSTEMS SOFTWARE (20.2%) BMC Software 4,600(b) 184,460 Check Point Software Technologies 8,947(b,c) 303,123 McAfee 835(b) 33,876 Microsoft 6,600 201,234 Oracle 7,800 191,412 SonicWALL 6,545(b,d) 49,807 Symantec 14,800(b) 264,772 Totvs 400(c) 27,080 Websense 2,221(b,d) 38,779 --------------- Total 1,294,543 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $5,485,507) $6,285,065 ------------------------------------------------------------------------------------- MONEY MARKET FUND (2.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 151,538(e) $151,538 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $151,538) $151,538 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (13.5%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND (13.5%) JPMorgan Prime Money Market Fund 860,234 $860,234 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $860,234) $860,234 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $6,497,279)(f) $7,296,837 =====================================================================================
The industries identified above are generally based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY COUNTRY The following table represents the portfolio investments of the Fund by country as a percentage of net assets at Dec. 31, 2009.
COUNTRY PERCENTAGE OF NET ASSETS ----------------------------------------------------------------------- Bermuda 0.8% Brazil 3.4% Canada 3.9% China 2.1% Germany 1.0% Guernsey 4.4% India 1.6% Israel 5.3% Italy 0.5% Japan 4.8% Netherlands 0.7% Singapore 0.9% South Korea 0.5% Taiwan 2.9% United Kingdom 4.9% ----------------------------------------------------------------------- Total Foreign Securities* 37.7% United States 76.4% -----------------------------------------------------------------------
* Amount shown does not include companies based in the U.S. that derive at least 50% of their revenue from business outside the U.S. or have at least 50% of their assets outside the U.S. If such companies were included, Total Foreign Securities would be greater than 40%. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depository Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2009, the value of foreign securities, excluding short-term securities, represented 37.67% of net assets. (d) At Dec. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 9 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (f) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $6,559,155 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $853,264 Unrealized depreciation (115,582) --------------------------------------------------------- Net unrealized appreciation $737,682 ---------------------------------------------------------
-------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) Application Software $1,104,618 $261,374 $-- $1,365,992 Auto Components -- 34,061 -- 34,061 Computers & Peripherals 1,012,479 36,439 -- 1,048,918 Diversified Telecommunication Services 64,680 74,132 -- 138,812 Electronic Equipment, Instruments & Components -- 329,838 -- 329,838 Home Entertainment Software -- 30,768 -- 30,768 Household Durables -- 25,277 -- 25,277 Internet Software & Services 438,717 31,445 -- 470,162 IT Services 466,871 128,871 -- 595,742 Office Electronics 34,686 36,097 -- 70,783 Semiconductor & Semiconductor Equipment 306,084 23,200 -- 329,284 All Other Industries(b) 1,845,428 -- -- 1,845,428 -------------------------------------------------------------------------------------------- Total Equity Securities 5,273,563 1,011,502 -- 6,285,065 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 151,538 -- -- 151,538 Investments of Cash Collateral Received for Securities on Loan 860,234 -- -- 860,234 -------------------------------------------------------------------------------------------- Total Other 1,011,772 -- -- 1,011,772 -------------------------------------------------------------------------------------------- Total $6,285,335 $1,011,502 $-- $7,296,837 --------------------------------------------------------------------------------------------
(a) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (b) All industry classifications are identified in the Portfolio of Investments. (c) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $5,485,507) $ 6,285,065 Affiliated money market fund (identified cost $151,538) 151,538 Investments of cash collateral received for securities on loan (identified cost $860,234) 860,234 ------------------------------------------------------------------------------ Total investments in securities (identified cost $6,497,279) 7,296,837 Capital shares receivable 20 Dividends and accrued interest receivable 4,142 Receivable for investment securities sold 4,363 ------------------------------------------------------------------------------ Total assets 7,305,362 ------------------------------------------------------------------------------ LIABILITIES Capital shares payable 3,893 Payable for investment securities purchased 2,154 Payable upon return of securities loaned 860,234 Accrued investment management services fees 5,209 Accrued distribution fees 539 Accrued transfer agency fees 329 Accrued administrative services fees 439 Other accrued expenses 40,397 ------------------------------------------------------------------------------ Total liabilities 913,194 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 6,392,168 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.001 par value $ 359 Additional paid-in capital 11,569,428 Excess of distributions over net investment income (135) Accumulated net realized gain (loss) (5,977,063) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 799,579 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 6,392,168 ------------------------------------------------------------------------------ *Value of securities on loan $ 825,559 ------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $4,021,757 224,536 $17.91 Class 2 $2,370,411 134,415 $17.64 ---------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends $ 27,276 Interest 18 Income distributions from affiliated money market fund 626 Income from securities lending -- net 695 Less foreign taxes withheld (1,777) ----------------------------------------------------------------------------- Total income 26,838 ----------------------------------------------------------------------------- Expenses: Investment management services fees 48,653 Distribution fees -- Class 2 4,401 Transfer agency fees Class 1 4,413 Class 2 2,486 Administrative services fees 2,902 Compensation of board members 155 Custodian fees 46,244 Printing and postage 19,983 Professional fees 62,732 Other 1,563 ----------------------------------------------------------------------------- Total expenses 193,532 Expenses waived/reimbursed by the Investment Manager and its affiliates (93,220) ----------------------------------------------------------------------------- Total net expenses 100,312 ----------------------------------------------------------------------------- Investment income (loss) -- net (73,474) ----------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 47,820 Foreign currency transactions (40,573) ----------------------------------------------------------------------------- Net realized gain (loss) on investments 7,247 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,466,138 ----------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 2,473,385 ----------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $2,399,911 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS Investment income (loss) -- net $ (73,474) $ (88,590) Net realized gain (loss) on investments 7,247 (890,975) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 2,466,138 (2,027,498) ------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 2,399,911 (3,007,063) ------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 160,070 124,499 Class 2 shares 1,486,640 799,399 Payments for redemptions Class 1 shares (485,495) (990,797) Class 2 shares (1,081,794) (1,555,793) ------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 79,421 (1,622,692) ------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 2,479,332 (4,629,755) Net assets at beginning of year 3,912,836 8,542,591 ------------------------------------------------------------------------------------------- Net assets at end of year $ 6,392,168 $ 3,912,836 ------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (135) $ (523) -------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, CLASS 1 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $11.03 $18.46 $15.99 $13.56 $12.54 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.19) (.21) (.25) (.20) (.19) Net gains (losses) (both realized and unrealized) 7.07 (7.22) 2.72 2.63 1.21 ---------------------------------------------------------------------------------------------------------- Total from investment operations 6.88 (7.43) 2.47 2.43 1.02 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.91 $11.03 $18.46 $15.99 $13.56 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 62.38% (40.25%) 15.45% 17.92% 8.13% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 3.86% 3.54% 3.04% 2.57% 2.49% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.90% 1.90% 1.90% 1.90% 1.90% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.38%) (1.38%) (1.44%) (1.37%) (1.53%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 $6 $6 $7 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 153% 161% 198% 205% 155% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 25 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED DEC. 31, CLASS 2 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $10.88 $18.25 $15.83 $13.45 $12.46 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.23) (.24) (.28) (.22) (.21) Net gains (losses) (both realized and unrealized) 6.99 (7.13) 2.70 2.60 1.20 ---------------------------------------------------------------------------------------------------------- Total from investment operations 6.76 (7.37) 2.42 2.38 .99 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.64 $10.88 $18.25 $15.83 $13.45 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 62.13% (40.38%) 15.29% 17.69% 7.95% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 3.79% 3.71% 3.19% 2.72% 2.64% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 2.15% 2.07% 2.05% 2.05% 2.05% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.60%) (1.55%) (1.59%) (1.52%) (1.68%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $1 $3 $2 $2 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 153% 161% 198% 205% 155% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Global Technology Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company and has 100 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in equity securities of U.S. and non-U.S. companies with business operations in technology and technology-related industries. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. The two 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 class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At Dec. 31, 2009, the Fund had no outstanding forward foreign currency contracts. OPTIONS TRANSACTIONS The Fund may buy and write options traded on any U.S. or foreign exchange, or in the over-the-counter (OTC) market to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments. The Fund may also buy and sell put and call options and write covered call options on portfolio securities. Options are contracts which entitle the holder to purchase or sell securities or other financial instruments at a specified price, or in the case of index options, to receive or pay the difference between the index value and the strike price of the index option. Completion of transactions for options traded in the OTC market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain OTC options trades. Cash collateral held or posted by the Fund for such option trades must be returned to the counterparty or the Fund upon closure, exercise or expiration of the contract. Option contracts purchased are recorded as investments and options contracts written are recorded as liabilities of the Fund. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. When options on debt -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The Fund's maximum payout in the case of written put option contracts represents the maximum potential amount of future payments (undiscounted) that the Fund could be required to make as a guarantor for written put options. For OTC options contracts, the transaction is also subject to counterparty credit risk. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained upon the exercise of the put options by holders of the option contracts or proceeds received upon entering into the contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT DEC. 31, 2009 At Dec. 31, 2009, the fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DEC. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS OPTIONS ----------------------------------------------------------------------- Foreign exchange contracts $(2,197) $-- ----------------------------------------------------------------------- Total $(2,197) $-- -----------------------------------------------------------------------
-------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ----------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS OPTIONS ----------------------------------------------------------------------- Foreign exchange contracts $-- $-- ----------------------------------------------------------------------- Total $-- $-- -----------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At Dec. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $9,000 for the year ended Dec. 31, 2009. OPTIONS At Dec. 31, 2009, the Fund had no outstanding options contracts. The monthly average gross notional amount for these contracts was $10,000 for the year ended Dec. 31, 2009. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.87% as the Fund's assets increase. Prior to May 11, 2009, the Investment Manager received an annual fee equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.90% as the Fund's net assets increased. The management fee for the year ended Dec. 31, 2009 was 0.96% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08 to 0.05% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.06% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $29. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains Fund shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class 1............................................. 1.90% Class 2............................................. 2.15
-------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- The waived/reimbursed fees and expenses for the transfer agency fees and other expenses at the class level were as follows: Class 1........................................... $1,244 Class 2........................................... 2,485
The management fees waived/reimbursed at the Fund level were $89,491. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that the "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.90% per annum of the class' average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 1.90% Class 2............................................. 2.15
Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 0.99% Class 2............................................. 1.24
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $7,410,058 and $7,195,329, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* --------------------------------------------------------------- CLASS 1 Sold 10,315 7,507 Redeemed (35,557) (63,517) --------------------------------------------------------------- Net increase (decrease) (25,242) (56,010) --------------------------------------------------------------- CLASS 2 Sold 99,079 47,638 Redeemed (71,169) (99,986) --------------------------------------------------------------- Net increase (decrease) 27,910 (52,348) ---------------------------------------------------------------
* Certain line items from the prior year have been renamed to conform to the current year presentation. 7. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $825,559 were on loan, secured by cash collateral of $860,234 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $695 earned from securities lending from for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. OPTION CONTRACTS WRITTEN Contracts and premiums associated with options contracts written during the year ended Dec. 31, 2009, are as follows:
CALLS CONTRACTS PREMIUMS ------------------------------------------------------------------ Balance Dec. 31, 2008 -- $ -- Opened 3 1,389 Exercised (3) (1,389) ------------------------------------------------------------------ Balance Dec. 31, 2009 -- $ -- ------------------------------------------------------------------
9. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $4,012,678 and $3,861,140, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 10. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 11. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, post-October losses and losses deferred due to wash sales. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $73,862 and accumulated net realized loss has been decreased by $4,222,662 resulting in a net reclassification adjustment to decrease paid-in capital by $4,296,524. At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ -- Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(5,915,187) Unrealized appreciation (depreciation)......... $ 737,568
For federal income tax purposes, the Fund had a capital loss carry-over of $5,915,187 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $4,941,506 $108,762 $544,777 $320,142
For the year ended Dec. 31, 2009, $4,220,678 of capital loss carry-over expired unused. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 13. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 14. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 39 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering -------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 41 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Global Technology Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 19, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Global Technology Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 43 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Fiscal year ended Dec. 31, 2009 The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 44 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 45 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 46 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 47 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 48 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 ANNUAL REPORT 49 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9916 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO SELIGMAN INTERNATIONAL GROWTH PORTFOLIO SEEKS LONG- TERM CAPITAL APPRECIATION. Seligman International Growth Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 13 Portfolio of Investments........... 15 Statement of Assets and Liabilities...................... 22 Statement of Operations............ 23 Statements of Changes in Net Assets........................... 24 Financial Highlights............... 25 Notes to Financial Statements...... 26 Report of Independent Registered Public Accounting Firm........... 39 Federal Income Tax Information..... 41 Board Members and Officers......... 42 Proxy Voting....................... 46
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman International Growth Portfolio (the Fund) gained 22.50% for the 12 month period ended Dec. 31, 2009. > The Fund underperformed its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Growth Index, which rose 29.91% during the same period. > The Fund also underperformed its peer group, as represented by the Lipper International Multi-Cap Growth Funds Index, which increased 43.99% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------- Seligman International Growth Portfolio +22.50% -13.83% -3.69% -5.21% -------------------------------------------------------------------- MSCI EAFE Growth Index (unmanaged) +29.91% -4.41% +4.02% -1.00% -------------------------------------------------------------------- MSCI EAFE Index (unmanaged) +32.46% -5.57% +4.02% +1.58% -------------------------------------------------------------------- Lipper International Multi-Cap Growth Funds Index +43.99% -3.40% +6.25% +0.55% --------------------------------------------------------------------
The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. There are specific risks associated with international investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Wellington Management Company, LLP (Wellington), an independent money management firm, manages the portfolio for Seligman International Growth Portfolio. Dear Shareholders, Seligman International Growth Portfolio (the Fund) gained 22.50% for the 12 months ended Dec. 31, 2009, underperforming the Fund's benchmark, the Morgan Stanley Capital International (MSCI) EAFE Growth Index, which gained 29.91% for the period. The Fund also underperformed its peer group, represented by the Lipper International Multi-Cap Growth Funds Index, which increased 43.99% for the period. COUNTRY BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Australia 0.6% ------------------------------------------------ Belgium 1.7% ------------------------------------------------ Brazil 2.0% ------------------------------------------------ Canada 5.2% ------------------------------------------------ China 5.4% ------------------------------------------------ Denmark 1.0% ------------------------------------------------ France 7.3% ------------------------------------------------ Germany 9.6% ------------------------------------------------ Hong Kong 2.7% ------------------------------------------------ Ireland 1.1% ------------------------------------------------ Israel 1.1% ------------------------------------------------ Italy 1.1% ------------------------------------------------ Japan 9.3% ------------------------------------------------ Luxembourg 1.0% ------------------------------------------------ Netherlands 8.6% ------------------------------------------------ Spain 3.3% ------------------------------------------------ Switzerland 13.3% ------------------------------------------------ United Kingdom 25.3% ------------------------------------------------ Other(2) 0.4% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- SIGNIFICANT PERFORMANCE FACTORS We believe stock selection was the primary driver of the Fund's underperformance relative to the MSCI EAFE Growth Index for the 12 months, particularly in the materials and financials sectors. Weak stock selection in materials was exemplified by our positions in gold producer AGNICO EAGLE MINES and base and precious metals producer ANGLO AMERICAN, whose stock price declined during the period. In financials, investments in financial services provider ALLIANZ and Swiss asset manager GAM HOLDINGS (formerly JULIUS BAER) also detracted from relative results. Stock selection was positive in the information technology and consumer discretionary sectors. Within information technology, positive results came from British software and services firm AUTONOMY, and from semiconductor companies ARM HOLDINGS and ASML HOLDINGS. Within the consumer discretionary sector, investing in DAIMLER benefitted the Fund's relative investment results. Overall, we believe sector allocation positively contributed, albeit modestly, to the Fund's results for the year. While an overweight to the consumer discretionary sector detracted from relative performance, TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Reckitt Benckiser Group (United Kingdom) 3.7% ------------------------------------------------ Nestle (Switzerland) 3.1% ------------------------------------------------ Daimler (Germany) 2.4% ------------------------------------------------ Rio Tinto (United Kingdom) 2.4% ------------------------------------------------ Unilever (Netherlands) 2.4% ------------------------------------------------ Xstrata (Switzerland) 2.4% ------------------------------------------------ Qiagen (Netherlands) 2.3% ------------------------------------------------ Potash Corp of Saskatchewan (Canada) 2.2% ------------------------------------------------ Metro (Germany) 2.2% ------------------------------------------------ Vodafone Group (United Kingdom) 2.2% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- underweight positions in the utilities and financials sectors outweighed the negative impact of the consumer discretionary weighting. On a country allocation basis, the Fund was negatively impacted by security selection within Belgium, Denmark, and Sweden and was positively impacted by an underweight allocation to Japan. CHANGES TO THE FUND'S PORTFOLIO At the sector level over the twelve month period, the Fund's allocations moved from an underweight positioning in consumer discretionary, industrials, and materials to an overweight position and in the opposite direction in health care and information technology. The Fund's allocation to the financials sector was increased, though it still remained a relative underweight, and exposure to telecommunication services was trimmed. At the country level, over the twelve month period, the Fund's exposure to the United Kingdom and Japan decreased and its exposure to Germany and Hong Kong increased. OUR FUTURE STRATEGY We believe the global economy will continue to rebound and cyclically-oriented sectors should perform well. We have therefore positioned the Fund with an overweight exposure to the materials, industrials, and consumer discretionary sectors. We have positioned the Fund with an underweight exposure to the financials sector as we believe that the sector currently provides limited opportunities for growth, relative to companies in other sectors. (LOGO) Wellington Management Company, LLP -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT THIS PAGE LEFT BLANK INTENTIONALLY THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman International Growth Portfolio (from 1/1/2000 to 12/31/2009) as compared to the performance of the MSCI EAFE Growth Index, the MSCI EAFE Index, the Lipper International Multi-Cap Growth Funds Index and the Lipper International Multi-Cap Growth Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN INTERNATIONAL GROWTH PORTFOLIO Cumulative value of $10,000 $12,250 $6,398 $8,288 $5,854 ------------------------------------------------------------------------------------------ Average annual total return +22.50% -13.83% -3.69% -5.21% ------------------------------------------------------------------------------------------ MSCI EAFE GROWTH INDEX(1) Cumulative value of $10,000 $12,991 $8,733 $12,176 $9,046 ------------------------------------------------------------------------------------------ Average annual total return +29.91% -4.41% +4.02% -1.00% ------------------------------------------------------------------------------------------ MSCI EAFE INDEX(2) Cumulative value of $10,000 $13,246 $8,420 $12,178 $11,697 ------------------------------------------------------------------------------------------ Average annual total return +32.46% -5.57% +4.02% +1.58% ------------------------------------------------------------------------------------------ LIPPER INTERNATIONAL MULTI-CAP GROWTH FUNDS INDEX(3) Cumulative value of $10,000 $14,399 $9,013 $13,539 $10,561 ------------------------------------------------------------------------------------------ Average annual total return +43.99% -3.40% +6.25% +0.55% ------------------------------------------------------------------------------------------ LIPPER INTERNATIONAL MULTI-CAP GROWTH FUNDS AVERAGE(4) Cumulative value of $10,000 $14,265 $8,490 $12,302 $11,529 ------------------------------------------------------------------------------------------ Average annual total return +42.65% -5.31% +4.23% +1.37% ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN INTERNATIONAL GROWTH PORTFOLIO LINE GRAPH)
LIPPER INTERNATIONAL LIPPER INTERNATIONAL SELIGMAN INTERNATIONAL MSCI EAFE MSCI EAFE MULTI-CAP GROWTH MULTI-CAP GROWTH GROWTH PORTFOLIO GROWTH INDEX(1) INDEX(2) FUNDS INDEX(3) FUNDS AVERAGE(4) ---------------------- --------------- ------------------ -------------------- -------------------- 1//1/00 $ 10,000 $ 10,000 $ 10,000 $ 10,000 $ 10,000 3/00 9,026 10,151 9,995 10,535 10,996 6/00 7,613 9,214 9,605 9,518 10,201 9/00 7,468 8,154 8,836 8,855 9,794 12/00 6,753 7,560 8,604 8,053 8,779 3/01 5,656 6,309 7,429 6,791 7,402 6/01 5,599 6,162 7,365 6,810 7,528 9/01 4,851 5,197 6,337 5,501 5,907 12/01 5,105 5,715 6,780 6,113 6,848 3/02 5,099 5,691 6,818 6,139 6,918 6/02 4,959 5,594 6,686 5,835 6,553 9/02 4,065 4,530 5,370 4,595 5,197 12/02 4,262 4,814 5,718 4,842 5,499 3/03 4,033 4,434 5,253 4,355 5,068 6/03 4,737 5,167 6,281 5,235 6,294 9/03 4,889 5,513 6,795 5,702 6,849 12/03 5,688 6,378 7,958 6,600 7,903 3/04 6,354 6,635 8,308 7,004 8,372 6/04 6,342 6,552 8,345 6,776 8,201 9/04 6,221 6,450 8,326 6,744 8,074 12/04 7,064 7,429 9,605 7,801 9,263 3/05 6,497 7,369 9,595 7,746 9,170 6/05 6,510 7,320 9,523 7,806 9,114 9/05 7,083 8,089 10,517 8,744 10,171 12/05 7,421 8,442 10,951 9,338 10,749 3/06 8,082 9,210 11,988 10,301 11,770 6/06 7,949 9,248 12,101 10,112 11,519 9/06 8,159 9,465 12,583 10,506 11,935 12/06 9,152 10,358 13,892 11,718 13,357 3/07 9,368 10,878 14,468 12,130 13,904 6/07 10,099 11,626 15,433 13,054 14,976 9/07 10,984 12,134 15,777 13,829 15,788 12/07 11,226 12,102 15,508 13,721 15,633 3/08 9,533 11,125 14,139 12,454 14,043 6/08 9,062 11,153 13,867 12,291 13,864 9/08 6,548 8,713 11,024 9,535 10,656 12/08 4,779 6,964 8,830 7,335 8,099 3/09 4,193 6,106 7,607 6,639 7,369 6/09 4,970 7,432 9,574 8,530 9,350 9/09 5,708 8,681 11,443 10,139 11,063 12/09 5,854 9,046 11,697 10,561 11,529
(1) The MSCI EAFE Growth Index, an unmanaged index, is compiled from a composite of securities markets in Europe, Australasia and the Far East. The index represents the growth portion of the market capitalizations of each country index, determined by price/book value, from the standard MSCI country indices. The index covers the full range of developed, emerging and MSCI All Country indices, including Free indices where applicable. The Country Growth indices are aggregated into regional Growth indices to create the composite. The index reflects reinvestment of all distributions and changes in market prices. (2) The MSCI EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australasia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper International Multi-Cap Growth Funds Index (the Lipper Index) includes the 10 largest international multi-cap growth funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper International Multi-Cap Growth Funds Average (the Lipper Average) is an average of funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi-cap funds typically have 25% to 75% of their assets invested in companies strictly outside of the US with market capitalizations (on a three-year weighted basis) greater than the 250th-largest company in the S&P/Citigroup World ex-US Broad Market Index (BMI). Multi-cap growth funds typically have an above-average price-to-cash flow ratio, price-to-book ratio, and three-year sales-per-share growth value compared to the S&P/Citigroup World ex-US BMI. The Lipper Average's returns include net reinvested dividends.* -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE (continued) ----------------------------------- * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's secondary benchmarks. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,178.00 $10.98(c) 2.00% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.12 $10.16(c) 2.00% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +17.80% for the six months ended Dec. 31, 2009. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.19%. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $6.53 and the hypothetical expenses paid would have been $6.06. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (101.8%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (0.6%) Toll Holdings 1,444 $11,273 ------------------------------------------------------------------------------------- BELGIUM (1.7%) Hansen Transmissions Intl 17,506(b) 30,838 ------------------------------------------------------------------------------------- BRAZIL (2.1%) Itau Unibanco Holding ADR 802 18,318 Petroleo Brasileiro ADR 400(d) 19,072 --------------- Total 37,390 ------------------------------------------------------------------------------------- CANADA (5.4%) Barrick Gold 700 27,566 Potash Corp of Saskatchewan 380 41,230 Teck Resources Cl B 800(b) 27,985 --------------- Total 96,781 ------------------------------------------------------------------------------------- CHINA (5.6%) Ctrip.com Intl ADR 300(b) 21,558 Golden Eagle Retail Group 5,000 10,142 Trina Solar ADR 500(b,d) 26,985 Yingli Green Energy Holding ADR 1,700(b,d) 26,877 ZTE Series H 2,400 14,756 --------------- Total 100,318 ------------------------------------------------------------------------------------- DENMARK (1.0%) Vestas Wind Systems 287(b,d) 17,456 ------------------------------------------------------------------------------------- FRANCE (7.5%) Danone 396 24,240 Essilor Intl 284(d) 16,961 PPR 76 9,109 Sanofi-Aventis 410 32,196 Schneider Electric 189 21,943 Valeo 282(b) 9,856 Vallourec 113(d) 20,414 --------------- Total 134,719 ------------------------------------------------------------------------------------- GERMANY (9.8%) Adidas 447 24,285 Bayer 171 13,720 Daimler 848 45,029 HeidelbergCement 390 26,668 Metro 667(d) 40,991 Siemens 206 18,924 ThyssenKrupp 194 7,332 --------------- Total 176,949 ------------------------------------------------------------------------------------- HONG KONG (2.7%) Li & Fung 8,120 33,571 Sun Hung Kai Properties 1,030 15,315 --------------- Total 48,886 ------------------------------------------------------------------------------------- IRELAND (1.1%) Experian 2,023 19,989 ------------------------------------------------------------------------------------- ISRAEL (1.1%) Teva Pharmaceutical Inds ADR 370 20,787 ------------------------------------------------------------------------------------- ITALY (1.1%) Bulgari 2,461(d) 20,239 ------------------------------------------------------------------------------------- JAPAN (9.5%) JFE Holdings 200 7,912 Komatsu 1,360 28,493 Mitsubishi UFJ Financial Group 3,800 18,733 Nikon 700 13,834 Nomura Holdings 2,000 14,885 Rakuten 17 12,953 Shin-Etsu Chemical 400 22,602 SoftBank 1,130 26,512 Sony 300 8,729 Toshiba 3,000(b) 16,660 --------------- Total 171,313 ------------------------------------------------------------------------------------- LUXEMBOURG (1.0%) ArcelorMittal 400(d) 18,300 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) NETHERLANDS (8.8%) ING Groep 922(b) $8,866 Koninklijke (Royal) KPN 1,798 30,517 Koninklijke Philips Electronics 1,176 34,711 Qiagen 1,850(b) 41,575 Unilever 1,338 43,484 --------------- Total 159,153 ------------------------------------------------------------------------------------- SPAIN (3.4%) Banco Santander 1,620 26,731 Red Electrica de Espana 617(d) 34,380 --------------- Total 61,111 ------------------------------------------------------------------------------------- SWITZERLAND (13.6%) Credit Suisse Group 508 25,152 Kuehne & Nagel Intl 211 20,502 Nestle 1,157 56,118 Roche Holding 119 20,338 Sonova Holding 90 10,897 STMicroelectronics 825 7,612 Swatch Group 131 33,138 Temenos Group 941(b) 24,233 UBS 280(b) 4,357 Xstrata 2,434(b) 43,426 --------------- Total 245,773 ------------------------------------------------------------------------------------- UNITED KINGDOM (25.8%) Anglo American 458(b) 19,841 Antofagasta 2,422 38,540 ARM Holdings 13,177 37,637 AstraZeneca 713 33,519 BG Group 1,242 22,433 British American Tobacco 1,188 38,578 Burberry Group 2,810 26,997 Compass Group 3,470 24,840 HSBC Holdings 920 10,499 Imperial Tobacco Group 439 13,853 Reckitt Benckiser Group 1,271 68,820 Rio Tinto 830 44,830 Standard Chartered 1,073 27,096 Thomas Cook Group 5,074 18,750 Vodafone Group 17,579 40,720 --------------- Total 466,953 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,616,886) $1,838,228 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.4%) ISSUER SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 7,572(e) $7,572 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $7,572) $7,572 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (8.7%) ISSUER SHARES VALUE(a) JPMorgan Prime Money Market Fund 156,537 $156,537 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $156,537) $156,537 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,780,995)(f) $2,002,337 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of net assets at Dec. 31, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(A) ----------------------------------------------------------------------- Air Freight & Logistics 0.6% $11,273 Auto Components 0.5 9,856 Automobiles 2.5 45,029 Capital Markets 2.5 44,394 Chemicals 3.5 63,832 Commercial Banks 5.6 101,377 Communications Equipment 0.8 14,756 Computers & Peripherals 0.9 16,660 Construction Materials 1.5 26,668 Distributors 1.9 33,571 Diversified Financial Services 0.5 8,866 Diversified Telecommunication Services 1.7 30,517 Electric Utilities 1.9 34,380 Electrical Equipment 5.2 93,261 Food & Staples Retailing 2.3 40,991 Food Products 6.9 123,842 Health Care Equipment & Supplies 1.5 27,858 Hotels, Restaurants & Leisure 3.6 65,148 Household Durables 0.5 8,729 Household Products 3.8 68,820 Industrial Conglomerates 3.0 53,635 Internet & Catalog Retail 0.7 12,953 Leisure Equipment & Products 0.8 13,834 Life Sciences Tools & Services 2.3 41,575 Machinery 4.4 79,745 Marine 1.1 20,502 Metals & Mining 13.0 235,732 Multiline Retail 1.1 19,251 Oil, Gas & Consumable Fuels 2.3 41,505 Pharmaceuticals 6.7 120,560 Professional Services 1.1 19,989 Real Estate Management & Development 0.8 15,315 Semiconductors & Semiconductor 45,249 Equipment 2.5 Software 1.3 24,233 Textiles, Apparel & Luxury Goods 5.8 104,659 Tobacco 2.9 52,431 Wireless Telecommunication Services 3.7 67,232 Other(1) 9.1 164,109 ----------------------------------------------------------------------- Total $2,002,337 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depository Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) At Dec. 31, 2009, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (f) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $1,796,409 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $226,213 Unrealized depreciation (20,285) --------------------------------------------------------- Net unrealized appreciation $205,928 ---------------------------------------------------------
-------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) Air Freight & Logistics $-- $11,273 $-- $11,273 Auto Components -- 9,856 -- 9,856 Automobiles -- 45,029 -- 45,029 Capital Markets -- 44,394 -- 44,394 Chemicals 41,230 22,602 -- 63,832 Commercial Banks 18,317 83,060 -- 101,377 Communications Equipment -- 14,756 -- 14,756 Computers & Peripherals -- 16,660 -- 16,660 Construction Materials -- 26,668 -- 26,668 Distributors -- 33,571 -- 33,571 Diversified Financial Services -- 8,866 -- 8,866 Diversified Telecommunication Services -- 30,517 -- 30,517 Electric Utilities -- 34,380 -- 34,380 Electrical Equipment 53,862 39,399 -- 93,261 Food & Staples Retailing -- 40,991 -- 40,991 Food Products -- 123,842 -- 123,842 Health Care Equipment & Supplies -- 27,858 -- 27,858 Hotels, Restaurants & Leisure 21,558 43,590 -- 65,148 Household Durables -- 8,729 -- 8,729 Household Products -- 68,820 -- 68,820 Industrial Conglomerates -- 53,635 -- 53,635 Internet & Catalog Retail -- 12,953 -- 12,953 Leisure Equipment & Products -- 13,834 -- 13,834 Life Sciences Tools & Services -- 41,575 -- 41,575 Machinery -- 79,745 -- 79,745 Marine -- 20,502 -- 20,502
-------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Metals & Mining $73,851 $161,881 $-- $235,732 Multiline Retail -- 19,251 -- 19,251 Oil, Gas & Consumable Fuels 19,072 22,433 -- 41,505 Pharmaceuticals 20,787 99,773 -- 120,560 Professional Services -- 19,989 -- 19,989 Real Estate Management & Development -- 15,315 -- 15,315 Semiconductors & Semiconductor Equipment -- 45,249 -- 45,249 Software -- 24,233 -- 24,233 Textiles, Apparel & Luxury Goods -- 104,659 -- 104,659 Tobacco -- 52,431 -- 52,431 Wireless Telecommunication Services -- 67,232 -- 67,232 -------------------------------------------------------------------------------------------- Total Equity Securities 248,677 1,589,551 -- 1,838,228 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(b) 7,572 -- -- 7,572 Investments of Cash Collateral Received for Securities on Loan 156,537 -- -- 156,537 -------------------------------------------------------------------------------------------- Total Other 164,109 -- -- 164,109 -------------------------------------------------------------------------------------------- Total $412,786 $1,589,551 $-- $2,002,337 --------------------------------------------------------------------------------------------
(a) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. (b) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value* Unaffiliated issuers (identified cost $1,616,886) $ 1,838,228 Affiliated money market fund (identified cost $7,572) 7,572 Investments of cash collateral received for securities on loan (identified cost $156,537) 156,537 ------------------------------------------------------------------------------ Total investments in securities (identified cost $1,780,995) 2,002,337 Dividends and accrued interest receivable 1,042 Reclaims receivable 4,196 ------------------------------------------------------------------------------ Total assets 2,007,575 ------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash 39 Capital shares payable 2,641 Payable upon return of securities loaned 156,537 Accrued investment management services fees 1,463 Accrued transfer agency fees 92 Accrued administrative services fees 123 Other accrued expenses 40,260 ------------------------------------------------------------------------------ Total liabilities 201,155 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 1,806,420 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.001 par value $ 196 Additional paid-in capital 3,733,622 Undistributed net investment income 922 Accumulated net realized gain (loss) (2,150,013) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 221,693 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 1,806,420 ------------------------------------------------------------------------------ Shares outstanding 196,344 ------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 9.20 ------------------------------------------------------------------------------ *Value of securities on loan $ 151,204 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends $ 38,947 Income distributions from affiliated money market fund 100 Income from securities lending -- net 429 Less foreign taxes withheld (8,425) --------------------------------------------------------------------------- Total income 31,051 --------------------------------------------------------------------------- Expenses: Investment management services fees 15,188 Transfer agency fees 651 Administrative services fees 869 Compensation of board members 48 Custodian fees 66,064 Printing and postage 8,236 Professional fees 36,018 Other 460 --------------------------------------------------------------------------- Total expenses 127,534 Expenses waived/reimbursed by the Investment Manager and its affiliates (96,059) --------------------------------------------------------------------------- Total net expenses 31,475 --------------------------------------------------------------------------- Investment income (loss) -- net (424) --------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (12,808) Foreign currency transactions (114) --------------------------------------------------------------------------- Net realized gain (loss) on investments (12,922) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 321,116 --------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 308,194 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $307,770 ---------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 23 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS Investment income (loss) -- net $ (424) $ (6,669) Net realized gain (loss) on investments (12,922) (1,661,393) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 321,116 (705,291) ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 307,770 (2,373,353) ------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 233,648 165,746 Payments for redemptions of shares (308,441) (772,441) ------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (74,793) (606,695) ------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 232,977 (2,980,048) Net assets at beginning of year 1,573,443 4,553,491 ------------------------------------------------------------------------------------------ Net assets at end of year $1,806,420 $ 1,573,443 ------------------------------------------------------------------------------------------ Undistributed (excess of distributions over) net investment income $ 922 $ (499) ------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of the Fund held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges.
YEAR ENDED DEC. 31, ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $7.51 $17.64 $14.38 $11.66 $11.10 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .00(a) (.03) (.02) (.07) (.03) Net gains (losses) (both realized and unrealized) 1.69 (10.10) 3.28 2.79 .59 ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.69 (10.13) 3.26 2.72 .56 ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.20 $7.51 $17.64 $14.38 $11.66 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 22.50% (57.43%) 22.67% 23.33% 5.04% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 8.11% 4.63% 4.02% 3.94% 5.05% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 2.00% 2.00% 2.00% 2.00% 2.00% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .01% (.22%) (.15%) (.54%) (.24%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $5 $4 $4 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 327% 365% 235% 166% 189% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Rounds to zero. (b) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman International Growth Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund invests primarily in high-quality, large and mid-capitalization growth companies ($1 billion or more at the time of initial purchase by the Fund) that are considered leaders in their industries, emphasizing those industries that are growing on a global basis. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM) (Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- transfers in), and the reasons(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT DEC. 31, 2009 At Dec. 31, 2009, the fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE YEAR ENDED DEC. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------------- Foreign exchange contracts $(1,884) ---------------------------------------------------------------------- Total $(1,884) ----------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------------- Foreign exchange contracts $-- ---------------------------------------------------------------------- Total $-- ----------------------------------------------------------------------
-------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- VOLUME OF DERIVATIVE ACTIVITY At Dec. 31, 2009, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $20,000 for the year ended Dec. 31, 2009. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.86% as the Fund's net assets increase. Prior to May 11, 2009, the Investment Manager received an annual fee that is equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.90% as the Fund's net assets increased. The management fee for the year ended Dec. 31, 2009 was 0.97% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Wellington Management Company, LLP to subadvise the assets of the Fund. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.06% of the Fund's average daily net assets for the year ended Dec. 31, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $11. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 2.00% of the Fund's average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 1.00% per annum of the Fund's average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 2.00% of the Fund's average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.19% of the Fund's average daily net assets. -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $4,990,074 and $5,012,938, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* --------------------------------------------------------------- Sold 26,863 11,174 Redeemed (40,094) (59,688) --------------------------------------------------------------- Net increase (decrease) (13,231) (48,514) ---------------------------------------------------------------
* Certain line items from the prior year have been removed to conform to the current year presentation. 7. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $151,204 were on loan, secured by cash collateral of $156,537 invested in short-term securities or in cash equivalents. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $429 earned from securities lending for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $1,584,548 and $1,576,976, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 9. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, post-October losses, foreign tax credits and losses deferred due to wash sales. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been increased by $1,845 and accumulated net realized loss has been increased by $1,845. At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................................... $957 Undistributed accumulated long-term gain......................... $-- $(2,134,- Accumulated realized loss........................................ 598) Unrealized appreciation (depreciation)........................... $206,243
For federal income tax purposes, the Fund had a capital loss carry-over of $2,056,911 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2016 2017 $481,073 $1,325,858 $249,980
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $77,687 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 12. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 37 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN INTERNATIONAL GROWTH PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman International Growth Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 27, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 39 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman International Growth Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) Fiscal year ended Dec. 31, 2009
INCOME DISTRIBUTIONS - the Fund designates the following tax attributes for distributions: Dividends Received Deduction for corporations................ 0.79% Foreign Tax Credit........................................... $7,704 Foreign Source Income........................................ $21,945
The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 41 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 43 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 44 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 45 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT 45 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 46 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 ANNUAL REPORT SELIGMAN INTERNATIONAL GROWTH PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9920 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO SEEKS FAVORABLE CURRENT INCOME. Seligman Investment Grade Fixed Income Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 12 Portfolio of Investments........... 14 Statement of Assets and Liabilities...................... 21 Statement of Operations............ 22 Statements of Changes in Net Assets........................... 23 Financial Highlights............... 24 Notes to Financial Statements...... 25 Report of Independent Registered Public Accounting Firm........... 37 Federal Income Tax Information..... 39 Board Members and Officers......... 40 Proxy Voting....................... 44
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Investment Grade Fixed Income Portfolio (the Fund) gained 5.06% for the 12 months ended Dec. 31, 2009. > The Fund underperformed its benchmark, the unmanaged Barclays Capital U.S. Aggregate Bond Index, which advanced 5.93% during the 12-month period. > The Fund underperformed its peer group, as represented by the Lipper Intermediate Investment-Grade Debt Funds Index, which rose 14.30% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------- Seligman Investment Grade Fixed Income Portfolio +5.06% +3.28% +2.87% +4.67% --------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index (unmanaged) +5.93% +6.04% +4.97% +6.33% --------------------------------------------------------------------- Lipper Intermediate Investment- Grade Debt Funds Index +14.30% +4.72% +4.18% +5.74% ---------------------------------------------------------------------
The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the Barclays Capital U.S. Aggregate Bond Index does not reflect the effect of expenses. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG X HIGH X MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. There are risks associated with an investment in a bond fund, including credit risk, interest rate risk, and prepayment risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, Seligman Investment Grade Fixed Income Portfolio (the Fund) gained 5.06% for the 12 months ended Dec. 31, 2009. The Fund underperformed its benchmark, the unmanaged Barclays Capital U.S. Aggregate Bond Index (Barclays Capital Index), which advanced 5.93% during the 12-month period. The Fund underperformed its peer group, as represented by the Lipper Intermediate Investment-Grade Debt Funds Index, which rose 14.30% during the same period. SIGNIFICANT PERFORMANCE FACTORS Lower quality fixed income sectors outperformed higher quality fixed income sectors during the quarter, as investors poured back in to risk assets. Indeed, 2009 was a year of significant performance dispersion. The U.S. Treasury market posted negative total returns, with the Barclays Capital U.S. Treasury Index down 3.57% for the year, the worst performance for the sector since the index was created in 1973. It can be said that Treasury rates, while increasing, moved in a direction that was consistent with economic data, equity and credit markets. Two-year Treasury yields rose 0.37%, five-year Treasury yields rose 1.13%, 10-year Treasury yields were up 1.62%, and 30-year Treasury yields increased 1.97% to end the year at 4.65%. The yield curve, then, steepened, as short-term rates appeared anchored by the low federal funds target rate PORTFOLIO BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Asset-Backed 1.4% ------------------------------------------------ Consumer Discretionary 0.5% ------------------------------------------------ Consumer Staples 1.9% ------------------------------------------------ Energy 1.1% ------------------------------------------------ Financials 1.8% ------------------------------------------------ Foreign Government 0.5% ------------------------------------------------ Materials 0.6% ------------------------------------------------ Residential Mortgage-Backed 15.8% ------------------------------------------------ Telecommunication 4.0% ------------------------------------------------ U.S. Government Obligations & Agencies 49.2% ------------------------------------------------ Utilities 9.3% ------------------------------------------------ Other(2) 13.9% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- and language from the Federal Reserve Board (the Fed) that suggests its overnight lending rate target will remain low for an extended period of time. Long-term rates experienced a more pronounced move higher, as investors showed some concern about the anticipated significant Treasury security supply in 2010, required to help fund the plethora of government stimulus programs, being heavily weighted to the long-term end of the market. In addition, as economic data showed signs of improvement, fixed income investors may have begun to price in an eventual shift in monetary policy, i.e. interest rate hikes by the Fed. Non-Treasury sectors performed quite well in comparison. Investors embraced the more credit sensitive fixed income sectors in 2009 as fear and panic subsided, giving way to optimism for the economic recovery developing and encouraged by higher equity markets globally. Within the investment grade sectors of the fixed income market, commercial mortgage-backed securities performed best, followed closely by asset-backed securities and investment grade corporate bonds. Mortgage-backed securities performed in line with the Barclays Capital Index, and government agency securities generated positive returns but lagged the other non-Treasury sectors. QUALITY BREAKDOWN OF FIXED INCOME SECURITIES(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
AAA rating 75.0% ------------------------------------------------ AA rating 0.6% ------------------------------------------------ A rating 6.4% ------------------------------------------------ BBB rating 14.9% ------------------------------------------------ Non-investment grade 3.1% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). Ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 0.2% of the bond portfolio assets were determined through internal analysis. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Throughout, the Fed maintained the targeted federal funds rate in the 0% to 0.25% range, continuing to anticipate that economic conditions, including low rates of resource utilization, subdued inflation trends and stable inflation expectations were likely to warrant exceptionally low levels of the federal funds rate for an extended period. According to the Fed, "household spending...remains constrained by a weak labor market, modest income growth, lower housing wealth, and tight credit." In its mid-December statement, the Fed also announced that most of its special liquidity facilities would expire on Feb. 1, 2010. Sector allocation within the Fund was a key driver of its results relative to the Barclays Capital Index during the annual period, as the non-Treasury sectors rallied. Significant allocations to investment grade corporate bonds and mortgage-backed securities particularly helped. Security selection overall was also a strong contributor to the Fund's results, especially within the mortgage- backed securities and investment grade corporate bond sectors. There were no major detractors from the Fund's results during the year. It could be said that monetizing some of the gains the Fund had garnered from non- Treasury sector investments (taking profits in an effort to be prudent for our shareholders) beginning late in the second quarter may have proved premature, as these sectors continued to rally through year end. The Fund began the year with a shorter duration (a measure of the Fund's sensitivity to changes in interest rates) than the Barclays Capital Index, as we expected interest rates to gradually rise as markets stabilized. While this positioning detracted from the Fund's results during the first quarter, we lengthened the Fund's duration to a rather neutral stance compared to the Barclays Capital Index by the end of the second quarter and then maintained that positioning through most of the year. We further extended the Fund's duration in December, anticipating lower interest rates. As interest rates continued to decline in December, this positioning hurt. For the annual period overall, however, the Fund's duration positioning had a neutral impact on its results. Similarly, yield curve positioning detracted during the first quarter when we had implemented a flattening bias. However, we subsequently removed that bias, which helped as the yield -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- curve steepened, and so yield curve positioning within the Fund had a fairly neutral impact on its results during the annual period as a whole. CHANGES TO THE FUND'S PORTFOLIO As indicated, the Fund began the year with a duration shorter-than-Barclays Capital Index and then lengthened to a duration neutral-to-the-Index as interest rates rose. Interest rates had been extremely low at the beginning of the year and spreads (the difference in yields between Treasury securities and non- Treasury securities) were very wide as the market feared a deepening of the financial crisis. We also removed the Fund's yield curve flattening bias during the first quarter of 2009. From a broad sector perspective, we increased the Fund's allocation to non- Treasury segments of the fixed income market during the first half of the year. We subsequently sought to reduce the Fund's risk level during the second half of the year, redeploying profits taken from the sale of non-Treasury securities into Treasury securities. The Fund's turnover rate for the annual period was 284%.* OUR FUTURE STRATEGY We expect the Fed to be on hold for the majority of 2010 as the economy continues its recovery. U.S. Gross Domestic Product is anticipated to be in the 3% to 4% range in 2010. If this scenario is realized, it would still mean, we believe, high unemployment levels at the end of the year. Therefore, we would not expect a change in monetary policy unless economic growth were to break out of that range. This may be difficult given the ongoing headwinds of persistent housing market and consumer balance sheet pressures. Overall, we expect the first quarter of 2010 to largely be a continuation of what we saw during the fourth quarter of 2009, but with a trend toward slightly higher interest rates, as the U.S. Treasury ramps up its issuance of longer- maturity Treasury securities. With the expiration of the U.S. government's asset purchase programs and with anticipation for increased long-maturity Treasury supply, we expect interest rates will need to move a bit higher to underwrite the issuance. We expect higher quality non-Treasury issues to continue to find good sponsorship in the marketplace. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- We would expect the yield curve to maintain its steep shape until there is evidence that a change in monetary policy is near. Going forward, we intend to increase the Fund's emphasis on corporate bonds, preferring the transparency of non-cyclical asset rich investment grade corporate bonds in non-financial industries. Mortgage positions will likely continue to be primarily in the agency mortgage sector. We expect to shorten slightly the Fund's duration compared to the Barclays Capital Index. As always, we will maintain our disciplined focus on individual security selection. Tom Murphy, CFA(R) Scott Schroepfer, CFA(R) Todd White Portfolio Manager Portfolio Manager Portfolio Manager
* A significant portion of the turnover was the result of "roll" transactions in the liquid derivatives and Treasury securities. In the derivative transactions, positions in expiring contracts are liquidated and simultaneously replaced with positions in new contracts with equivalent characteristics. In the Treasury transactions, existing holdings are sold to purchase newly issued securities with slightly longer maturity dates. Although these transactions affect the turnover rate of the portfolio, they do not change the risk exposure or result in material transactions costs. The remaining turnover resulted from strategic reallocations and relative value trading. After transaction costs, we expect this activity to enhance the returns on the overall Portfolio. Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ---------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Investment Grade Fixed Income Portfolio (from 1/1/2000 to 12/31/2009) as compared to the performance of the Barclays Capital U.S. Aggregate Bond Index, the Lipper Intermediate Investment-Grade Debt Funds Index and the Lipper Corporate Debt Funds BBB-Rated Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO Cumulative value of $10,000 $10,506 $11,016 $11,522 $15,786 ------------------------------------------------------------------------------------------ Average annual total return +5.06% +3.28% +2.87% +4.67% ------------------------------------------------------------------------------------------ BARCLAYS CAPITAL U.S. AGGREGATE BOND INDEX(1) Cumulative value of $10,000 $10,593 $11,925 $12,744 $18,473 ------------------------------------------------------------------------------------------ Average annual total return +5.93% +6.04% +4.97% +6.33% ------------------------------------------------------------------------------------------ LIPPER INTERMEDIATE INVESTMENT-GRADE DEBT FUNDS INDEX(2) Cumulative value of $10,000 $11,430 $11,483 $12,270 $17,480 ------------------------------------------------------------------------------------------ Average annual total return +14.30% +4.72% +4.18% +5.74% ------------------------------------------------------------------------------------------ LIPPER CORPORATE DEBT FUNDS BBB-RATED AVERAGE(3) Cumulative value of $10,000 $12,116 $11,340 $12,190 $17,700 ------------------------------------------------------------------------------------------ Average annual total return +21.16% +4.28% +4.04% +6.11% ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO LINE GRAPH)
SELIGMAN INVESTMENT BARCLAYS CAPITAL LIPPER INTERMEDIATE LIPPER CORPORATE GRADE FIXED U.S. AGGREGATE INVESTMENT GRADE DEBT FUNDS INCOME PORTFOLIO BOND INDEX(1) INDEX (2) BBB-RATED AVERAGE(3) ------------------- ---------------- ------------------- -------------------- 1/1/00 $10,000 $10,000 $10,000 $10,000 3/00 10,205 10,221 10,197 10,187 6/00 10,356 10,399 10,330 10,196 9/00 10,637 10,712 10,632 10,433 12/00 11,025 11,163 11,058 10,684 3/01 11,316 11,501 11,405 11,054 6/01 11,316 11,566 11,456 11,129 9/01 11,694 12,100 11,954 11,437 12/01 11,634 12,105 11,967 11,550 3/02 11,532 12,116 11,959 11,554 6/02 11,986 12,564 12,266 11,790 9/02 12,667 13,140 12,689 12,055 12/02 12,777 13,347 12,959 12,448 3/03 12,966 13,532 13,187 12,781 6/03 13,463 13,871 13,586 13,481 9/03 13,392 13,851 13,584 13,515 12/03 13,378 13,894 13,661 13,775 3/04 13,650 14,264 14,003 14,153 6/04 13,268 13,915 13,663 13,723 9/04 13,613 14,360 14,077 14,275 12/04 13,700 14,497 14,246 14,575 3/05 13,552 14,428 14,177 14,447 6/05 13,950 14,862 14,588 14,839 9/05 13,787 14,761 14,506 14,772 12/05 13,828 14,849 14,571 14,830 3/06 13,687 14,753 14,491 14,772 6/06 13,624 14,742 14,471 14,716 9/06 14,175 15,303 15,017 15,317 12/06 14,329 15,493 15,221 15,564 3/07 14,530 15,726 15,447 15,783 6/07 14,430 15,644 15,330 15,679 9/07 14,714 16,089 15,720 15,935 12/07 15,130 16,572 16,048 16,095 3/08 15,307 16,931 16,066 16,119 6/08 15,131 16,759 15,890 15,943 9/08 14,761 16,677 15,339 14,762 12/08 15,025 17,440 15,292 14,626 3/09 15,062 17,461 15,383 14,270 6/09 15,303 17,772 16,217 15,958 9/09 15,824 18,436 17,235 17,391 12/09 15,786 18,473 17,480 17,700
(1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Intermediate Investment-Grade Debt Funds Index (the Lipper Index) includes the 30 largest investment grade funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Corporate Debt Funds BBB-Rated Average (the Lipper Average) is an average of funds that invest primarily in corporate and government debt issues rated in the top four grades. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as the Fund's secondary benchmark. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare each 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other similar funds. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,031.50 $4.35(c) .85% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.92 $4.33(c) .85% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +3.15% for the six months ended Dec. 31, 2009. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.79%. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $4.05 and the hypothetical expenses paid would have been $4.02. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (93.6%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRANATIONAL (0.6%)(C) Corp Andina de Fomento 01-12-17 5.75% $10,000(e) $10,177 ------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (53.4%) Federal Farm Credit Bank 02-07-13 3.40 40,000 41,704 Federal Home Loan Banks 05-20-11 2.63 45,000 46,083 12-30-11 1.25 15,000 14,890 11-17-17 5.00 10,000 10,817 Federal Home Loan Mtge Corp 12-15-11 1.13 5,000 4,992 02-24-12 1.50 25,000 24,914 10-26-12 2.05 15,000 14,911 12-28-12 0.50 25,000(i) 24,984 07-15-14 5.00 5,000 5,493 Federal Natl Mtge Assn 06-09-10 3.26 15,000 15,192 08-12-10 3.25 10,000 10,178 11-10-11 1.30 25,000 25,001 08-17-12 2.24 5,000 5,010 11-19-12 4.75 10,000 10,826 01-02-14 5.13 6,000 6,370 11-20-14 2.63 15,000(e) 14,850 U.S. Treasury 02-28-11 4.50 95,000 99,160 11-15-12 1.38 15,000 14,892 05-31-13 3.50 5,000 5,269 12-31-13 1.50 35,000 34,079 11-30-14 2.13 155,000(e) 151,330 08-15-15 4.25 30,000 32,109 04-30-16 2.63 20,000 19,380 08-15-19 3.63 28,000 27,528 11-15-19 3.38 125,000(e) 120,331 02-15-29 5.25 15,000 16,252 02-15-31 5.38 16,000 17,680 08-15-39 4.50 50,000 48,867 U.S. Treasury Inflation-Indexed Bond 04-15-10 0.88 4,564(h) 4,580 04-15-14 1.25 8,172(h) 8,446 01-15-15 1.63 14,717(h) 15,307 01-15-16 2.00 5,446(h) 5,751 07-15-16 2.50 13,380(h) 14,571 07-15-17 2.63 7,823(h) 8,603 U.S. Treasury Principal Strip 11-15-26 6.50 50,000 22,122 --------------- Total 942,472 ------------------------------------------------------------------------------------- ASSET-BACKED (1.5%) Caterpillar Financial Asset Trust Series 2008A Cl A3 04-25-14 4.94 15,000 15,352 Centex Home Equity Series 2002-D Cl M2 12-25-32 2.28 19,243(i) 1,827 Irwin Home Equity Series 2005-A Cl A3 02-25-34 0.61 10,757(i) 8,720 --------------- Total 25,899 ------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE-BACKED (17.2%)(f) Banc of America Mtge Securities Collateralized Mtge Obligation Series 2004-F Cl 1A1 07-25-34 4.09 4,451(i) 3,952 Federal Home Loan Mtge Corp 01-01-25 5.50 100,000(g) 105,734 Federal Home Loan Mtge Corp #1Q0140 08-01-36 6.16 14,514(i) 15,388 Federal Natl Mtge Assn 01-01-40 6.50 25,000(g) 26,773 Federal Natl Mtge Assn #256901 09-01-37 6.50 28,066 29,943 Federal Natl Mtge Assn #745392 12-01-20 4.50 13,188 13,713
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) RESIDENTIAL MORTGAGE-BACKED (CONT.) Federal Natl Mtge Assn #881886 04-01-36 5.36% $16,918(i) $17,830 Federal Natl Mtge Assn #886764 08-01-36 6.00 16,710(i) 17,731 GSR Mtge Loan Trust Collateralized Mtge Obligation Series 2005-AR4 Cl 4A1 07-25-35 5.36 14,905(i) 11,725 Homestar Mtge Acceptance Collateralized Mtge Obligation Series 2004-1 Cl A1 03-25-34 0.55 7,814(i) 5,167 Indymac Index Mtge Loan Trust Collateralized Mtge Obligation Series 2006-AR3 Cl 2A1B 03-25-36 5.78 25,214(i) 12,887 Structured Asset Securities Series 2003-18XS Cl A6 06-25-33 4.04 30,021 27,875 Wells Fargo Mtge Backed Securities Trust Collateralized Mtge Obligation Series 2004-K Cl 2A3 07-25-34 4.72 14,676(i) 14,228 --------------- Total 302,946 ------------------------------------------------------------------------------------- BANKING (1.4%) Bank of America Sr Unsecured 05-01-18 5.65 10,000 10,176 Citigroup Sr Unsecured 05-15-18 6.13 10,000(e) 10,054 Wells Fargo & Co Sr Unsecured 12-11-17 5.63 5,000 5,201 --------------- Total 25,431 ------------------------------------------------------------------------------------- BROKERAGE (0.2%) Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 15,000(b,j) 3,113 ------------------------------------------------------------------------------------- CHEMICALS (0.7%) Dow Chemical Sr Unsecured 05-15-19 8.55 10,000 11,931 ------------------------------------------------------------------------------------- ELECTRIC (6.1%) Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 10,000 12,346 Consumers Energy 1st Mtge Series J 02-15-14 6.00 10,000 10,992 Dominion Resources Sr Unsecured Series A 11-15-16 5.60 15,000 15,566 DTE Energy Sr Unsecured 05-15-14 7.63 5,000 5,582 Indiana Michigan Power Sr Unsecured 03-15-19 7.00 5,000 5,580 Metropolitan Edison Sr Unsecured 03-15-13 4.95 5,000 5,203 Nevada Power Series L 01-15-15 5.88 10,000 10,731 NiSource Finance 03-01-13 6.15 5,000 5,324 09-15-17 5.25 5,000 4,918 01-15-19 6.80 5,000 5,347 Potomac Electric Power 1st Mtge 04-15-14 4.65 15,000 15,743 Sierra Pacific Power Series M 05-15-16 6.00 10,000 10,598 --------------- Total 107,930 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (2.1%) Dr Pepper Snapple Group 12-21-11 1.70 10,000 9,991
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) FOOD AND BEVERAGE (CONT.) Kraft Foods Sr Unsecured 10-01-13 5.25% $10,000 $10,567 08-11-17 6.50 5,000 5,425 02-01-18 6.13 5,000 5,258 SABMiller Sr Unsecured 01-15-14 5.70 5,000(c,d) 5,402 --------------- Total 36,643 ------------------------------------------------------------------------------------- GAS PIPELINES (4.0%) CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 10,000 10,576 CenterPoint Energy Resources Sr Unsecured Series B 04-01-13 7.88 5,000 5,632 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 30,000 33,122 Northwest Pipeline Sr Unsecured 06-15-16 7.00 5,000 5,630 Transcontinental Gas Pipe Line LLC Sr Unsecured 04-15-16 6.40 10,000 10,909 Transcontinental Gas Pipe Line LLC Sr Unsecured Series B 08-15-11 7.00 5,000 5,377 --------------- Total 71,246 ------------------------------------------------------------------------------------- INDEPENDENT ENERGY (1.2%) Anadarko Petroleum Sr Unsecured 09-15-16 5.95 5,000 5,408 EnCana Sr Unsecured 12-01-17 5.90 15,000(c) 16,132 --------------- Total 21,540 ------------------------------------------------------------------------------------- MEDIA CABLE (0.3%) Comcast 05-15-18 5.70 5,000 5,256 ------------------------------------------------------------------------------------- MEDIA NON CABLE (0.5%) RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 10,000 9,886 ------------------------------------------------------------------------------------- NON CAPTIVE DIVERSIFIED (0.3%) General Electric Capital Sr Unsecured 01-10-39 6.88 5,000 5,163 ------------------------------------------------------------------------------------- RETAILERS (0.3%) CVS Caremark Sr Unsecured 09-15-39 6.13 5,000 4,956 ------------------------------------------------------------------------------------- WIRELESS (0.3%) US Cellular Sr Unsecured 12-15-33 6.70 5,000 4,917 ------------------------------------------------------------------------------------- WIRELINES (3.5%) AT&T Sr Unsecured 02-01-18 5.50 5,000 5,255 02-15-39 6.55 5,000 5,268 BellSouth Sr Unsecured 09-15-14 5.20 15,000 16,065 TELUS Sr Unsecured 06-01-11 8.00 7,000(c) 7,578 Verizon New York Sr Unsecured Series A 04-01-12 6.88 15,000 16,320 Verizon New York Sr Unsecured Series B 04-01-32 7.38 10,000 10,773 --------------- Total 61,259 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $1,674,763) $1,650,765 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
MONEY MARKET FUND (15.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 266,290(k) $266,290 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $266,290) $266,290 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (10.6%) SHARES VALUE(a) JPMorgan Prime Money Market Fund 186,416 $186,416 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $186,416) $186,416 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,127,469)(l) $2,103,471 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At Dec. 31, 2009, the value of foreign securities, excluding short- term securities, represented 2.23% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At Dec. 31, 2009, the value of these securities amounted to $5,402 or 0.31% of net assets. (e) At Dec. 31, 2009, security was partially or fully on loan. See Note 6 to the financial statements. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) At Dec. 31, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $133,756. See Note 2 to the financial statements. (h) Inflation-indexed bonds are securities in which the principal amount is adjusted for inflation and the semiannual interest payments equal a fixed percentage of the inflation-adjusted principal amount. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (i) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on Dec. 31, 2009. (j) This position is in bankruptcy. (k) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (l) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $2,127,544 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $46,147 Unrealized depreciation (70,220) --------------------------------------------------------- Net unrealized depreciation $(24,073) ---------------------------------------------------------
-------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 19 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $10,177 $-- $10,177 U.S. Government Obligations & Agencies 609,000 333,472 -- 942,472 Asset-Backed Securities -- 25,899 -- 25,899 Residential Mortgage- Backed Securities -- 302,946 -- 302,946 Corporate Debt Securities -- 369,271 -- 369,271 -------------------------------------------------------------------------------------------- Total Bonds 609,000 1,041,765 -- 1,650,765 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(a) 266,290 -- -- 266,290 Investments of Cash Collateral Received for Securities on Loan 186,416 -- -- 186,416 -------------------------------------------------------------------------------------------- Total Other 452,706 -- -- 452,706 -------------------------------------------------------------------------------------------- Total $1,061,706 $1,041,765 $-- $2,103,471 --------------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $1,674,763) $1,650,765 Affiliated money market fund (identified cost $266,290) 266,290 Investments of cash collateral received for securities on loan (identified cost $186,416) 186,416 ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,127,469) 2,103,471 Cash 292 Dividends and accrued interest receivable 13,242 Receivable for investment securities sold 102 ----------------------------------------------------------------------------- Total assets 2,117,107 ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 3,742 Payable for investment securities purchased 133,776 Payable upon return of securities loaned 186,416 Accrued investment management services fees 525 Accrued transfer agency fees 91 Accrued administrative services fees 107 Other accrued expenses 28,903 ----------------------------------------------------------------------------- Total liabilities 353,560 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $1,763,547 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 220 Additional paid-in capital 1,913,800 Undistributed net investment income 18,693 Accumulated net realized gain (loss) (145,168) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (23,998) ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $1,763,547 ----------------------------------------------------------------------------- Shares outstanding 219,902 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 8.02 ----------------------------------------------------------------------------- *Value of securities on loan $ 301,042 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 21 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Interest $ 58,543 Income distributions from affiliated money market fund 674 Income from securities lending -- net 226 --------------------------------------------------------------------------- Total income 59,443 --------------------------------------------------------------------------- Expenses: Investment management services fees 6,562 Transfer agency fees 704 Administrative services fees 821 Compensation of board members 55 Custodian fees 16,888 Printing and postage 9,341 Professional fees 28,353 Other 531 --------------------------------------------------------------------------- Total expenses 63,255 Expenses waived/reimbursed by the Investment Manager and its affiliates (47,932) --------------------------------------------------------------------------- Total net expenses 15,323 --------------------------------------------------------------------------- Investment income (loss) -- net 44,120 --------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on investments 9,572 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,192 --------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 45,764 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 89,884 ---------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 44,120 $ 77,188 Net realized gain (loss) on investments 9,572 (14,681) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 36,192 (78,840) ------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 89,884 (16,333) ------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (100,000) (89,938) ------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 119,605 442,726 Net asset value of shares issued for reinvestment of distributions 100,000 89,938 Payments for redemptions of shares (257,928) (557,296) ------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions (38,323) (24,632) ------------------------------------------------------------------------------------ Total increase (decrease) in net assets (48,439) (130,903) Net assets at beginning of year 1,811,986 1,942,889 ------------------------------------------------------------------------------------ Net assets at end of year $1,763,547 $1,811,986 ------------------------------------------------------------------------------------ Undistributed net investment income $ 18,693 $ 74,790 ------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 23 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of the Fund held for periods shown. Per share net investment income amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, ------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.09 $8.57 $8.57 $8.80 $9.27 ---------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .20 .34 .39 .41 .34 Net gains (losses) (both realized and unrealized) .21 (.40) .08 (.09) (.26) ---------------------------------------------------------------------------------------------------- Total from investment operations .41 (.06) .47 .32 .08 ---------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.48) (.42) (.47) (.55) (.55) ---------------------------------------------------------------------------------------------------- Net asset value, end of period $8.02 $8.09 $8.57 $8.57 $8.80 ---------------------------------------------------------------------------------------------------- TOTAL RETURN 5.06% (.70%) 5.59% 3.61% .95% ---------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 3.51% 2.20% 2.48% 2.38% 1.70% ---------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) .85% .85% .85% .85% .85% ---------------------------------------------------------------------------------------------------- Net investment income (loss) 2.45% 3.97% 4.49% 4.59% 3.67% ---------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $2 $2 $3 ---------------------------------------------------------------------------------------------------- Portfolio turnover rate 284%(c) 232% 281% 768% 597% ----------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS. (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (c) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been 249% for the year ended Dec. 31, 2009. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Investment Grade Fixed Income Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund invests in fixed-income securities, diversified among a number of market sectors. The Fund has a fundamental policy that at least 80% of the Fund's assets will be invested in securities that are rated investment-grade when purchased by the Fund. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At Dec. 31, 2009, the Fund has outstanding when-issued securities of $133,756. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 2009, the management fee is equal to 0.345% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received an annual fee equal to 0.40% of the Fund's average daily net assets. The management fee for the year ended Dec. 31, 2009 was 0.36% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.07% to 0.04% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.05% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $13. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 0.85% of the Fund's average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.45% per annum of the average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.85% of the Fund's average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.79% of the Fund's average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations, but including mortgage dollar rolls) aggregated $4,495,922 and $4,225,411, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008 --------------------------------------------------------------- Sold 14,247 51,096 Reinvested distributions 12,438 11,063 Redeemed (30,810) (64,946) --------------------------------------------------------------- Net increase (decrease) (4,125) (2,787) ---------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $301,042 were on loan, secured by U.S. government securities valued at $121,704 and by cash collateral of $186,416 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $226 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- earned from securities lending from May 8, 2009 through Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $1,077,815 and $811,525, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, undistributed net investment income has been decreased by $217 and accumulated net realized loss has been decreased by $217. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED DEC. 31, 2009 2008 --------------------------------------------------------------- Ordinary income............................. $100,000 $89,938
At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income..................... $ 18,730 Undistributed accumulated long-term gain.......... $ -- Accumulated realized loss......................... $(145,093) Unrealized appreciation (depreciation)............ $ (24,110)
For federal income tax purposes, the Fund had a capital loss carry-over of $141,804 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2013 2014 2017 $56,149 $75,089 $10,566
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $3,289 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 35 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Investment Grade Fixed Income Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 27, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 37 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Investment Grade Fixed Income Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Dec. 31, 2009 The Fund designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 39 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 41 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT 43 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 44 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 ANNUAL REPORT SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9919 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN LARGE-CAP VALUE PORTFOLIO SELIGMAN LARGE-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Large-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 12 Portfolio of Investments........... 14 Statement of Assets and Liabilities...................... 18 Statement of Operations............ 19 Statements of Changes in Net Assets........................... 20 Financial Highlights............... 21 Notes to Financial Statements...... 22 Report of Independent Registered Public Accounting Firm........... 33 Federal Income Tax Information..... 35 Board Members and Officers......... 36 Proxy Voting....................... 40
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Large-Cap Value Portfolio (the Fund) Class 1 shares gained 30.23% for the 12-month period ended Dec. 31, 2009. > The Fund outperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which advanced 19.69% during the same 12 months. > The Fund also outperformed its peer group, as represented by the Lipper Large- Cap Value Funds Index, which rose 24.96% during the same period. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------- Seligman Large-Cap Value Portfolio -- Class 1 +30.23% -4.06% +2.10% +3.10% --------------------------------------------------------------------- Russell 1000(R) Value Index (unmanaged) +19.69% -8.96% -0.25% +2.47% --------------------------------------------------------------------- S&P 500 Index (unmanaged) +26.46% -5.63% +0.42% -0.95% --------------------------------------------------------------------- Lipper Large-Cap Value Funds Index +24.96% -6.91% +0.28% +0.85% ---------------------------------------------------------------------
As of Dec. 31, 2009, there were no Class 2 shares outstanding and therefore Class 2 performance is not shown. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. A fund with fewer holdings, such as Seligman Large-Cap Value Portfolio, may be subject to greater volatility than a fund with a greater number of holdings. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, Seligman Large-Cap Value Portfolio (the Fund) Class 1 shares gained 30.23% for the 12 months ended Dec. 31, 2009. The Fund significantly outperformed its benchmark, the Russell 1000(R) Value Index (Russell Index), which advanced 19.69% during the same 12-month period. The Fund also significantly outperformed its peer group, as represented by the Lipper Large-Cap Value Funds Index, which rose 24.96% during the same period. SIGNIFICANT PERFORMANCE FACTORS At the beginning of 2009, financial markets were in disarray in the U.S. and around the world, as investors feared the global financial system was on the verge of collapse. In response, we saw a concerted effort by major countries to bolster financial firms, particularly banks, and to stimulate the global economy. The positive impact, along with strong first quarter corporate earnings, alleviated fears and persuaded investors the financial system would stabilize, setting the stage for a robust equity rally. For the balance of the year, the environment progressively improved. We SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 13.0% ------------------------------------------------ Consumer Staples 11.3% ------------------------------------------------ Energy 8.9% ------------------------------------------------ Financials 26.7% ------------------------------------------------ Health Care 10.1% ------------------------------------------------ Industrials 17.2% ------------------------------------------------ Information Technology 3.0% ------------------------------------------------ Materials 4.7% ------------------------------------------------ Utilities 4.3% ------------------------------------------------ Other(2) 0.8% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- characterize 2009 as a healing year and the stock markets seemed to anticipate that healing early on. We believe strongly that having a disciplined investment process and sticking with it in the face of fear and uncertainty enabled the Fund to outpace the Russell Index for the fiscal year. We maintained a near fully-invested equity position throughout the year; we did not raise cash and we did not shift the portfolio to a defensive posture. In keeping with our discipline, we were discriminating buyers as other investors ran for the sidelines. Early on and through most of the year, we kept the Fund overweight in the financial sector when many value managers were reducing exposure. Both the overweight and stock selection added to relative return. For example, we held on to MORGAN STANLEY, which many investors would have been tempted to sell when its price fell into the teens. The stock recovered strongly and was a leading contributor to relative performance during the year. BANK OF AMERICA was another key contributor. On the negative side, U.S. BANCORP detracted from relative return. TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Tyson Foods Cl A 5.1% ------------------------------------------------ JPMorgan Chase & Co 4.8% ------------------------------------------------ Bristol-Myers Squibb 4.6% ------------------------------------------------ AES 4.3% ------------------------------------------------ Bank of America 4.1% ------------------------------------------------ General Dynamics 4.1% ------------------------------------------------ Gap 3.8% ------------------------------------------------ Prudential Financial 3.4% ------------------------------------------------ Humana 3.4% ------------------------------------------------ El du Pont de Nemours & Co 3.4% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Both stock selection and an underweight in utilities also added to relative return. The Fund had a significant emphasis on industrial stocks, an area that performed well, particularly due to strong stock selection. Two railroads, UNION PACIFIC and CSX, added value as did aerospace and defense contractor GENERAL DYNAMICS, which we added to the Fund later in the year. We thought 2009 was an opportune time to own consumer-related stocks as we had confidence that consumers would resume spending. High-end retailer NORDSTROM, which we purchased in the latter part of the year, and other retail stocks such as THE GAP had a positive effect on the Fund's results. However, overall stock selection in the consumer discretionary sector detracted from relative performance in the sector. Stock selection in the health care and materials sectors detracted from relative return. Individual detractors from relative return included health care insurer HUMANA, KRAFT FOODS and crude oil refiner VALERO ENERGY. CHANGES TO THE FUND'S PORTFOLIO For the most part, we made few changes to the Fund, though it is important to note that we added to existing positions at opportune times and as money became available for investment. We added a few new positions including General Dynamics whose price dropped to levels we thought were incredibly low, WAL-MART STORES, whose stock finally appeared attractive to us based on its valuation and positive fundamental changes being implemented by management, and SHERWIN-WILLIAMS, which we believe should benefit when the housing market recovers. As mentioned above, we also bought Nordstrom, which has cut costs, effectively managed inventory and maintained reasonable sales despite the downturn. We sold the Fund's holdings of Kraft Foods and MEDTRONIC. When we buy a stock, we identify specific factors that we believe will drive the stock's price higher. If our reason for owning the stock no longer holds true, we sell the stock. In the case of Kraft, we thought lower commodity prices would enable the company to maintain or expand its profit margins. That did not happen, and when we saw no other near-term -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- benefits for owning Kraft, we decided there were better opportunities elsewhere. Medtronic's original business, heart pacemakers, has leveled off and we do not see consistent strength across its full business line. In our view, Medtronic had also become fully priced, making it less attractive, given our value style. To summarize the Fund's sector positioning at year-end, the consumer discretionary, consumer staples, industrials and financials positions were larger than those of the Russell Index, while the energy, telecommunications, utilities and information technology positions were smaller. OUR FUTURE STRATEGY We believe the economic and investment environments will continue to improve during 2010 -- currently, global economies are improving, interest rates are low and inflation continues to remain muted. As a result, we believe equities could advance further from current levels, though any gains are likely to be at a slower pace than we saw for much of 2009. We are optimistic about corporate profits as we believe companies are operating quite lean and current inventories are low. If demand rises and companies increase production, as we believe they will, they should be able to raise prices. In the short term, we believe inventory restocking may fuel further gains in U.S. Gross Domestic Product and may help alleviate the high unemployment rate as companies hire workers (though some on a temporary basis) to help meet demand. As employment improves, consumer confidence will likely improve as well. Eventually, we believe the Federal Reserve Board will raise interest rates as the recovery takes a firmer hold. If this occurs, it may initially distress the stock market, but when investors realize that higher rates are an inevitable consequence of improving economic growth, markets should respond well. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Stock market gains in 2009 were largely driven by institutional investors, while individual investors, as a group, have not yet come back to stocks. At some point we believe they will and that should provide further impetus for rising stock prices. In our view, companies that have made dramatic cost cuts are well- positioned for strong earnings gains. Going forward, we expect the market to shift from a rally that lifts most stocks, to one that specifically rewards successful companies. (PHOTO - NEIL EIGEN) (PHOTO - RICHARD ROSEN) Neil Eigen Richard Rosen Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Large-Cap Value Portfolio Class 1 shares (from 1/1/2000 to 12/31/2009) as compared to the performance of the Russell 1000 Value Index, the S&P 500 Index, the Lipper Large-Cap Value Funds Index and the Lipper Large- Cap Value Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN LARGE-CAP VALUE PORTFOLIO Class 1 Cumulative value of $10,000 $13,023 $8,830 $11,095 $13,573 ------------------------------------------------------------------------------------------ Average annual total return +30.23% -4.06% +2.10% +3.10% ------------------------------------------------------------------------------------------ RUSSELL 1000(R) VALUE INDEX(1) Cumulative value of $10,000 $11,969 $7,546 $9,875 $12,767 ------------------------------------------------------------------------------------------ Average annual total return +19.69% -8.96% -0.25% +2.47% ------------------------------------------------------------------------------------------ S&P 500 INDEX(2) Cumulative value of $10,000 $12,646 $8,405 $10,211 $9,091 ------------------------------------------------------------------------------------------ Average annual total return +26.46% -5.63% +0.42% -0.95% ------------------------------------------------------------------------------------------ LIPPER LARGE-CAP VALUE FUNDS INDEX(3) Cumulative value of $10,000 $12,496 $8,066 $10,139 $10,882 ------------------------------------------------------------------------------------------ Average annual total return +24.96% -6.91% +0.28% +0.85% ------------------------------------------------------------------------------------------ LIPPER LARGE-CAP VALUE FUNDS AVERAGE(4) Cumulative value of $10,000 $12,284 $7,666 $9,457 $11,485 ------------------------------------------------------------------------------------------ Average annual total return +23.16% -7.58% -0.25% +2.05% ------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN LARGE-CAP VALUE PORTFOLIO LINE GRAPH)
SELIGMAN LARGE-CAP LIPPER LARGE-CAP LIPPER LARGE-CAP VALUE PORTFOLIO RUSSELL 1000(R) S&P 500 VALUE FUNDS VALUE FUNDS CLASS 1 VALUE INDEX(1) INDEX(2) INDEX(3) AVERAGE(4) ------------------ --------------- -------- ---------------- -------------------- 1/1/00 $10,000 $10,000 $10,000 $10,000 $10,000 3/00 9,601 10,048 10,229 10,015 9,974 6/00 9,461 9,577 9,958 9,801 9,784 9/00 11,002 10,330 9,861 10,159 10,416 12/00 12,583 10,701 9,090 10,195 10,913 3/01 12,105 10,075 8,012 9,405 10,415 6/01 12,311 10,567 8,481 9,823 10,923 9/01 10,736 9,409 7,236 8,573 9,668 12/01 11,540 10,103 8,009 9,321 10,538 3/02 11,739 10,517 8,031 9,500 10,799 6/02 9,742 9,621 6,955 8,472 9,754 9/02 7,249 7,815 5,754 6,892 7,970 12/02 7,860 8,535 6,239 7,487 8,600 3/03 7,233 8,120 6,043 7,121 8,169 6/03 8,722 9,522 6,973 8,292 9,535 9/03 9,102 9,719 7,157 8,453 9,737 12/03 10,525 11,098 8,029 9,583 11,036 3/04 10,672 11,434 8,165 9,815 11,295 6/04 11,104 11,535 8,305 9,918 11,424 9/04 11,001 11,713 8,150 9,864 11,409 12/04 12,235 12,929 8,902 10,733 12,478 3/05 12,476 12,940 8,711 10,644 12,419 6/05 12,544 13,157 8,830 10,786 12,556 9/05 12,809 13,668 9,149 11,196 13,028 12/05 13,534 13,840 9,340 11,405 13,249 3/06 14,021 14,662 9,733 11,907 13,876 6/06 14,010 14,748 9,593 11,914 13,882 9/06 14,335 15,666 10,136 12,605 14,649 12/06 15,371 16,919 10,815 13,490 15,690 3/07 15,711 17,129 10,884 13,591 15,841 6/07 17,114 17,973 11,567 14,471 16,816 9/07 17,160 17,929 11,802 14,499 16,791 12/07 16,821 16,890 11,409 13,822 16,004 3/08 15,655 15,417 10,332 12,504 14,511 6/08 14,795 14,598 10,050 12,078 13,901 9/08 13,855 13,706 9,209 11,035 12,833 12/08 10,423 10,666 7,188 8,708 10,083 3/09 9,041 8,878 6,396 7,684 8,764 6/09 11,292 10,360 7,415 8,940 10,210 9/09 13,400 12,250 8,573 10,361 11,872 12/09 13,573 12,767 9,091 10,882 12,412
(1) The Russell 1000(R) Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to- book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The S&P 500 Index, an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) Lipper Large-Cap Value Funds Index (the Lipper Index) includes the 30 largest large-cap value funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper Large-Cap Value Funds Average (the Lipper Average) is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper's U.S. Diversified Equity large-cap floor. Large-cap value funds typically have a below average price-to-earnings ratio, price- to-book ratio, and three-year sales-per-share growth value relative to the S&P 500 Index. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's secondary benchmarks. The Lipper Average includes all funds categorized by Lipper within the broad universe of funds in the Lipper Average, whereas the Lipper Index includes only a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one-year transition period. Thereafter, only the Lipper Index will be included. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 11 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in each Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare each 5% hypothetical example with the -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ----------------------------------------------------------------------------------------------- Class 1 ----------------------------------------------------------------------------------------------- Actual(b) $1,000 $1,202.00 $7.88(c) 1.42% ----------------------------------------------------------------------------------------------- Hypothetical (5% return before expenses) $1,000 $1,018.05 $7.22(c) 1.42% -----------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return of +20.20% for the six months ended Dec. 31, 2009. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment, will not exceed 0.95%. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $5.27 and the hypothetical expenses paid would have been $4.84. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (99.7%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (9.3%) General Dynamics 1,300 $88,621 Honeywell Intl 1,500 58,800 United Technologies 800 55,528 --------------- Total 202,949 ------------------------------------------------------------------------------------- CAPITAL MARKETS (3.3%) Morgan Stanley 2,400 71,040 ------------------------------------------------------------------------------------- CHEMICALS (4.7%) EI du Pont de Nemours & Co 2,200 74,074 Praxair 350 28,109 --------------- Total 102,183 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.1%) US Bancorp 3,000 67,530 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (3.1%) Juniper Networks 2,500(b) 66,675 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (8.9%) Bank of America 6,000 90,360 JPMorgan Chase & Co 2,500 104,175 --------------- Total 194,535 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.8%) Costco Wholesale 600(c) 35,502 Wal-Mart Stores 500 26,725 --------------- Total 62,227 ------------------------------------------------------------------------------------- FOOD PRODUCTS (5.1%) Tyson Foods Cl A 9,000(c) 110,430 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.1%) Baxter Intl 800 46,944 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.4%) Humana 1,700(b) 74,613 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (4.3%) AES 7,000(b) 93,170 ------------------------------------------------------------------------------------- INSURANCE (11.5%) MetLife 2,000 70,700 Prudential Financial 1,500(c) 74,639 Travelers Companies 1,000 49,860 Unum Group 3,000(c) 58,560 --------------- Total 253,759 ------------------------------------------------------------------------------------- MACHINERY (2.6%) Caterpillar 1,000 56,990 ------------------------------------------------------------------------------------- MULTILINE RETAIL (4.8%) JC Penney 1,700 45,237 Nordstrom 1,600(c) 60,128 --------------- Total 105,365 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (9.0%) Chevron 500 38,495 Marathon Oil 2,000 62,440 Valero Energy 2,500 41,875 Williams Companies 2,500 52,700 --------------- Total 195,510 ------------------------------------------------------------------------------------- PHARMACEUTICALS (4.6%) Bristol-Myers Squibb 4,000 101,000 ------------------------------------------------------------------------------------- ROAD & RAIL (5.4%) CSX 1,500 72,735 Union Pacific 700 44,730 --------------- Total 117,465 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (8.2%) Gap 4,000 83,800 Lowe's Companies 2,800 65,492 Sherwin-Williams 500(c) 30,825 --------------- Total 180,117 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TOBACCO (3.5%) Altria Group 1,400 $27,482 Philip Morris Intl 1,000 48,190 --------------- Total 75,672 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,918,446) $2,178,174 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 16,401(d) $16,401 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $16,401) $16,401 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (14.2%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 310,106 $310,106 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $310,106) $310,106 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,244,953)(e) $2,504,681 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) At Dec. 31, 2009, security was partially or fully on loan. See Note 6 to the financial statements. (d) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (e) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $2,248,454 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $428,451 Unrealized depreciation (172,224) --------------------------------------------------------- Net unrealized appreciation $256,227 ---------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $2,178,174 $-- $-- $2,178,174 -------------------------------------------------------------------------------------------- Total Equity Securities 2,178,174 -- -- 2,178,174 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(b) 16,401 -- -- 16,401 Investments of Cash Collateral Received for Securities on Loan 310,106 -- -- 310,106 -------------------------------------------------------------------------------------------- Total Other 326,507 -- -- 326,507 -------------------------------------------------------------------------------------------- Total $2,504,681 $-- $-- $2,504,681 --------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $1,918,446) $2,178,174 Affiliated money market fund (identified cost $16,401) 16,401 Investments of cash collateral received for securities on loan (identified cost $310,106) 310,106 ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,244,953) 2,504,681 Dividends and accrued interest receivable 3,063 ----------------------------------------------------------------------------- Total assets 2,507,744 ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 80 Payable upon return of securities loaned 310,106 Accrued investment management services fees 1,397 Accrued transfer agency fees 111 Accrued administrative services fees 111 Other accrued expenses 12,040 ----------------------------------------------------------------------------- Total liabilities 323,845 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $2,183,899 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 216 Additional paid-in capital 2,043,639 Undistributed net investment income 11,344 Accumulated net realized gain (loss) (131,028) Unrealized appreciation (depreciation) on investments 259,728 ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $2,183,899 ----------------------------------------------------------------------------- Shares outstanding 215,962 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 10.11 ----------------------------------------------------------------------------- *Value of securities on loan $ 296,834 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends $ 44,955 Income distributions from affiliated money market fund 41 Income from securities lending -- net 127 ---------------------------------------------------------------------------- Total income 45,123 ---------------------------------------------------------------------------- Expenses: Investment management services fees 14,699 Transfer agency fees 799 Administrative services fees 799 Compensation of board members 58 Custodian fees 6,259 Printing and postage 19,687 Professional fees 22,724 Other 641 ---------------------------------------------------------------------------- Total expenses 65,666 Expenses waived/reimbursed by the Investment Manager and its affiliates (37,711) ---------------------------------------------------------------------------- Total net expenses 27,955 ---------------------------------------------------------------------------- Investment income (loss) -- net 17,168 ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on investments (129,424) Net change in unrealized appreciation (depreciation) on investments 611,978 ---------------------------------------------------------------------------- Net gain (loss) on investments 482,554 ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 499,722 ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 17,168 $ 25,093 Net realized gain (loss) on investments (129,424) 274,071 Net change in unrealized appreciation (depreciation) on investments 611,978 (1,556,116) ------------------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations 499,722 (1,256,952) ------------------------------------------------------------------------------------------ Distributions to shareholders from: Net investment income (30,001) (22,736) Net realized gain (218,918) -- ------------------------------------------------------------------------------------------ Total distributions (248,919) (22,736) ------------------------------------------------------------------------------------------ CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 219,232 284,580 Net asset value of shares issued for reinvestment of distributions 248,919 22,736 Payments for redemptions of shares (455,119) (964,871) ------------------------------------------------------------------------------------------ Increase (decrease) in net assets from capital share transactions 13,032 (657,555) ------------------------------------------------------------------------------------------ Total increase (decrease) in net assets 263,835 (1,937,243) Net assets at beginning of year 1,920,064 3,857,307 ------------------------------------------------------------------------------------------ Net assets at end of year $2,183,899 $ 1,920,064 ------------------------------------------------------------------------------------------ Undistributed net investment income $ 11,344 $ 24,177 ------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of the Fund held for periods shown. Per share net investment income amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, CLASS 1 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.75 $14.29 $13.15 $11.67 $10.65 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .11 .07 .08 .07 Net gains (losses) (both realized and unrealized) 2.57 (5.55) 1.17 1.50 1.06 ---------------------------------------------------------------------------------------------------------- Total from investment operations 2.66 (5.44) 1.24 1.58 1.13 ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.16) (.10) (.10) (.10) (.11) Dividends from net realized gain (loss) (1.14) -- -- -- -- ---------------------------------------------------------------------------------------------------------- Total distributions (1.30) (.10) (.10) (.10) (.11) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.11 $8.75 $14.29 $13.15 $11.67 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 30.23% (38.03%) 9.43% 13.57% 10.63% ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Gross expenses prior to expense waiver/reimbursement 3.43% 1.95% 1.42% 1.32% 1.34% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(b) 1.46% 1.54% 1.42% 1.32% 1.34% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) .90% .87% .51% .67% .65% ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $4 $5 $5 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 39% 18% 11% 14% 27% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS. (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds), before giving effect to any performance incentive adjustment. The accompanying Notes to Financial Statements are an integral part of this statements. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Large-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund generally invests at least 80% of its net assets in the common stock of "value" companies with large market capitalization ($4 billion or more) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. The two 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 class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. As of Dec. 31, 2009, there are no Class 2 shares outstanding. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business in the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.755% to 0.565% as the Fund's net assets increase. Prior to May 11, 2009, the Investment Manager received an annual fee equal to a percentage of the Fund's average daily net assets that declines from 0.80% to 0.60% as the Fund's net assets increased. The management fee for the year ended Dec. 31, 2009 was 0.77% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.04% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $13. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses of the Fund's Class 1 shares (excluding fees and expenses of acquired funds*), were 1.46% of the class average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.62% per annum of Class 1 average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.42% of Class 1 average daily net assets. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.95% of Class 1 average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $725,587 and $936,932, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* --------------------------------------------------------------- Sold 21,632 24,141 Reinvested distributions 24,356 2,622 Redeemed (49,393) (77,350) --------------------------------------------------------------- Net increase (decrease) (3,405) (50,587) ---------------------------------------------------------------
* Certain line items from prior year have been renamed to conform to the current year presentation. 6. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $296,834 were on loan, secured by cash collateral of $310,106 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $127 earned from securities lending from May 8, 2009 through Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $324,022 and $307,621, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from May 8, 2009 through June 17, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED DEC. 31, 2009 2008 --------------------------------------------------------------- Ordinary income $ 30,001 $22,736 Long-term capital gain 218,918 --
At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income..................... $ 11,390 Undistributed accumulated long-term gain.......... $ -- Accumulated realized loss......................... $(127,528) Unrealized appreciation (depreciation)............ $ 256,182
For federal income tax purposes, the Fund had a capital loss carry-over of $121,250 at Dec. 31, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $6,278 that is treated for income tax purposes as occurring on Jan. 1, 2010. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF SELIGMAN LARGE-CAP VALUE PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Large-Cap Value Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 27, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 33 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM (continued) ------------ In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Large-Cap Value Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Dec. 31, 2009 CAPITAL GAIN DISTRIBUTION - the Fund designates $218,918 to be taxed as long- term capital gain. The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 35 BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2006 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 37 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 39 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT SELIGMAN LARGE-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9913 A (3/10)
Annual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS ANNUAL REPORT FOR THE PERIOD ENDED DECEMBER 31, 2009 SELIGMAN SMALLER-CAP VALUE PORTFOLIO SELIGMAN SMALLER-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Smaller-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Manager Commentary................. 5 The Fund's Long-term Performance... 10 Fund Expenses Example.............. 13 Portfolio of Investments........... 15 Statement of Assets and Liabilities...................... 19 Statement of Operations............ 20 Statements of Changes in Net Assets........................... 21 Financial Highlights............... 22 Notes to Financial Statements...... 24 Report of Independent Registered Public Accounting Firm........... 36 Federal Income Tax Information..... 38 Board Members and Officers......... 39 Proxy Voting....................... 43
-------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Smaller-Cap Value Portfolio (the Fund) Class 1 shares gained 35.46% for the 12 months ended Dec. 31, 2009. > The Fund outperformed its benchmark, the Russell 2000(R) Value Index, which increased 20.58% during the same period. > The Fund also outperformed its peers, as represented by the Lipper Small-Cap Core Funds Index and the Lipper Small-Cap Value Funds Index, which rose 34.50% and 33.00%, respectively, during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended Dec. 31, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 ------------------------------------------------------------------------------- Seligman Smaller-Cap Value Portfolio Class 1 +35.46% -5.16% -0.14% +9.52% N/A ------------------------------------------------------------------------------- Class 2 +35.09% -5.33% -0.32% N/A +7.04% ------------------------------------------------------------------------------- Russell 2000 Value Index (unmanaged) +20.58% -8.22% -0.01% +8.27% +7.93% ------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index +34.50% -4.06% +1.55% +5.24% +4.71% ------------------------------------------------------------------------------- Lipper Small-Cap Value Funds Index +33.00% -5.17% +1.42% +8.73% +8.59% -------------------------------------------------------------------------------
* For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the Russell 2000 Value Index does not reflect the effect of expenses. It is not possible to invest directly in an index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE MEDIUM SIZE X SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. A fund with fewer holdings, such as Seligman Smaller-Cap Value Portfolio, may be subject to greater volatility than a fund with a greater number of holdings. Investments in small-capitalization companies involve greater risks and volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT MANAGER COMMENTARY ------------------------------------------------------------- Dear Shareholder, Seligman Smaller-Cap Value Portfolio (the Fund) Class 1 shares gained 35.46% for the 12 months ended Dec. 31, 2009. The Fund significantly outperformed its benchmark, the Russell 2000(R) Value Index (Russell Index), which gained 20.58% during the same 12-month period. The Fund outperformed its peers, represented by the Lipper Small-Cap Core Funds Index, which rose 34.50%, and the Lipper Small- Cap Value Funds Index, which rose 33.00%, during the same period. SIGNIFICANT PERFORMANCE FACTORS At the beginning of 2009, financial markets were in disarray in the U.S. and around the world, as investors feared the global financial system was on the verge of collapse. A concerted effort by major countries to bolster financial firms and stimulate the global economy alleviated those fears and persuaded investors the financial system would stabilize, setting the stage for a robust equity rally. For the balance of the year, the environment progressively improved. We believe strongly that having a disciplined investment process and sticking with it enabled the Fund to outpace the Russell Index for the SECTOR BREAKDOWN(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Consumer Discretionary 10.1% ------------------------------------------------ Consumer Staples 8.0% ------------------------------------------------ Energy 4.0% ------------------------------------------------ Financials 17.0% ------------------------------------------------ Health Care 7.6% ------------------------------------------------ Industrials 29.9% ------------------------------------------------ Information Technology 19.6% ------------------------------------------------ Materials 3.8% ------------------------------------------------ Other(2) --% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 5 MANAGER COMMENTARY (continued) ------------------------------------------------- fiscal year. The small-cap arena tends to be more volatile and it's easy for investors to lose confidence in a stock. Understanding the fundamentals of the companies in the Fund's portfolio helped us maintain our faith in their ability to navigate tough times. Thus, when a stock's valuation suffered, we followed our discipline. We believe that's what made the difference in the Fund's return during its fiscal year. The Fund's positioning in the financial sector had the largest positive effect on relative performance for the year. The financials weighting was much smaller than that of the Russell Index and the Fund had no exposure to commercial banks; both proved advantageous. Smaller banks were vulnerable to real estate exposure and limited capital. Within the financials group, we did own small insurance companies, which performed better than regional banks during the year. The Fund had a larger information technology weighting than the Russell Index, an advantage since the information technology sector performed so well. Stock selection within the sector also had a positive effect on relative return. Communications equipment company F5 NETWORKS was a leading contributor for the year. Several semiconductor stocks also had a TOP TEN HOLDINGS(1) (at Dec. 31, 2009) ---------------------------------------------------------------------
Delta Air Lines 4.7% ------------------------------------------------ F5 Networks 4.1% ------------------------------------------------ WellCare Health Plans 3.8% ------------------------------------------------ Herbalife 3.6% ------------------------------------------------ Cubic 3.5% ------------------------------------------------ Lincoln Natl 3.4% ------------------------------------------------ Quest Software 3.4% ------------------------------------------------ Hanover Insurance Group 3.2% ------------------------------------------------ Continental Airlines Cl B 3.2% ------------------------------------------------ Aspen Insurance Holdings 2.9% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- notable positive impact on relative performance, including ON SEMICONDUCTOR and CYPRESS SEMICONDUCTOR. The Fund's positioning in the health care sector added value, largely due to effective stock selection. WELLCARE HEALTH PLANS was a key contributor for the fiscal year. The company provides Medicare health plans -- mainly in Florida, but other states as well. As with many health care stocks, Wellcare's stock price had declined on fear that proposed reform would drive private companies out of business. We evaluated the company's fundamentals and noted that, despite fears about reform, analysts were not cutting the stock's earnings estimates. We found no reason for the stock's declining as much as it did, so we increased the Fund's position in Wellcare. The stock has since rebounded strongly from its prior low. Having a smaller materials position than the Russell Index was disadvantageous. Selection among materials stocks also detracted, mainly because we held no metal and mining companies or paper stocks in the Fund. These groups advanced sharply on expectations for an improving global economy and rising demand from China. Having a larger industrials weighting than the Russell Index also detracted from relative return. Individual detractors from relative return included DELTA AIRLINES, CONTINENTAL AIRLINES and property/casualty insurer W.R. BERKLEY. CHANGES TO THE FUND'S PORTFOLIO We believe the prospects for technology spending remain positive, particularly because many companies cut spending so sharply as part of their previous cost- reduction efforts. As of year-end, the Fund had a large overweight in the information technology sector relative to the Russell Index. The Fund's exposure to financials stocks was also significant at year end, though it was smaller than that of the Russell Index. We believe the long-term outlook for financial stocks is positive, even with the possibility of further regulatory reform. We believe the interest rate environment is quite favorable for lenders, and, after slashing costs, many financial services organizations may deliver outsized earnings gains if revenue becomes more normal. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 7 MANAGER COMMENTARY (continued) ------------------------------------------------- During the year, we added a number of new stocks to the Fund. These include AEGEAN MARINE PETROLEUM NETWORK, a marine fuel logistics company whose tankers provide fuel to ships at sea and in port. We also added HERBALIFE, maker of nutrition and weight management products, and SOTHEBY'S auction house. Sotheby's had suffered from declining auction sales during the recession, but we expected the stock to perform better as economic expectations improved and it became one of the leading contributors for the year. We took advantage of a sell-off in LINCOLN NATIONAL to add the stock to the Fund. Its stock was selling far below book value as many investors apparently thought the company, which offers investment and insurance products, was headed for bankruptcy. Lincoln National subsequently rebounded. OUR FUTURE STRATEGY We believe the economic and investment environments will continue to improve during 2010 -- currently, global economies are improving, interest rates are low and inflation remains muted. As a result, we believe equities could advance further from current levels, but any gains are likely to be at a slower pace than we saw for much of 2009. Eventually, as the recovery takes hold, the Federal Reserve will likely raise interest rates. If this occurs, it may initially distress the stock market, but when investors realize that higher rates are an inevitable consequence of improving economic growth, markets should respond well. Last year's stock market gains were largely driven by institutional investors, while individual investors, as a group, have not yet come back to stocks. We believe they will eventually return, providing further impetus for rising stock prices. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- We remain optimistic about small-cap stock performance as well. We do not think the stocks are overvalued and the universe is very large, so we believe we can continue to find attractive stocks. Since most small-cap companies are domestic, with a few specific products, they tend to be very responsive to economic activity. Of course, we do not know how strong the economy will be, but we think it will be stronger than last year and, in that scenario, we believe these companies could have impressive earnings results. (PHOTO - NEIL EIGEN) (PHOTO - RICHARD ROSEN) Neil Eigen Richard Rosen Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not a complete list of securities that have increased or decreased in value. The views expressed in this statement reflect those of the portfolio manager(s) only through the end of the period of the report as stated on the cover and do not necessarily represent the views of RiverSource Investments, LLC (RiverSource) or any subadviser to the Fund or any other person in the RiverSource or subadviser organizations. Any such views are subject to change at any time based upon market or other conditions and RiverSource disclaims any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a fund in the RiverSource Family of Funds are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any fund in the RiverSource Family of Funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 9 THE FUND'S LONG-TERM PERFORMANCE ----------------------------------------------- The chart on the facing page illustrates the total value of an assumed $10,000 investment in Seligman Smaller-Cap Value Portfolio Class 1 shares (from 1/1/2000 to 12/31/2009) as compared to the performance of the Russell 2000(R) Value Index, the Lipper Small-Cap Core Funds Index, the Lipper Small-Cap Value Funds Index, the Lipper Small-Cap Core Funds Average and the Lipper Small-Cap Value Funds Average. Returns for the Fund include the reinvestment of any distributions paid during each period. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The total returns shown do not reflect expenses that apply to the variable account, annuity contract or life insurance policy. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. Also see "Past Performance" in the Fund's current prospectus. COMPARATIVE RESULTS --------------------------------------------------------------------------------
Results at Dec. 31, 2009 1 YEAR 3 YEARS 5 YEARS 10 YEARS SELIGMAN SMALLER-CAP VALUE PORTFOLIO Class 1 Cumulative value of $10,000 $13,546 $8,530 $9,931 $24,836 ------------------------------------------------------------------------------------------ Average annual total return +35.46% -5.16% -0.14% +9.52% ------------------------------------------------------------------------------------------ RUSSELL 2000(R) VALUE INDEX(1) Cumulative value of $10,000 $12,058 $7,732 $9,997 $22,138 ------------------------------------------------------------------------------------------ Average annual total return +20.58% -8.22% -0.01% +8.27% ------------------------------------------------------------------------------------------ LIPPER SMALL-CAP CORE FUNDS INDEX(2) Cumulative value of $10,000 $13,450 $8,830 $10,798 $16,664 ------------------------------------------------------------------------------------------ Average annual total return +34.50% -4.06% +1.55% +5.24% ------------------------------------------------------------------------------------------ LIPPER SMALL-CAP VALUE FUNDS INDEX(3) Cumulative value of $10,000 $13,300 $8,527 $10,732 $23,086 ------------------------------------------------------------------------------------------ Average annual total return +33.00% -5.17% +1.42% +8.73% ------------------------------------------------------------------------------------------ LIPPER SMALL-CAP CORE FUNDS AVERAGE(4) Cumulative value of $10,000 $13,196 $8,396 $10,329 $18,317 ------------------------------------------------------------------------------------------ Average annual total return +31.96% -5.66% +0.65% +5.86% ------------------------------------------------------------------------------------------ LIPPER SMALL-CAP VALUE FUNDS AVERAGE(5) Cumulative value of $10,000 $13,243 $8,293 $10,463 $21,893 ------------------------------------------------------------------------------------------ Average annual total return +32.43% -6.05% +0.91% +8.11% ------------------------------------------------------------------------------------------
Results for Class 2 shares can be found on page 3. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- (VALUE OF A HYPOTHETICAL $10,000 INVESTMENT IN SELIGMAN SMALLER CAP VALUE PORTFOLIO LINE GRAPH)
SELIGMAN SMALLER-CAP LIPPER SMALL-CAP LIPPER SMALL-CAP LIPPER SMALL-CAP LIPPER SMALL-CAP VALUE PORTFOLIO RUSSELL 2000 CORE FUNDS VALUE FUNDS CORE FUNDS VALUE FUNDS CLASS 1 VALUE INDEX(1) INDEX(2) INDEX(3) AVERAGE(4) AVERAGE(5) -------------------- -------------- ---------------- ---------------- ---------------- ---------------- 12/99 $10,000 $10,000 $10,000 $10,000 $10,000 $10,000 3/00 10,631 10,382 11,032 10,360 10,898 10,439 6/00 10,705 10,585 10,855 10,496 10,879 10,494 9/00 11,980 11,362 11,160 11,217 11,392 11,230 12/00 13,299 12,283 10,693 11,610 11,302 11,793 3/01 13,186 12,402 9,880 11,898 10,720 11,884 6/01 14,884 13,845 11,398 13,410 12,243 13,451 9/01 13,374 11,999 9,404 11,478 10,276 11,692 12/01 16,428 14,005 11,455 13,608 12,223 13,711 3/02 17,499 15,347 11,864 14,694 12,955 14,952 6/02 16,176 15,021 10,835 14,095 12,105 14,354 9/02 13,001 11,823 8,746 11,440 9,857 11,552 12/02 13,903 12,405 9,252 12,083 10,345 12,186 3/03 13,187 11,775 8,775 11,387 9,837 11,556 6/03 16,564 14,450 10,578 13,985 11,866 14,012 9/03 17,856 15,567 11,351 15,308 12,796 15,061 12/03 20,847 18,115 13,037 17,827 14,678 17,445 3/04 22,404 19,368 13,832 18,890 15,537 18,529 6/04 22,314 19,532 14,048 19,200 15,743 18,838 9/04 21,748 19,561 13,847 19,089 15,491 18,648 12/04 25,005 22,144 15,431 21,509 17,495 20,958 3/05 23,563 21,263 14,948 21,134 16,995 20,614 6/05 23,035 22,343 15,406 21,796 17,564 21,200 9/05 22,970 23,034 16,325 22,808 18,546 22,190 12/05 24,013 23,187 16,597 23,112 18,771 22,494 3/06 27,543 26,318 18,525 25,783 20,973 24,948 6/06 25,742 25,607 17,643 24,907 20,077 24,107 9/06 25,757 26,260 17,462 25,025 19,990 24,151 12/06 29,116 28,631 18,871 27,071 21,636 26,173 3/07 29,777 29,049 19,464 27,932 22,319 26,930 6/07 32,153 29,718 20,672 29,400 23,569 28,275 9/07 32,169 27,858 20,084 27,705 22,813 26,577 12/07 30,323 25,832 19,234 25,834 21,607 24,850 3/08 25,902 24,146 17,467 24,159 19,582 23,097 6/08 25,865 23,289 17,881 23,701 19,769 22,663 9/08 23,434 24,445 16,628 23,174 18,715 22,300 12/08 18,335 18,360 12,389 17,356 13,896 16,508 3/09 15,273 14,754 10,971 14,961 12,149 14,033 6/09 19,751 17,410 13,410 18,162 14,763 17,321 9/09 23,502 21,362 15,948 22,151 17,521 21,059 12/09 24,836 22,138 16,664 23,086 18,317 21,893
(1) The Russell 2000(R) Value Index, an unmanaged index, measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Small-Cap Core Funds Index includes the 30 largest small-cap core funds tracked by Lipper Inc. The Lipper Index's returns reflect reinvestment of all dividends and changes in market prices.* (3) The Lipper Small-Cap Value Funds Index includes the 30 largest small-cap value funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper Small-Cap Core Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity small-cap ceiling. Small-cap core funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P SmallCap 600 Index. The Lipper Average's returns include net reinvested dividends.* (5) The Lipper Small-Cap Value Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity small-cap ceiling. Small-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P SmallCap 600 Index. The Lipper Average's returns include net reinvested dividends.* -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 11 THE FUND'S LONG-TERM PERFORMANCE (continued) ----------------------------------- * On Jan. 1, 2010, the Lipper Small-Cap Core Funds Index and Lipper Small-Cap Value Funds Index replaced the Lipper Small-Cap Core Funds Average and Lipper Small-Cap Value Funds Average, respectively, as secondary benchmarks for the Fund. The Lipper Averages include all funds categorized by Lipper within the broad universe of funds in the Lipper Averages, whereas the Lipper Indexes include only a select peer group from the Lipper Averages. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the RiverSource Family of Funds, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Indexes and the Lipper Averages will be included for a one-year transition period. Thereafter, only the Lipper Indexes will be included. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended Dec. 31, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 13 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- 5% hypothetical examples that appear in the shareholder reports of other similar funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JULY 1, 2009 DEC. 31, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,257.50 $6.71(c) 1.18% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.26 $6.01(c) 1.18% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,256.70 $8.13(c) 1.43% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.00 $7.27(c) 1.43% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended Dec. 31, 2009: +25.75% for Class 1 and +25.67% for Class 2. (c) Beginning May 1, 2010, RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.02% for Class 1 and 1.27% for Class 2. Had this agreement been in effect for the entire six month period ended Dec. 31, 2009, the actual expenses paid would have been $5.80 for Class 1 and $7.22 for Class 2 and the hypothetical expenses paid would have been $5.19 for Class 1 and $6.46 for Class 2. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- DEC. 31, 2009 (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (100.2%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (3.5%) Cubic 90,000 $3,357,000 ------------------------------------------------------------------------------------- AIRLINES (7.9%) Continental Airlines Cl B 170,000(b,d) 3,046,400 Delta Air Lines 400,000(b,d) 4,552,000 --------------- Total 7,598,400 ------------------------------------------------------------------------------------- BEVERAGES (2.4%) Central European Distribution 80,000(b,d) 2,272,800 ------------------------------------------------------------------------------------- CHEMICALS (2.3%) Minerals Technologies 40,000(d) 2,178,800 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (4.1%) Brink's 50,000 1,217,000 Waste Connections 80,000(b) 2,667,200 --------------- Total 3,884,200 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.1%) F5 Networks 75,000(b) 3,973,500 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (1.8%) Shaw Group 60,000(b) 1,725,000 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (1.5%) Owens-Illinois 45,000(b) 1,479,150 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (2.7%) Sotheby's 115,000(d) 2,585,200 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (6.5%) Belden 85,000 1,863,200 EnerSys 125,000(b) 2,733,750 Thomas & Betts 46,500(b) 1,664,235 --------------- Total 6,261,185 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (4.0%) Exterran Holdings 70,000(b,d) 1,501,500 TETRA Technologies 210,000(b) 2,326,800 --------------- Total 3,828,300 ------------------------------------------------------------------------------------- FOOD PRODUCTS (2.1%) Smithfield Foods 130,000(b,d) 1,974,700 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.7%) Analogic 17,400(d) 670,074 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.2%) Select Medical Holdings 30,000(b) 318,600 WellCare Health Plans 100,000(b) 3,676,000 --------------- Total 3,994,600 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (2.7%) Eclipsys 140,000(b) 2,592,800 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (5.4%) Burger King Holdings 25,400 478,028 Penn Natl Gaming 90,000(b) 2,446,200 Texas Roadhouse 200,000(b) 2,246,000 --------------- Total 5,170,228 ------------------------------------------------------------------------------------- INSURANCE (17.1%) Aspen Insurance Holdings 110,000(c) 2,799,500 Endurance Specialty Holdings 70,000(c) 2,606,100 Hanover Insurance Group 70,000(d) 3,110,100 Infinity Property & Casualty 50,000 2,032,000 Lincoln Natl 130,000 3,234,400 WR Berkley 105,000 2,587,200 --------------- Total 16,369,300 ------------------------------------------------------------------------------------- IT SERVICES (2.6%) CACI Intl Cl A 50,000(b,d) 2,442,500 ------------------------------------------------------------------------------------- MACHINERY (2.3%) Mueller Inds 85,000 2,111,400 Navistar Intl 3,000(b) 115,950 --------------- Total 2,227,350 ------------------------------------------------------------------------------------- MULTILINE RETAIL (1.9%) Fred's Cl A 185,000(d) 1,887,000 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) PERSONAL PRODUCTS (3.6%) Herbalife 85,000(c) $3,448,450 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (2.7%) School Specialty 112,000(b,d) 2,619,680 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (6.9%) Cypress Semiconductor 200,000(b,d) 2,112,000 ON Semiconductor 263,600(b,d) 2,322,316 Varian Semiconductor Equipment Associates 60,950(b,d) 2,186,886 --------------- Total 6,621,202 ------------------------------------------------------------------------------------- SOFTWARE (6.1%) Lawson Software 390,000(b,d) 2,593,500 Quest Software 175,000(b) 3,220,000 --------------- Total 5,813,500 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (1.1%) Aegean Marine Petroleum Network 37,600(c) 1,033,248 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $88,746,359) $96,008,167 ------------------------------------------------------------------------------------- MONEY MARKET FUND (--%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.18% 23,998(e) $23,998 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $23,998) $23,998 ------------------------------------------------------------------------------------- INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (19.4%) SHARES VALUE(a) CASH COLLATERAL REINVESTMENT FUND JPMorgan Prime Money Market Fund 18,605,706 $18,605,706 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $18,605,706) $18,605,706 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $107,376,063)(f) $114,637,871 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At Dec. 31, 2009, the value of foreign securities, excluding short-term securities, represented 10.32% of net assets. (d) At Dec. 31, 2009, security was partially or fully on loan. See Note 6 to the financial statements. (e) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at Dec. 31, 2009. (f) At Dec. 31, 2009, the cost of securities for federal income tax purposes was $107,376,063 and the aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $21,889,171 Unrealized depreciation (14,627,363) ----------------------------------------------------------- Net unrealized appreciation $7,261,808 -----------------------------------------------------------
-------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 17 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of Dec. 31, 2009:
FAIR VALUE AT DEC. 31, 2009 --------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL --------------------------------------------------------------------------------------------- Equity Securities Common Stocks(a) $96,008,167 $-- $-- $96,008,167 --------------------------------------------------------------------------------------------- Total Equity Securities 96,008,167 -- -- 96,008,167 --------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(b) 23,998 -- -- 23,998 Investments of Cash Collateral Received for Securities on Loan 18,605,706 -- -- 18,605,706 --------------------------------------------------------------------------------------------- Total Other 18,629,704 -- -- 18,629,704 --------------------------------------------------------------------------------------------- Total $114,637,871 $-- $-- $114,637,871 ---------------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at Dec. 31, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1(800) SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- DEC. 31, 2009
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $88,746,359) $ 96,008,167 Affiliated money market fund (identified cost $23,998) 23,998 Investments of cash collateral received for securities on loan (identified cost $18,605,706) 18,605,706 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $107,376,063) 114,637,871 Capital shares receivable 19,783 Dividends and accrued interest receivable 11,728 -------------------------------------------------------------------------------------- Total assets 114,669,382 -------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 151,555 Payable upon return of securities loaned 18,605,706 Accrued investment management services fees 75,434 Accrued distribution fees 4,728 Accrued transfer agency fees 4,841 Accrued administrative services fees 6,454 Other accrued expenses 42,525 -------------------------------------------------------------------------------------- Total liabilities 18,891,243 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 95,778,139 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 15,184 Additional paid-in capital 102,902,670 Excess of distributions over net investment income (1,900) Accumulated net realized gain (loss) (14,399,623) Unrealized appreciation (depreciation) on investments 7,261,808 -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 95,778,139 -------------------------------------------------------------------------------------- *Value of securities on loan $ 17,878,060 --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $73,255,391 11,532,576 $6.35 Class 2 $22,522,748 3,651,762 $6.17 ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 19 STATEMENT OF OPERATIONS -------------------------------------------------------- YEAR ENDED DEC. 31, 2009
INVESTMENT INCOME Income: Dividends $ 484,819 Income distributions from affiliated money market fund 835 Income from securities lending -- net 11,647 -------------------------------------------------------------------------- Total income 497,301 -------------------------------------------------------------------------- Expenses: Investment management services fees 798,571 Distribution fees -- Class 2 48,589 Transfer agency fees Class 1 36,501 Class 2 5,654 Administrative services fees 46,508 Compensation of board members 2,523 Custodian fees 37,635 Printing and postage 47,224 Professional fees 44,627 Other 5,155 -------------------------------------------------------------------------- Total expenses 1,072,987 Expenses waived/reimbursed by the Investment Manager and its affiliates (830) -------------------------------------------------------------------------- Total net expenses 1,072,157 -------------------------------------------------------------------------- Investment income (loss) -- net (574,856) -------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (11,122,955) Net change in unrealized appreciation (depreciation) on investments 37,693,309 -------------------------------------------------------------------------- Net gain (loss) on investments 26,570,354 -------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 25,995,498 --------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
YEAR ENDED DEC. 31, 2009 2008 OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (574,856) $ (890,509) Net realized gain (loss) on investments (11,122,955) (1,089,345) Net change in unrealized appreciation (depreciation) on investments 37,693,309 (62,280,091) ----------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 25,995,498 (64,259,945) ----------------------------------------------------------------------------------------- Distributions to shareholders from: Net realized gain Class 1 (1,588,590) (33,558,758) Class 2 (501,310) (10,283,193) Tax return of capital Class 1 (63) -- Class 2 (19) -- ----------------------------------------------------------------------------------------- Total distributions (2,089,982) (43,841,951) ----------------------------------------------------------------------------------------- Proceeds from sales Class 1 shares 8,075,270 44,163,742 Class 2 shares 2,136,746 2,503,070 Reinvestment of distributions at net asset value Class 1 shares 1,588,653 33,558,758 Class 2 shares 501,329 10,283,193 Payments for redemptions Class 1 shares (18,783,752) (77,916,550) Class 2 shares (4,787,236) (10,017,638) ----------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (11,268,990) 2,574,575 ----------------------------------------------------------------------------------------- Total increase (decrease) in net assets 12,636,526 (105,527,321) Net assets at beginning of year 83,141,613 188,668,934 ----------------------------------------------------------------------------------------- Net assets at end of year $ 95,778,139 $ 83,141,613 ----------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (1,900) $ (1,558) -----------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 21 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or any contract charges.
YEAR ENDED DEC. 31, CLASS 1 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $4.79 $17.21 $18.51 $16.67 $19.40 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.09) (.11) (.12) (.07) Net gains (losses) (both realized and unrealized) 1.73 (6.83) .90 3.66 (.71) ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.70 (6.92) .79 3.54 (.78) ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- (.11) Dividends from net realized gain (loss) (.14) (5.50) (2.09) (1.70) (1.84) Tax return of capital (.00)(a) -- -- -- -- ---------------------------------------------------------------------------------------------------------- Total distributions (.14) (5.50) (2.09) (1.70) (1.95) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.35 $4.79 $17.21 $18.51 $16.67 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 35.46% (39.53%) 4.14% 21.25% (3.98%) ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.23% 1.22% 1.14% 1.13% 1.14% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.23% 1.22% 1.14% 1.13% 1.14% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.64%) (.63%) (.58%) (.66%) (.37%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $73 $64 $148 $188 $199 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 8% 14% 27% 32% 23% ----------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED DEC. 31, CLASS 2 ------------------------------------------------------- PER SHARE DATA 2009 2008 2007 2006 2005 Net asset value, beginning of period $4.67 $17.03 $18.37 $16.59 $19.26 ---------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.04) (.11) (.15) (.15) (.10) Net gains (losses) (both realized and unrealized) 1.68 (6.75) .90 3.63 (.70) ---------------------------------------------------------------------------------------------------------- Total from investment operations 1.64 (6.86) .75 3.48 (.80) ---------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- (.03) Dividends from net realized gain (loss) (.14) (5.50) (2.09) (1.70) (1.84) Tax return of capital (.00)(a) -- -- -- -- ---------------------------------------------------------------------------------------------------------- Total distributions (.14) (5.50) (2.09) (1.70) (1.87) ---------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.17 $4.67 $17.03 $18.37 $16.59 ---------------------------------------------------------------------------------------------------------- TOTAL RETURN 35.09% (39.58%) 3.96% 20.99% (4.13%) ---------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.45% 1.42% 1.33% 1.32% 1.33% ---------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.45% 1.42% 1.33% 1.32% 1.33% ---------------------------------------------------------------------------------------------------------- Net investment income (loss) (.86%) (.83%) (.77%) (.85%) (.56%) ---------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $23 $19 $41 $41 $36 ---------------------------------------------------------------------------------------------------------- Portfolio turnover rate 8% 14% 27% 32% 23% ----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Rounds to zero. (b) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- 1. ORGANIZATION Seligman Smaller-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 150 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in the common stock of "value" companies with smaller market capitalization ($3 billion or less) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. The two 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 class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ADOPTION OF NEW ACCOUNTING STANDARD In June 2009, the Financial Accounting Standards Board (FASB) established the FASB Accounting Standards Codification(TM )(Codification) as the single source of authoritative accounting principles recognized by the FASB in the preparation of financial statements in conformity with U.S. generally accepted accounting principles (GAAP). The Codification supersedes existing non-grandfathered, non- SEC accounting and reporting standards. The Codification did not change GAAP but, rather, organized it into a hierarchy where all guidance within the Codification carries an equal level of authority. The Codification became effective for financial statements issued for interim and annual periods ending after Sept. 15, 2009. The Codification did not have an effect on the Fund's financial statements. USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Fund's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. RECENT ACCOUNTING PRONOUNCEMENT On Jan. 21, 2010, the FASB issued an Accounting Standards Update (the amendment), Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements, which provides guidance on how investment assets and liabilities are to be valued and disclosed. Specifically, the amendment requires reporting entities to disclose the input and valuation techniques used to measure fair value for both recurring and nonrecurring fair value measurements for Level 2 or Level 3 positions. The amendment also requires that transfers between all levels (including Level 1 and Level 2) be disclosed on a gross basis (i.e., transfers out must be disclosed separately from transfers in), and the reason(s) for the transfer. Additionally purchases, sales, issuances and settlements must be disclosed on a gross basis in the Level 3 rollforward. The effective date of the amendment is for interim and annual periods beginning after Dec. 15, 2009, however, the requirement to provide the Level 3 activity for purchases, sales, issuances and settlements on a gross basis will be effective for interim and annual periods beginning after Dec. 15, 2010. At this time the Fund is evaluating the implications of the amendment and the impact to the financial statements. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.935% to 0.745% as the Fund's net assets increase. Prior to May 11, 2009, the Investment Manager received an annual fee equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.80% as the Fund's net assets increased. The management fee for the year ended Dec. 31, 2009 was 0.96% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. For the period from May 11, 2009 through Dec. 31, 2009, the fee was 0.06% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the year ended Dec. 31, 2009, other expenses paid to this company were $546. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent at an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the year ended Dec. 31, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), were as follows: Class 1............................................. 1.23% Class 2............................................. 1.45
The management fees waived/reimbursed at the Fund level were $830. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the sole discretion of the Board, such that net -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 1.22% Class 2............................................. 1.47
Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired Funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 1.02% Class 2............................................. 1.27
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $6,407,020 and $18,993,391, respectively, for the year ended Dec. 31, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
YEAR ENDED DEC. 31, 2009 2008* ------------------------------------------------------------------ CLASS 1 Sold 1,929,617 3,947,171 Reinvested distributions 247,069 7,155,385 Redeemed (3,975,316) (6,357,579) ------------------------------------------------------------------ Net increase (decrease) (1,798,630) 4,744,977 ------------------------------------------------------------------ CLASS 2 Sold 424,412 200,590 Reinvested distributions 80,341 2,250,152 Redeemed (971,602) (733,602) ------------------------------------------------------------------ Net increase (decrease) (466,849) 1,717,140 ------------------------------------------------------------------
* Certain line items from the prior year have been removed to conform to the current year presentation. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 6. LENDING OF PORTFOLIO SECURITIES Effective May 15, 2009, the Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral balance are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At Dec. 31, 2009, securities valued at $17,878,060 were on loan, secured by cash collateral of $18,605,706 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Funds or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $11,647 earned from securities lending for the year ended Dec. 31, 2009 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- of RiverSource Short-Term Cash Fund aggregated $6,387,778 and $6,363,780, respectively, for the year ended Dec. 31, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at Dec. 31, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective on Oct. 15, 2009, replacing the prior credit facilities. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to the Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (A) 1.25% per annum plus (B) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. For the period from June 17, 2009 through to Oct. 15, 2009, the credit facility agreement, which was a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permitted collective borrowings up to $475 million. Interest was charged to the Fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. The Fund also paid a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Prior to June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings during the year ended Dec. 31, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) were recorded by the Fund. In the Statement of Assets and Liabilities, as a result of permanent book-to-tax differences, excess of distributions over net investment income has been decreased by $574,514 resulting in a net reclassification adjustment to decrease paid-in capital by $574,514. The tax character of distributions paid for the years indicated is as follows:
YEAR ENDED DEC. 31, 2009 2008 ------------------------------------------------------------------ Ordinary income.......................... -- $ 6,182,790 Long-term capital gain................... $2,089,900 37,659,161 Tax return of capital.................... 82 --
At Dec. 31, 2009, the components of distributable earnings on a tax basis are as follows: Undistributed ordinary income.................. $ -- Undistributed accumulated long-term gain....... $ -- Accumulated realized loss...................... $(14,399,624) Unrealized appreciation (depreciation)......... $ 7,259,909
For federal income tax purposes, the Fund had a capital loss carry-over of $14,150,615 at Dec. 31, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $249,009 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Feb. 18, 2010, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 33 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other -------------------------------------------------------------------------------- 34 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 35 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF SELIGMAN SMALLER-CAP VALUE PORTFOLIO: We have audited the accompanying statement of assets and liabilities, including the portfolio of investments, of Seligman Smaller-Cap Value Portfolio (the Fund) (one of the portfolios constituting the Seligman Portfolios, Inc.) as of December 31, 2009, and the related statements of operations, changes in net assets, and the financial highlights for the year then ended. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit. The statement of changes in net assets and financial highlights of the Fund for the periods presented through December 31, 2008, were audited by other auditors whose report dated February 19, 2009, expressed an unqualified opinion on those financial statements and financial highlights. We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Fund's internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund's internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2009, by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. We believe that our audit provides a reasonable basis for our opinion. -------------------------------------------------------------------------------- 36 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- In our opinion, the 2009 financial statements and financial highlights audited by us as referred to above present fairly, in all material respects, the financial position of Seligman Smaller-Cap Value Portfolio of the Seligman Portfolios, Inc. at December 31, 2009, the results of its operations, changes in its net assets and the financial highlights for the year then ended, in conformity with U.S. generally accepted accounting principles. /s/ Ernst & Young LLP Minneapolis, Minnesota February 18, 2010 -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 37 FEDERAL INCOME TAX INFORMATION ------------------------------------------------- (UNAUDITED) The Fund is required by the Internal Revenue Code of 1986 to tell its shareholders about the tax treatment of the dividends it pays during its fiscal year. The dividends listed below are reported to you on Form 1099-DIV, Dividends and Distributions. Shareholders should consult a tax advisor on how to report distributions for state and local tax purposes. Fiscal year ended Dec. 31, 2009 CAPITAL GAIN DISTRIBUTION - the Fund designates $2,089,900 to be taxed as long-term capital gain.
The Fund also designates as distributions of long-term gains, to the extent necessary to fully distribute such capital gains, earnings and profits distributed to shareholders on the redemption of shares. -------------------------------------------------------------------------------- 38 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT BOARD MEMBERS AND OFFICERS ----------------------------------------------------- Shareholders elect a Board that oversees the Fund's operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. The following is a list of the Fund's Board members. The RiverSource Family of Funds that each Board member oversees consists of 132 funds, which includes 100 RiverSource funds and 32 Seligman funds. Board members serve until the next regular shareholders' meeting or until he or she reaches the mandatory retirement age established by the Board. INDEPENDENT BOARD MEMBERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None 901 S. Marquette Ave. 2005 Attorney Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None 901 S. Marquette Ave. 1999 Governor of Minnesota Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None 901 S. Marquette Ave. 2007 Leadership (consulting company) Minneapolis, MN 55402 Age 55 ------------------------------------------------------------------------------------------------------------------------------ Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None 901 S. Marquette Ave. 2004 College; former Dean, McCallum Graduate School of Minneapolis, MN 55402 Business, Bentley University Age 59 ------------------------------------------------------------------------------------------------------------------------------ Anne P. Jones Board member since Attorney and Consultant None 901 S. Marquette Ave. 1985 Minneapolis, MN 55402 Age 75 ------------------------------------------------------------------------------------------------------------------------------ Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive 901 S. Marquette Ave. 2005 Insurance Minneapolis, MN 55402 Age 74 ------------------------------------------------------------------------------------------------------------------------------ Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries, 901 S. Marquette Ave. since 2007, College Inc. (manufactures Minneapolis, MN 55402 Board member since irrigation systems) Age 71 2002 ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 39 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- INDEPENDENT BOARD MEMBERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ John F. Maher Board member since Retired President and Chief Executive Officer and None 901 S. Marquette Ave. 2008 former Director, Great Western Financial Corporation Minneapolis, MN 55402 (financial services), 1986-1997 Age 66 ------------------------------------------------------------------------------------------------------------------------------ Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None 901 S. Marquette Ave. 2004 real estate and asset management company) Minneapolis, MN 55402 Age 57 ------------------------------------------------------------------------------------------------------------------------------ Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc. 901 S. Marquette Ave. 2008 President and General Counsel, Automotive Legal (digital imaging); Minneapolis, MN 55402 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil Age 68 and gas exploration and production); OGE Energy Corp. (energy and energy services) ------------------------------------------------------------------------------------------------------------------------------ Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera 901 S. Marquette Ave. 2002 since 2003 (biotechnology); former President, Aquila Pharmaceuticals, Minneapolis, MN 55402 Biopharmaceuticals Inc. Age 65 (biotechnology); Healthways, Inc. (health management programs) ------------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 40 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT -------------------------------------------------------------------------------- BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION OTHER AGE LENGTH OF SERVICE DURING PAST FIVE YEARS DIRECTORSHIPS ------------------------------------------------------------------------------------------------------------------------------ William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None 53600 Ameriprise 2001, Officer, Ameriprise Financial, Inc. since 2005; Financial Center Vice President since President, Chairman of the Board and Chief Investment Minneapolis, MN 55474 2002 Officer, RiverSource Investments, LLC since 2001; Age 49 Director, President and Chief Executive Officer, Ameriprise Certificate Company since 2006; Chairman of the Board and Chief Executive Officer, RiverSource Distributors, Inc. since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder and/or employee of RiverSource Investments or Ameriprise Financial. The SAI has additional information about the Fund's Board members and is available, without charge, upon request by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; or visiting riversource.com/funds (for RiverSource and Threadneedle funds) or seligman.com (for Seligman funds). The Board has appointed officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is Vice President, the Fund's other officers are: FUND OFFICERS
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since 2006 Director and Senior Vice President -- Asset Management, 172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC Center and Director and Vice President -- Asset Management, Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc. Age 44 since 2006 and of RiverSource Fund Distributors, Inc. since 2008; Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004- 2006; President, Touchstone Investments, 2002-2004 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 41 BOARD MEMBERS AND OFFICERS (continued) ----------------------------------------- FUND OFFICERS (CONTINUED)
NAME, POSITION HELD ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION AGE LENGTH OF SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------------- Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income, 172 Ameriprise Financial 2004 Ameriprise Financial, Inc. and RiverSource Investments, Center LLC since 2006; Vice President -- Investments, Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice Age 45 President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004-2006 -------------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments, 5228 Ameriprise Financial 2006 LLC since 2009; Vice President -- Asset Management and Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC, 55474 2006-2009; Vice President -- Operations and Compliance, Age 44 RiverSource Investments, LLC, 2004-2006; Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------------- Jeffrey P. Fox Treasurer since 2002 Vice President -- Investment Accounting, Ameriprise 105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer, Center RiverSource Distributors, Inc. since 2006 and of Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008 Age 54 -------------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management, 5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel, Center Secretary since 2006 RiverSource Distributors, Inc. and Chief Legal Officer Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC Age 50 since 2006; Chief Counsel, RiverSource Fund Distributors, Inc. since 2008; Vice President, General Counsel and Secretary, Ameriprise Certificate Company since 2005; Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004 -------------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC, 100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service New York, NY 10010 Corporation since 2009; Chief Compliance Officer for Age 58 each of the Seligman funds since 2004; Money Laundering Prevention Officer and Identity Theft Prevention Officer for each of the Seligman funds, 2008-2009; Managing Director, J. & W. Seligman & Co. Incorporated and Vice-President for each of the Seligman funds, 2004-2008 -------------------------------------------------------------------------------------------------------- Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial, 2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer, Center since 2004 and Ameriprise Financial, Inc. since 2005; Compliance Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008 Age 46 Prevention Officer since 2008 --------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 42 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 ANNUAL REPORT 43 SELIGMAN SMALLER-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman(R) mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9917 A (3/10)
Item 2. (a) The Registrant has adopted a code of ethics that applies to the Registrant's principal executive officer and principal financial officer. A copy of the code of ethics is filed as an exhibit to this form N-CSR. (b) During the period covered by this report, there were not any amendments to the provisions of the code of ethics adopted in 2(a) above. (c) During the period covered by this report, there were not any implicit or explicit waivers to the provisions of the code of ethics adopted in 2(a). Item 3. The Registrant's board of directors has determined that independent directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P. Jones, each qualify as audit committee financial experts. Item 4. Principal Accountant Fees and Services (a) Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for professional services rendered for the audit of the annual financial statements for Seligman Portfolios, Inc. were as follows: 2009 - $183,560 (b) Audit-Related Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for additional audit-related services rendered related to the semiannual financial statement review, the transfer agent 17Ad-13 review and other consultations and services required to complete the audit for Seligman Portfolios, Inc. were as follows: 2009 - $18,234 (c) Tax Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for tax compliance related services rendered for Seligman Portfolios, Inc. were as follows: 2009 - $32,104 (d) All Other Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for additional professional services rendered for Seligman Portfolios, Inc. were as follows: 2009 - $0 (e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley pre-approval requirements, all services to be performed by Ernst & Young LLP for the registrant and to the registrant's investment adviser and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant must be pre-approved by the audit committee. (e) (2) 100% of the services performed for items (b) through (d) above during 2009 were pre-approved by the audit committee. (f) Not applicable. (g) Non-Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP by the registrant for non-audit fees and by the registrant's investment adviser, and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant were as follows: 2009 - $849,024 (h) 100% of the services performed in item (g) above during 2009 were pre-approved by the Ameriprise Financial Audit Committee and/or the RiverSource Mutual Funds Audit Committee. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. Investments. (a) The complete schedule of investments is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics as applies to the Registrant's principal executive officer and principal financial officer, as required to be disclosed under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Seligman Portfolios, Inc. By /s/ Patrick T. Bannigan ---------------------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date March 5, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ----------------------- Patrick T. Bannigan President and Principal Executive Officer Date March 5, 2010 By /s/ Jeffrey P. Fox ------------------ Jeffrey P. Fox Treasurer and Principal Financial Officer Date March 5, 2010