485BPOS 1 c56698be485bpos.txt 485BPOS SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form N-1A REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ] Pre-Effective Amendment ______ [ ] Post-Effective Amendment No. 45 (File No. 33-15253) [X] and/or REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 Amendment No. 47 (File No. 811-05221) [X] SELIGMAN PORTFOLIOS, INC. 50606 Ameriprise Financial Center Minneapolis, MN 55474 Scott R. Plummer 5228 Ameriprise Financial Center Minneapolis, MN 55474 (612) 671-1947 Approximate Date of Proposed Public Offering: It is proposed that this filing will become effective (check appropriate box) [ ] immediately upon filing pursuant to paragraph (b) [X] on April 30, 2010 pursuant to paragraph (b) [ ] 60 days after filing pursuant to paragraph (a)(1) [ ] on (date) pursuant to paragraph (a)(1) [ ] 75 days after filing pursuant to paragraph (a)(2) [ ] on (date) pursuant to paragraph (a)(2) of rule 485 If appropriate, check the following box: [ ] This Post-Effective Amendment designates a new effective date for a previously filed Post-Effective Amendment. Prospectus (SELIGMAN LOGO) SELIGMAN CAPITAL PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN CAPITAL PORTFOLIO SEEKS CAPITAL APPRECIATION. The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective.............................. 3p Fees and Expenses of the Fund..................... 3p Principal Investment Strategies of the Fund....... 4p Principal Risks of Investing in the Fund.......... 5p Past Performance.................................. 6p Fund Management................................... 7p Buying and Selling Shares......................... 7p Tax Information................................... 7p Financial Intermediary Compensation............... 8p MORE INFORMATION ABOUT THE FUND Investment Objective.............................. 9p Principal Investment Strategies of the Fund....... 9p Principal Risks of Investing in the Fund.......... 10p More about Annual Fund Operating Expenses......... 11p Other Investment Strategies and Risks............. 12p Fund Management and Compensation.................. 14p FINANCIAL HIGHLIGHTS.............................. 17P GENERAL INFORMATION............................... 19P BUYING AND SELLING SHARES......................... 22P Description of Fund Shares...................... 22p Pricing and Valuing of Fund Shares.............. 22p Purchasing and Selling Shares................... 23p DISTRIBUTIONS AND TAXES........................... 26P Reinvestments................................... 26p Taxes........................................... 26p
-------------------------------------------------------------------------------- 2P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Capital Portfolio (the Fund) seeks to provide shareholders with capital appreciation. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 CLASS 2 Management fees 0.36% 0.36% Distribution and/or service (12b-1) fees 0.00% 0.25% Other expenses 0.97% 0.97% Total annual fund operating expenses 1.33% 1.58% Less: Fee waiver/expense reimbursement(b) (0.34%) (0.34%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 0.99% 1.24%
(a) The expense ratios have been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.99% for Class 1 and 1.24% for Class 2. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $101 $388 $697 $1,577 Class 2 $126 $466 $829 $1,855
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 144% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND The Fund invests primarily in the common stock of medium-sized U.S. companies. The Fund defines medium-sized companies as those with market capitalizations between $1 billion and $15 billion at the time of purchase by the Fund. The Fund's Board of Directors may change the parameters by which "medium-sized companies" are defined if it concludes that such a change is appropriate. The investment manager chooses common stocks for the Fund through fundamental analysis, considering both qualitative and quantitative factors including company fundamentals, strength of management, market earnings expectations, potential for improvement in operations, valuations relative to projected earnings growth and potential for above-average growth. The Fund may invest up to 25% of its net assets in foreign investments. -------------------------------------------------------------------------------- 4P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies, including less predictable earnings, lack of experienced management, financial resources, product diversification and competitive strengths. Securities of mid-sized companies may trade only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. RISKS OF FOREIGN INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Mid-Cap Growth Funds Index (the Lipper Index) replaced the Lipper Mid-Cap Growth Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) +8.50% -15.97% -32.98% +36.07% +8.60% +12.49% +6.10% +16.48% -47.92% +48.70% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +27.39% (quarter ended Dec. 31, 2001). - Lowest return for a calendar quarter was -30.55% (quarter ended Sept. 30, 2001). -------------------------------------------------------------------------------- 6P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS
CLASS 2 SINCE INCEPTION (FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS (8/30/2000) Seligman Capital Portfolio: Class 1 +48.70% +1.49% -0.28% N/A Class 2 +48.45% +1.24% N/A -4.01% Russell Midcap(R) Growth Index (reflects no deduction for fees, expenses or taxes) +46.29% +2.40% -0.52% -2.31% Lipper Mid-Cap Growth Funds Index (reflects no deduction for taxes) +42.65% +3.35% -1.47% -2.60% Lipper Mid-Cap Growth Funds Average (reflects no deduction for taxes) +40.73% +1.63% +0.11% -1.28%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Erik J. Voss Portfolio Manager Oct. 2006
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 7P FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- 8P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Capital Portfolio (the Fund) seeks to provide shareholders with capital appreciation. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Generally, the Fund invests primarily in the common stock of medium-sized U.S. companies. The investment manager defines medium-sized companies as companies with market capitalizations between $1 billion and $15 billion at the time of purchase by the Fund. The Fund's Board of Directors may change the parameters by which "medium-sized companies" are defined if it concludes that such a change is appropriate. The Fund may invest up to 25% of its net assets in foreign investments. The investment manager chooses common stocks for the Fund through fundamental analysis, considering both quantitative and qualitative factors. In selecting individual securities for investment, the investment manager looks to identify medium-sized companies that it believes display certain characteristics, including but not limited to, one or more of the following: - Strong or improving company fundamentals; - Strong management; - Market earnings expectations are at or below the investment manager's estimates; - Potential for improvement in overall operations (a catalyst for growth in revenues and/or earnings); - Low valuations relative to projected earnings growth rates (i.e., low price/earnings ratio); and/or - Potential for above-average growth. The Fund will generally sell a stock when the investment manager believes that the company's fundamentals have deteriorated, the company's catalyst for growth is already reflected in the stock's price (i.e., the stock is fully valued) or the investment manager's price target has been met. -------------------------------------------------------------------------------- 9P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. This risk is generally greater for small and mid-sized companies, which tend to be more vulnerable to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. MID-SIZED COMPANY RISK. Investments in mid-sized companies often involve greater risks than investments in larger, more established companies because mid-sized companies may lack the management experience, financial resources, product diversification and competitive strengths of larger companies. In addition, in some instances the securities of mid-sized companies are traded only over-the- counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. -------------------------------------------------------------------------------- 10P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 11P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- 12P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial loss for the Fund. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 13P Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. -------------------------------------------------------------------------------- 14P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.37% of the Fund's average daily net assets. Effective May 11, 2009, the annual management fee rate is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the annual fee rate was equal to 0.40% of the Fund's average daily net assets. The reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 15P Portfolio Manager. The portfolio manager responsible for the day-to-day management of the Fund is: Erik J. Voss, Portfolio Manager - Managed the Fund since Oct. 2006. - Head of RiverSource Investments Growth Team since November 2008. - Joined J. & W. Seligman & Co. Incorporated (the Fund's previous investment manager) as portfolio manager in 2006. - Portfolio manager October 2000 through March 2006, Wells Capital Management Incorporated (Strong Capital Management, Inc. prior to its acquisition by Wells Capital Management Incorporated in January 2005). - Began investment career in 1993. - M.S. Finance, University of Wisconsin. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 16P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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 CAPITAL PORTFOLIO -- 2010 PROSPECTUS 17P
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. -------------------------------------------------------------------------------- 18P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees on Class 2 shares. The distributor uses these fees to support its distribution and servicing activity for Class 2 shares. Fees paid by the Fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. More information on how these fees are used is set forth under "Buying and Selling Shares -- Description of Fund Shares" in this prospectus and in the SAI. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 19P PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. -------------------------------------------------------------------------------- 20P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 21P BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. Not all share classes may be available under your Contract or Qualified Plan. Under a Rule 12b-1 plan adopted by the Fund, Class 2 shares pay an annual shareholder servicing and distribution ("12b-1") fee of up to 0.25% of average net assets. The Fund pays this fee to the distributor. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners who invest in Class 2 shares, and for distribution related expenses. Additionally, the distributor may use this fee to make payments to Qualified Plan sponsors or their affiliates for similar services provided to Qualified Plans and their participants. Because these 12b-1 fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. -------------------------------------------------------------------------------- 22P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 23P Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- 24P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS 25P There can be no assurances that Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- 26P SELIGMAN CAPITAL PORTFOLIO -- 2010 PROSPECTUS Seligman Capital Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9914-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN COMMON STOCK PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN COMMON STOCK PORTFOLIO SEEKS TO PROVIDE SHAREHOLDERS WITH TOTAL RETURN THROUGH A COMBINATION OF CAPITAL APPRECIATION AND CURRENT INCOME. The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 6p Fund Management.................................................. 7p Buying and Selling Shares........................................ 7p Tax Information.................................................. 7p Financial Intermediary Compensation.............................. 7p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 8p Principal Investment Strategies of the Fund...................... 8p Principal Risks of Investing in the Fund......................... 9p More about Annual Fund Operating Expenses........................ 11p Other Investment Strategies and Risks............................ 11p Fund Management and Compensation................................. 13p FINANCIAL HIGHLIGHTS............................................. 16P GENERAL INFORMATION.............................................. 18P BUYING AND SELLING SHARES........................................ 21P Description of Fund Shares..................................... 21p Pricing and Valuing of Fund Shares............................. 21p Purchasing and Selling Shares.................................. 22p DISTRIBUTIONS AND TAXES.......................................... 25P Reinvestments.................................................. 25p Taxes.......................................................... 25p
The Board of Directors of Seligman Common Stock Portfolio (the Fund) has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. It is anticipated that the redemption of all shares of the Fund will take place before the end of the third quarter of 2010. -------------------------------------------------------------------------------- 2P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Common Stock Portfolio (the Fund) seeks to provide shareholders with total return through a combination of capital appreciation and current income. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 Management fees 0.36% Other expenses 1.74% Total annual fund operating expenses 2.10% Less: Fee waiver/expense reimbursement(b) (1.19%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 0.91%
(a) The expense ratio has been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.91%. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $93 $543 $1,021 $2,342
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 77% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets in common stocks that are broadly diversified among a number of industries. 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 initial investment); however, it may invest in companies of any size. The Fund seeks to produce a level of current income consistent with its primary benchmark, the Standard and Poor's 500 Index (S&P 500 Index). This strategy allows for variations over time in the level of current income produced by the Fund. In pursuit of the Fund's objectives, the investment manager will choose equity investments by employing proprietary, disciplined quantitative methods. The Fund may use derivatives such as futures, options, swaps and forward contracts to produce incremental earnings, to hedge existing positions, maintain investment efficiency or to increase flexibility. -------------------------------------------------------------------------------- 4P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. The Fund's use of derivatives involves risks different from, and possibly greater than, the risks associated with investing directly in the investments underlying the derivatives. Derivatives may be volatile and involve significant risk, such as, among other things, correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Large-Cap Core Funds Index (the Lipper Index) replaced the Lipper Large-Cap Core Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) -10.53% -12.24% -27.16% +26.30% +12.65% +2.03% +16.92% -1.60% -45.07% +20.72% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +15.88% (quarter ended Sept. 30, 2009). - Lowest return for a calendar quarter was -25.77% (quarter ended Dec. 31, 2008). -------------------------------------------------------------------------------- 6P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS
(FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS Seligman Common Stock Portfolio -- Class 1 +20.72% -4.89% -4.46% S&P 500 Index (reflects no deduction for fees, expenses or taxes) +26.46% +0.42% -0.95% Lipper Large-Cap Core Funds Index (reflects no deduction for taxes) +28.15% +0.61% -1.20% Lipper Large-Cap Core Funds Average (reflects no deduction for taxes) +27.13% +0.46% -0.49%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Dimitris J. Bertsimas, Senior Portfolio Manager Nov. 2008 Ph.D. Gina K. Mourtzinou, Portfolio Manager Nov. 2008 Ph.D.
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 7P MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Common Stock Portfolio (the Fund) seeks to provide shareholders with total return through a combination of capital appreciation and current income. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets in common stocks that are broadly diversified among a number of industries. 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 initial investment); however, it may invest in companies of any size. The Fund will provide shareholders with at least 60 days' written notice of any change in the 80% policy. The Fund seeks to produce a level of current income consistent with its primary benchmark, the Standard and Poor's 500 Index (S&P 500 Index). This strategy allows for variations over time in the level of current income produced by the Fund. In pursuit of the Fund's objectives, the investment manager will choose equity investments by employing proprietary, disciplined quantitative methods. The investment manager's disciplined quantitative approach is designed to identify companies with: - Attractive valuations, based on factors such as price-to-earnings ratios; - Sound balance sheets; or - Improving outlooks, based on an analysis of return patterns over time. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The security is overvalued relative to other potential investments. - The company does not meet the investment manager's performance expectations. The universe of stocks from which the investment manager selects the Fund's investments primarily will be those included in the Fund's benchmark, the S&P 500 Index. -------------------------------------------------------------------------------- 8P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS In selecting stocks for the Fund to purchase or to sell, the investment manager employs a rigorous process for evaluating the relationship between the risk associated with each security and its potential for positive returns. This process includes factors such as: - Limits on positions relative to weightings in the benchmark index. - Limits on sector and industry allocations relative to the benchmark index. - Limits on size of holdings relative to market liquidity. The Fund may use derivatives such as futures, options, swaps and forward contracts to produce incremental earnings, to hedge existing positions, maintain investment efficiency or to increase flexibility. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 9P Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. These risks are generally greater for small and mid-sized companies, which tend to be more vulnerable than large companies to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. QUANTITATIVE MODEL RISK. Securities selected using quantitative methods may perform differently from the market as a whole for many reasons, including the factors used in building the quantitative analytical framework, the weights placed on each factor, and changing sources of market returns, among others. There can be no assurance that these methodologies will enable the Fund to achieve its objective. -------------------------------------------------------------------------------- 10P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 11P Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- 12P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.37% of the Fund's average daily net assets. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 13P Effective May 11, 2009, the annual management fee rate is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the annual fee rate was equal to 0.40% of the Fund's average daily net assets. The reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Dimitris J. Bertsimas, Ph.D., Senior Portfolio Manager - Managed the Fund since Nov. 2008. - Joined RiverSource Investments as a portfolio manager and leader of the Disciplined Equity and Asset Allocation Team in 2002. - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where he served as Managing Partner, 1999 to 2002. Currently, Boeing Professor of Operations Research, Sloan School of Management and the Operations Research Center, MIT. - Began investment career as a consultant to asset managers in 1993; became portfolio manager in 2002. - MS and Ph.D., MIT. -------------------------------------------------------------------------------- 14P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS Gina K. Mourtzinou, Ph.D., Portfolio Manager - Managed the Fund since Nov. 2008. - Joined RiverSource Investments as a portfolio manager and member of the Disciplined Equity and Asset Allocation Team in 2002. - Co-founded Dynamic Ideas, LLC, a consulting firm that specialized in the development of quantitative tools for the asset management industry, where she served as Vice President of Research and Analytics, 1999 to 2002. - Began investment career as a consultant to asset managers in 1996; became portfolio manager in 2002. - Ph.D., MIT. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 15P FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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% ----------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 16P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 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). -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 17P GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments -------------------------------------------------------------------------------- 18P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 19P While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- 20P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 21P PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- 22P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 23P There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. -------------------------------------------------------------------------------- 24P SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 PROSPECTUS 25P SELIGMAN COMMON STOCK PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File # 811-5221 (SELIGMAN LOGO) SL-9921-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO SEEKS CAPITAL GAIN. The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 6p Fund Management.................................................. 7p Buying and Selling Shares........................................ 7p Tax Information.................................................. 7p Financial Intermediary Compensation.............................. 8p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 9p Principal Investment Strategies of the Fund...................... 9p Principal Risks of Investing in the Fund......................... 10p More about Annual Fund Operating Expenses........................ 12p Other Investment Strategies and Risks............................ 13p Fund Management and Compensation................................. 15p FINANCIAL HIGHLIGHTS............................................. 19P GENERAL INFORMATION.............................................. 21P BUYING AND SELLING SHARES........................................ 24P Description of Fund Shares..................................... 24p Pricing and Valuing of Fund Shares............................. 24p Purchasing and Selling Shares.................................. 25p DISTRIBUTIONS AND TAXES.......................................... 28P Reinvestments.................................................. 28p Taxes.......................................................... 28p
-------------------------------------------------------------------------------- 2P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Communications and Information Portfolio (the Fund) seeks to provide shareholders with capital gain. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 CLASS 2 Management fees 0.71% 0.71% Distribution and/or service (12b-1) fees 0.00% 0.25% Other expenses 0.36% 0.36% Total annual fund operating expenses 1.07% 1.32% Less: Fee waiver/expense reimbursement(b) (0.08%) (0.08%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 0.99% 1.24%
(a) The expense ratios have been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.99% for Class 1 and 1.24% for Class 2. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $101 $333 $583 $ 1,303 Class 2 $126 $411 $717 $1,588
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 147% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund will invest at least 80% of its net assets in securities of companies operating in the communications, information and related industries. Accordingly, the Fund invests in companies operating in the information technology and telecommunications sectors as well as those in the media industry. In addition, as noted above, the Fund may invest in related industries, which provides the Fund with broad investment flexibility to invest in any industry and many of the issuers in which the Fund invests are technology and technology-related companies. These technology and technology-related companies may include companies operating in any industry, including but not limited to software, hardware, health care, medical technology and technology services, such as the internet. The Fund may invest up to 25% of its net assets in foreign investments. The Fund may invest in securities of large companies that are well established and can be expected to grow with the market. The Fund may also invest in small- to-medium size companies that the investment manager believes provide opportunities to benefit from the rapidly changing technologies and the expansion of the communications, information and related industries. -------------------------------------------------------------------------------- 4P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. MARKET RISK. The market value of securities may fall, fail to rise, or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. CONCENTRATION RISK. The Fund concentrates its investments in companies in the communications, information and related industries. The market prices of these stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. Therefore, the Fund's net asset value may fluctuate more than a fund that invests in a wider range of industries. SECTOR RISK. Stocks of companies in the technology sector, like those in which the Fund may invest, periodically experience periods of volatility, and the value of technology stocks may decline. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium size companies often involve greater risks than investments in larger, more established companies, including less predictable earnings, lack of experienced management, financial resources, product diversification and competitive strengths. RISKS OF FOREIGN INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Science & Technology Funds Index (the Lipper Index) replaced the Lipper Science & Technology Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) -36.19% +5.34% -36.06% +44.35% +11.19% +7.82% +22.33% +15.37% -36.22% +59.89% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +34.23% (quarter ended Dec. 31, 2001). - Lowest return for a calendar quarter was -30.44% (quarter ended Sept. 30, 2001). -------------------------------------------------------------------------------- 6P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS
CLASS 2 SINCE INCEPTION (FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS (5/1/2000) Seligman Communications and Information Portfolio: Class 1 +59.89% +9.19% +0.68% N/A Class 2 +59.38% +8.90% N/A -0.96% Standard & Poor's North American Technology Sector Index (reflects no deduction for fees, expenses or taxes) +63.19% +3.75% -6.59% -7.47% Lipper Science & Technology Funds Index (reflects no deduction for taxes) +57.90% +3.00% -6.94% -8.10% Lipper Science & Technology Funds Average (reflects no deduction for taxes) +60.34% +2.63% -6.93% -8.50%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Paul H. Wick Portfolio Manager 1994 Reema D. Shah Co-Portfolio Manager 2005 Ajay Diwan Co-Portfolio Manager 2005 Richard M. Parower Technology Team Member 2005 Sangeeth Peruri Technology Team Member 2008
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 7P FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- 8P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Communications and Information Portfolio (the Fund) seeks to provide shareholders with capital gain. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund will invest at least 80% of its net assets in securities of companies operating in the communications, information and related industries. Accordingly, the Fund invests in companies operating in the information technology and telecommunications sectors as well as those in the media industry. In addition, as noted above, the Fund may invest in related industries, which provides the Fund with broad investment flexibility to invest in any industry and many of the issuers in which the Fund invests are technology and technology-related companies. These technology and technology-related companies may include companies operating in any industry, including but not limited to software, hardware, health care, medical technology and technology services, such as the internet. The Fund may invest up to 25% of its net assets in foreign investments. The Fund will provide shareholders with at least 60 days' written notice of any change in the 80% policy. The Fund may invest in securities of large companies that are well established and can be expected to grow with the market. The Fund may also invest in small- to-medium size companies that the investment manager believes provide opportunities to benefit from the rapidly changing technologies and the expansion of the communications, information and related industries. The Fund uses a bottom-up stock selection approach. This means that the investment manager (RiverSource Investments, LLC) uses extensive in-depth research into specific companies in the communications, information and related industries to find those companies that it believes offer the greatest prospects for future growth. In selecting individual securities, the investment manager looks for companies that it believes display or are expected to display: - Robust growth prospects - High profit margins or return on capital - Attractive valuation relative to expected earnings or cash flow - Quality management - Unique competitive advantages The Fund generally sells a stock if the investment manager believes: - its target price is reached, -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 9P - its valuation becomes excessive, - its earnings or revenue growth are disappointing, - its underlying fundamentals have deteriorated, or - more attractive investment opportunities are believed to be available. The Fund may purchase American Depositary Receipts (ADRs), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. These risks are generally greater for small and mid-sized companies, which tend to be more vulnerable than large companies to adverse developments. In addition, by focusing on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. CONCENTRATION RISK. The Fund concentrates its investments in companies in the communications, information and related industries. The market prices of these stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. These stocks may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. In such an environment, those companies with high market valuations may appear less attractive to investors, which may cause sharp decreases in the companies' market prices. 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 pace of change within many of these industries tends to create a more volatile operating environment than in other industries. -------------------------------------------------------------------------------- 10P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS SECTOR RISK. Stocks of companies in the technology sector, like those in which the Fund may invest, periodically experience periods of volatility, and the value of technology stocks may decline. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. These stocks may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. These stocks also may be affected adversely by changes in technology, consumer and business purchasing patterns, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and technology-related companies. In such an environment, those companies with high market valuations may appear less attractive to investors, which may cause sharp decreases in the companies' market prices. Further, those technology or technology-related companies seeking to finance their expansion would have increased borrowing costs, which may negatively impact their earnings. As a result, these factors may negatively affect the performance of the Fund. Finally, the Fund may be susceptible to factors affecting the technology and technology-related industries, and the Fund's net asset value may fluctuate more than a fund that invests in a wider range of industries. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium sized companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 11P Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. -------------------------------------------------------------------------------- 12P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 13P Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial loss for the Fund. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. -------------------------------------------------------------------------------- 14P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 15P The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.72% of the Fund's average daily net assets. Effective May 11, 2009, the annual management fee rate is equal to 0.705% of the Fund's average daily net assets. Prior to May 11, 2009, the annual fee rate was equal to 0.75% of the Fund's average daily net assets. The reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. -------------------------------------------------------------------------------- 16P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Paul H. Wick, Lead Portfolio Manager/Technology Team Leader - Managed the Fund since 1994. - Prior to RiverSource Investments acquisition of J. & W. Seligman & Co. Incorporated (Seligman) in Nov. 2008, Mr. Wick was a Managing Director of Seligman. - Joined Seligman in 1987. - Began investment career in 1987. - BA, Duke; MBA, Duke/Fuqua. Reema D. Shah, Co-Portfolio Manager - Co-managed the Fund since 2005. - Prior to RiverSource Investments acquisition of Seligman in Nov. 2008, Ms. Shah was a Managing Director of Seligman. - Joined Seligman in 2000. - Began investment career in 1997. - BA/BS, University of Pennsylvania; MBA, Northwestern University. Ajay Diwan, Co-Portfolio Manager - Co-managed the Fund since 2005. - Prior to RiverSource Investments acquisition of Seligman in Nov. 2008, Mr. Diwan was a Managing Director of Seligman. - Joined Seligman in 2001. - Began investment career in 1992. - BS, Case Western Reserve University; MBA, Columbia University. Richard M. Parower, CFA - Technology Team member since 2005. - Prior to RiverSource Investments acquisition of Seligman in Nov. 2008, Mr. Parower was a Managing Director of Seligman. - Joined Seligman in 2000. - Began investment career in 1988. - BA, Washington University; MBA, Columbia University. Sangeeth Peruri - Technology Team member since 2008. - Prior to RiverSource Investments acquisition of Seligman in Nov. 2008, Mr. Peruri was a Managing Director of Seligman. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 17P - Joined Seligman in 2000. - Began investment career in 1999. - BA, Brown University. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 18P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 19P
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. -------------------------------------------------------------------------------- 20P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees on Class 2 shares. The distributor uses these fees to support its distribution and servicing activity for Class 2 shares. Fees paid by the Fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. More information on how these fees are used is set forth under "Buying and Selling Shares -- Description of Fund Shares" in this prospectus and in the SAI. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 21P PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. -------------------------------------------------------------------------------- 22P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 23P BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. Not all share classes may be available under your Contract or Qualified Plan. Under a Rule 12b-1 plan adopted by the Fund, Class 2 shares pay an annual shareholder servicing and distribution ("12b-1") fee of up to 0.25% of average net assets. The Fund pays this fee to the distributor. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners who invest in Class 2 shares, and for distribution related expenses. Additionally, the distributor may use this fee to make payments to Qualified Plan sponsors or their affiliates for similar services provided to Qualified Plans and their participants. Because these 12b-1 fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. -------------------------------------------------------------------------------- 24P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 25P Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- 26P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant or whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts and Qualified Plans may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS 27P There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- 28P SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 PROSPECTUS Seligman Communications and Information Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9915-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 7p Fund Management.................................................. 8p Buying and Selling Shares........................................ 8p Tax Information.................................................. 8p Financial Intermediary Compensation.............................. 9p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 10p Principal Investment Strategies of the Fund...................... 10p Principal Risks of Investing in the Fund......................... 12p More about Annual Fund Operating Expenses........................ 14p Other Investment Strategies and Risks............................ 15p Fund Management and Compensation................................. 17p FINANCIAL HIGHLIGHTS............................................. 21P GENERAL INFORMATION.............................................. 23P BUYING AND SELLING SHARES........................................ 26P Description of Fund Shares..................................... 26p Pricing and Valuing of Fund Shares............................. 26p Purchasing and Selling Shares.................................. 27p DISTRIBUTIONS AND TAXES.......................................... 30P Reinvestments.................................................. 30p Taxes.......................................................... 30p
-------------------------------------------------------------------------------- 2P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Global Technology Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 CLASS 2 Management fees 0.95% 0.95% Distribution and/or service (12b-1) fees 0.00% 0.25% Other expenses 2.70% 2.70% Total annual fund operating expenses 3.65% 3.90% Less: Fee waiver/expense reimbursement(b) (2.66%) (2.66%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 0.99% 1.24%
(a) The expense ratios have been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.99% for Class 1 and 1.24% for Class 2. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $101 $871 $1,662 $3,737 Class 2 $126 $945 $1,782 $3,957
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 153% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND The Fund generally invests at least 80% of its assets in equity securities of U.S. and non-U.S. companies with business operations in technology and technology-related industries. Technology-related companies are those companies that use technology extensively to improve their business processes and applications. The technology industry comprises information technology and communications, as well as medical, environmental and bio-technology. The Fund may invest in companies domiciled in any country which the investment manager believes to be appropriate to the Fund's objective. The Fund generally invests in several countries in different geographic regions. Under normal market conditions, the Fund generally will invest at least 40% of its net assets in companies that maintain their principal place of business or conduct their principal business activities outside the U.S., have their securities traded on non-U.S. exchanges or have been formed under the laws of non-U.S. countries. The investment manager may reduce this 40% minimum investment amount to 30% if it believes that market conditions for these types of companies or specific foreign markets are unfavorable. The Fund considers a company to conduct its principal business activities outside the U.S. if it derives at least 50% of its revenue from business outside the U.S. or had at least 50% of its assets outside the U.S. -------------------------------------------------------------------------------- 4P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS The Fund may invest in companies of any size. Securities of large companies that are well established in the world technology market can be expected to grow with the market and will frequently be held by the Fund. However, rapidly changing technologies and expansion of technology and technology-related industries often provide a favorable environment for companies of small-to-medium size, and the Fund may invest in these companies as well. The investment manager seeks to identify those technology companies that it believes have the greatest prospects for future growth, regardless of their countries of origin. The Fund uses an investment style that combines research into individual company attractiveness with macro analysis. This means that the investment manager uses extensive in-depth research to identify attractive technology companies around the world, while seeking to identify particularly strong technology sectors and/or factors within regions or specific countries that may affect investment opportunities. The Fund may invest in all types of securities, many of which will be denominated in currencies other than the U.S. dollar. The Fund may purchase American Depositary Receipts (ADRs), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may, from time to time, take temporary defensive positions that are inconsistent with its principal strategies (e.g., investing less than 30% of its assets in companies outside the U.S.) in seeking to minimize extreme volatility caused by adverse market, economic, political, or other conditions. This could prevent the Fund from achieving its objective. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. TECHNOLOGY AND TECHNOLOGY-RELATED INVESTMENT RISK. The Fund will invest a substantial portion of its assets in technology and technology-related companies. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 5P RISKS OF FOREIGN/EMERGING MARKETS INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, social and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. Emerging markets risk includes the dramatic pace of change in these countries as well as the other considerations listed above. Because of the less developed markets and economics and less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers domiciled or doing substantial business in emerging markets. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. SECTOR RISK. The Fund may invest a significant part of its total assets in securities of companies primarily engaged in the technology, media or telecommunications sectors. This may result in greater fluctuations in value than would be the case for a fund invested in a wider variety of unrelated industries. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium size companies often involve greater risks than investments in larger, more established companies, including less predictable earnings, lack of experienced management, financial resources, product diversification and competitive strengths. -------------------------------------------------------------------------------- 6P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Global Science & Technology Funds Index (the Lipper Index) replaced the Lipper Global Science & Technology Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) -23.75% -22.05% -31.64% +36.12% +3.98% +8.13% +17.92% +15.45% -40.25% +62.38% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +30.82% (quarter ended Dec. 31, 2001). - Lowest return for a calendar quarter was -32.05% (quarter ended Sept. 30, 2001). -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 7P AVERAGE ANNUAL TOTAL RETURNS
CLASS 2 SINCE INCEPTION (FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS (5/1/2000) Seligman Global Technology Portfolio: Class 1 +62.38% +7.39% -1.95% N/A Class 2 +62.13% +7.20% N/A -3.39% Morgan Stanley Capital International (MSCI) World IT Index (reflects no deduction for fees, expenses or taxes) +50.88% +1.67% -8.51% -9.03% MSCI World Index (reflects no deduction for fees, expenses or taxes) +30.79% +2.57% +0.23% +0.50% Lipper Global Science & Technology Funds Index (reflects no deduction for taxes) +72.12% +4.18% N/A N/A Lipper Global Science & Technology Funds Average (reflects no deduction for taxes) +68.51% +3.42% -4.90% -5.67%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Richard M. Parower, CFA Portfolio Manager 2002 Paul H. Wick Portfolio Manager 2006 Reema D. Shah Portfolio Manager 2005 Ajay Diwan Portfolio Manager 2005 Benjamin Lu Portfolio Manager 2006
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. -------------------------------------------------------------------------------- 8P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 9P MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Global Technology Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND The Fund generally invests at least 80% of its assets in equity securities of U.S. and non-U.S. companies with business operations in technology and technology-related industries. Technology-related companies are those companies that use technology extensively to improve their business processes and applications. The technology industry comprises information technology and communications, as well as medical, environmental and bio-technology. The Fund may invest in companies domiciled in any country which the investment manager believes to be appropriate to the Fund's objective. The Fund generally invests in several countries in different geographic regions. The Fund will provide shareholders with at least 60 days' written notice of any change in the 80% policy. Under normal market conditions, the Fund generally will invest at least 40% of its net assets in companies that maintain their principal place of business or conduct their principal business activities outside the U.S., have their securities traded on non-U.S. exchanges or have been formed under the laws of non-U.S. countries. The investment manager may reduce this 40% minimum investment amount to 30% if it believes that market conditions for these types of companies or specific foreign markets are unfavorable. The Fund considers a company to conduct its principal business activities outside the U.S. if it derives at least 50% of its revenue from business outside the U.S. or had at least 50% of its assets outside the U.S. The Fund may invest in companies of any size. Securities of large companies that are well established in the world technology market can be expected to grow with the market and will frequently be held by the Fund. However, rapidly changing technologies and expansion of technology and technology-related industries often provide a favorable environment for companies of small-to-medium size, and the Fund may invest in these companies as well. -------------------------------------------------------------------------------- 10P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS The investment manager seeks to identify those technology companies that it believes have the greatest prospects for future growth, regardless of their countries of origin. The Fund uses an investment style that combines research into individual company attractiveness with macro analysis. This means that the investment manager uses extensive in-depth research to identify attractive technology companies around the world, while seeking to identify particularly strong technology sectors and/or factors within regions or specific countries that may affect investment opportunities. In selecting individual securities, the investment manager looks for companies that it believes display one or more of the following: - Above-average growth prospects; - High profit margins; - Attractive valuations relative to earnings forecasts or other valuation criteria (e.g., return on equity); - Quality management and equity ownership by executives; - Unique competitive advantages (e.g., market share, proprietary products); or - Potential for improvement in overall operations. In evaluating whether to sell a security, the investment manager considers, among other factors, whether: - The investment manager believes its target price has been reached; - Its earnings are disappointing; - Its revenue growth has slowed; - Its underlying fundamentals have deteriorated; - If the investment manager believes that negative country or regional factors may affect a company's outlook; or - To meet cash requirements. The Fund may invest in all types of securities, many of which will be denominated in currencies other than the U.S. dollar. The Fund may purchase American Depositary Receipts (ADRs), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may, from time to time, take temporary defensive positions that are inconsistent with its principal strategies (e.g., investing less than 30% of its assets in companies outside the U.S.) in seeking to minimize extreme volatility caused by adverse market, economic, political, or other conditions. This could prevent the Fund from achieving its objective. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 11P PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. These risks are generally greater for small and mid-sized companies, which tend to be more vulnerable than large companies to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. TECHNOLOGY AND TECHNOLOGY-RELATED INVESTMENT RISK. The Fund will invest a substantial portion of its assets in technology and technology-related companies. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. These stocks may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. These stocks also may be affected adversely by changes in technology, consumer and business purchasing patterns, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and technology-related companies. In such an environment, those companies with high market valuations may appear less attractive to investors, which may cause sharp decreases in the companies' market prices. Further, those technology or technology-related companies seeking to finance their expansion would have increased borrowing costs, which may negatively impact their earnings. As a result, these factors may negatively affect the performance of the Fund. Finally, the Fund may be susceptible to factors affecting the technology and technology-related industries, and the Fund's net asset value may fluctuate more than a fund that invests in a wider range of industries. Technology and technology-related companies are often smaller and less experienced companies and may be subject to greater risks than larger companies, such as limited product lines, markets and financial and managerial resources. These risks may be heightened for technology companies in foreign markets. -------------------------------------------------------------------------------- 12P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS The Fund seeks to limit risk by allocating investments among different sectors within the technology industry, as well as among different foreign markets. Allocating among a number of sectors reduces the effect the performance of any one sector or events in any one country will have on the Fund's entire investment portfolio. However, a decline in the value of one of the Fund's investments may offset potential gains from other investments. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 13P SECTOR RISK. The Fund may invest a significant part of its total assets in securities of companies primarily engaged in the technology, media or telecommunications sectors. This may result in greater fluctuations in value than would be the case for a fund invested in a wider variety of unrelated industries. As these sectors increase or decrease in favor with the investing public, the price of securities of companies that rely heavily on those sectors could become increasingly sensitive to downswings in the economy. SMALL AND MID-SIZED COMPANY RISK. Investments in small and medium sized companies often involve greater risks than investments in larger, more established companies because small and medium companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. Additionally, in many instances the securities of small and medium companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. -------------------------------------------------------------------------------- 14P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 15P Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial loss for the Fund. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. -------------------------------------------------------------------------------- 16P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 17P securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.96% of the Fund's average daily net assets. Effective May 11, 2009, the annual management fee rate 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 annual fee rate was 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 reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. -------------------------------------------------------------------------------- 18P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: The Portfolio is managed by the investment manager's Technology Group: Richard M. Parower has been a Portfolio Manager of the Fund since 2002. Mr. Parower joined Seligman (the Fund's predecessor investment manager) in April 2000 and RiverSource Investments in November 2008. Mr. Parower is also Portfolio Manager of Seligman Global Technology Fund and RiverSource Global Technology Fund. Mr. Parower provides portfolio management services for certain private and offshore funds, including those with similar investment strategies as the Fund and those using long and short strategies. Paul H. Wick has been a Portfolio Manager of the Fund since 2006. Mr. Wick has also been Portfolio Manager of Seligman Communication and Information Portfolio since its inception, Portfolio Manager of Seligman Communications and Information Fund, Inc. since December 1989 and Portfolio Manager of RiverSource Global Technology Fund since November 2008. Mr. Wick provides portfolio management services for certain private and offshore funds, including those with similar investment strategies as the Fund and those using long and short strategies. Mr. Wick provides assistance to Mr. Parower in managing the Fund through his research and contributions to the investment decisions with respect to companies in the semiconductor and electronics capital equipment sectors. Mr. Wick joined Seligman in August 1987 as an Associate, Investment Research, and became Vice President, Investment Officer in August 1991; he was named Managing Director in January 1995. Mr. Wick joined RiverSource Investments in November 2008. Reema D. Shah has been a Portfolio Manager of the Fund since 2005. Ms. Shah joined Seligman in November 2000 and RiverSource Investments in November 2008, and is also Co-Portfolio Manager of Seligman Communications and Information Portfolio, Co-Portfolio Manager of Seligman Communications and Information Fund, Inc. and a Portfolio Manager of RiverSource Global Technology Fund. Ms. Shah provides portfolio management services for certain private and offshore funds, including those with similar strategies as the Fund and those using long and short strategies. Ms. Shah provides assistance to Mr. Parower in managing the Fund through her research and contributions to the investment decisions with respect to companies in the internet, consumer and enterprise software, education, and financial exchanges sectors. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 19P Ajay Diwan has been a Portfolio Manager of the Fund since 2005. Mr. Diwan joined Seligman in February 2001 and RiverSource Investments in November 2008, and is also Co-Portfolio Manager of Seligman Communications and Information Portfolio, Co-Portfolio Manager of Seligman Communications and Information Fund, Inc. and a Portfolio Manager of RiverSource Global Technology Fund. Mr. Diwan provides portfolio management services for certain private and offshore funds, including those with similar investment strategies as the Fund and those using long and short strategies. Mr. Diwan provides assistance to Mr. Parower in managing the Fund through his research and contributions to the investment decisions with respect to companies in the communications equipment, data storage, information technology services, and electronic payment processing industries. Benjamin Lu has been a Portfolio Manager of the Fund since 2006. Mr. Lu joined Seligman in April 2005 and RiverSource Investments in November 2008. Previously, Mr. Lu was an Associate Director for UBS from July 2002 to April 2005, covering the U.S. electronic manufacturing services and electronic components sectors. Mr. Lu provides assistance to Mr. Parower in managing the Fund through his research and contributions to the investment decisions with respect to companies in the Asia technology sector as well as the U.S. electronic manufacturing services and electronic components sectors. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- 20P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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 GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 21P
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). -------------------------------------------------------------------------------- 22P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees on Class 2 shares. The distributor uses these fees to support its distribution and servicing activity for Class 2 shares. Fees paid by the Fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. More information on how these fees are used is set forth under "Buying and Selling Shares -- Description of Fund Shares" in this prospectus and in the SAI. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly- -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 23P owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. -------------------------------------------------------------------------------- 24P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 25P BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. Not all share classes may be available under your Contract or Qualified Plan. Under a Rule 12b-1 plan adopted by the Fund, Class 2 shares pay an annual shareholder servicing and distribution ("12b-1") fee of up to 0.25% of average net assets. The Fund pays this fee to the distributor. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners who invest in Class 2 shares, and for distribution related expenses. Additionally, the distributor may use this fee to make payments to Qualified Plan sponsors or their affiliates for similar services provided to Qualified Plans and their participants. Because these 12b-1 fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses -------------------------------------------------------------------------------- 26P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 27P The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. -------------------------------------------------------------------------------- 28P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS 29P DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- 30P SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 PROSPECTUS SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9916-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN INTERNATIONAL GROWTH PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO SEEKS TO PROVIDE SHAREHOLDERS WITH LONG-TERM CAPITAL APPRECIATION. The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 6p Fund Management.................................................. 7p Buying and Selling Shares........................................ 7p Tax Information.................................................. 7p Financial Intermediary Compensation.............................. 7p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 8p Principal Investment Strategies of the Fund...................... 8p Principal Risks of Investing in the Fund......................... 9p More about Annual Fund Operating Expenses........................ 11p Other Investment Strategies and Risks............................ 12p Fund Management and Compensation................................. 13p FINANCIAL HIGHLIGHTS............................................. 16P GENERAL INFORMATION.............................................. 17P BUYING AND SELLING SHARES........................................ 20P Description of Fund Shares..................................... 20p Pricing and Valuing of Fund Shares............................. 20p Purchasing and Selling Shares.................................. 21p DISTRIBUTIONS AND TAXES.......................................... 23P Reinvestments.................................................. 23p Taxes.......................................................... 23p
The Board of Directors of Seligman International Growth Portfolio (the Fund) has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. It is anticipated that the redemption of all shares of the Fund will take place before the end of the third quarter of 2010. -------------------------------------------------------------------------------- 2P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman International Growth Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 Management fees 0.95% Other expenses 7.16% Total annual fund operating expenses 8.11% Less: Fee waiver/expense reimbursement(b) (6.92%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 1.19%
(a) The expense ratio has been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 1.19%. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $121 $1,755 $3,290 $6,734
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 327% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, 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. The Fund may invest in any country; however, it typically will not invest in the U.S. It generally invests in several countries in different geographic regions. RiverSource Investments, LLC serves as the investment manager to the Fund and is responsible for the oversight of the Fund's subadviser, Wellington Management, LLP, which provides day-to-day management of the Fund. The Fund generally invests in the common stocks of medium- to large-sized companies in the principal international markets. It may also invest in companies with lower market capitalization or in smaller regional or emerging markets (representation in the emerging markets will generally be less than 25% of assets). The Fund may invest in securities which are denominated in currencies other than the U.S. dollar. The securities may be listed on a U.S. or foreign stock exchange or traded in U.S. or foreign over-the-counter markets. The Fund normally concentrates its investments in common stocks; however, it may invest in other types of equity securities, including depositary receipts. -------------------------------------------------------------------------------- 4P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS The Fund may from time to time enter into forward foreign currency exchange contracts in an attempt to manage the risk of adverse changes in currencies. The Fund may also purchase put options in an attempt to hedge against a decline in the price of securities it holds in its portfolio. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. RISKS OF FOREIGN/EMERGING MARKETS INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, social and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. Emerging markets risk includes the dramatic pace of change in these countries as well as the other considerations listed above. Because of the less developed markets and economics and less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers domiciled or doing substantial business in emerging markets. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. DERIVATIVES RISK. The Fund's use of derivatives involves risks different from, and possibly greater than, the risks associated with investing directly in the investments underlying the derivatives. Derivatives may be volatile and involve significant risk, such as, among other things, correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper International Multi-Cap Growth Funds Index (the Lipper Index) replaced the Lipper International Multi-Cap Growth Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) -32.47% -24.41% -16.52% +33.48% +24.19% +5.04% +23.33% +22.67% -57.43% +22.50% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +18.51% (quarter ended June 30, 2009). - Lowest return for a calendar quarter was -27.74% (quarter ended Sept. 30, 2008). -------------------------------------------------------------------------------- 6P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS
(FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS Seligman International Growth Portfolio -- Class 1 +22.50% -3.69% -5.21% Morgan Stanley Capital International (MSCI) EAFE Growth Index (reflects no deduction for fees, expenses or taxes) +29.91% +4.02% -1.00% MSCI EAFE Index (reflects no deduction for fees, expenses or taxes) +32.46% +4.02% +1.58% Lipper International Multi-Cap Growth Funds Index (reflects no deduction for taxes) +43.99% +6.25% +0.55% Lipper International Multi-Cap Growth Funds Average (reflects no deduction for taxes) +42.65% +4.23% +1.37%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC (RiverSource Investments) SUBADVISER: Wellington Management Company, LLP (Wellington Management)
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Jean-Marc Berteaux Portfolio Manager 2010 Matthew D. Hudson, CFA Portfolio Manager 2006
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 7P MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman International Growth Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, 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. The Fund may invest in any country; however, it typically will not invest in the U.S. It generally invests in several countries in different geographic regions. The Fund generally invests in the common stocks of medium- to large-sized companies in the principal international markets. It may also invest in companies with lower market capitalization or in smaller regional or emerging markets (representation in the emerging markets will generally be less than 25% of assets). RiverSource Investments serves as the investment manager to the Fund and is responsible for the oversight of the Fund's subadviser, Wellington Management, which provides day-to-day management of the Fund. In selecting individual securities, Wellington Management looks to identify companies that it believes display one or more of the following attributes: - Attractive valuations relative to earnings and revenue forecasts or other valuation criteria (e.g., return on equity) - Quality management - Unique competitive advantage (e.g., market share, proprietary products) - Strong possibility of multiple expansion - Potential for improvement in overall operations (hidden/unappreciated value) The Fund generally sells a stock if Wellington Management believes its target price has been reached, there is a decelerating trend of earnings growth, deteriorating industry fundamentals, management change or failure, its revenue growth has slowed, or its underlying fundamentals have deteriorated. -------------------------------------------------------------------------------- 8P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS The Fund may invest in securities, which are denominated in currencies other than the U.S. dollar. The securities may be listed on a U.S. or foreign stock exchange or traded in U.S. or foreign over-the-counter markets. The Fund may purchase American Depositary Receipts (ADRs), which are publicly traded instruments generally issued by domestic banks or trust companies that represent a security of a foreign issuer. The Fund may from time to time enter into forward foreign currency exchange contracts in an attempt to manage the risk of adverse changes in currencies. The Fund may also purchase put options in an attempt to hedge against a decline in the price of securities it holds in its portfolio. A put option gives the Fund the right to sell an underlying security at a particular price during a fixed period of time. Forward foreign currency exchange contracts and put options on securities may not be available to the Fund on reasonable terms in many situations, and the Fund may frequently choose not to enter into such contracts or purchase such options even when they are available. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 9P Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. These risks are generally greater for small and mid-sized companies, which tend to be more vulnerable than large companies to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. -------------------------------------------------------------------------------- 10P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 11P OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other -------------------------------------------------------------------------------- 12P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 13P The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. At a special meeting of shareholders held June 2, 2009, a majority of the Fund's outstanding voting securities approved a policy authorizing the Fund to operate in this manner. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.97% of the Fund's average daily net assets. Effective May 11, 2009, the annual management fee rate 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 annual fee rate was 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 reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. -------------------------------------------------------------------------------- 14P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS RiverSource Investments selects, contracts with and compensates the Subadviser to manage the investment of the Fund's assets. RiverSource Investments monitors the compliance of the Subadviser with the investment objectives and related policies of the Fund, reviews the performance of the Subadviser, and reports periodically to the Board. The Subadviser manages the Fund's assets based upon its experience in managing funds with investment goals and strategies substantially similar to those of the Fund. WELLINGTON MANAGEMENT Wellington Management, which has served as subadviser to the Fund since 2003, is a Massachusetts limited liability partnership with principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington Management is a professional investment counseling firm which provides investment services to investment companies, employee benefit plans, endowments, foundations and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 70 years. Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Jean-Marc Berteaux, Senior Vice President and Equity Portfolio Manager of Wellington Management, who has served as Portfolio Manager of the Fund since 2010 and has been involved in portfolio management and securities analysis for the Portfolio since 2003. Mr. Berteaux joined Wellington Management as an investment professional in 2001. Matthew D. Hudson, CFA, Vice President and Equity Portfolio Manager of Wellington Management, has been involved in portfolio management and securities analysis for the Portfolio since 2006. Mr. Hudson joined Wellington Management as an investment professional in 2005. Mr. Berteaux is the lead portfolio manager of the Portfolio. Mr. Hudson assists in the research and portfolio construction process. In Mr. Berteaux's absence, Mr. Hudson may purchase or sell securities for the Portfolio. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 15P FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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). -------------------------------------------------------------------------------- 16P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 17P PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. -------------------------------------------------------------------------------- 18P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 19P BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. -------------------------------------------------------------------------------- 20P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 21P SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- 22P SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 PROSPECTUS 23P Seligman International Growth Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9920-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO SEEKS TO PROVIDE SHAREHOLDERS WITH FAVORABLE CURRENT INCOME. The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 7p Fund Management.................................................. 9p Buying and Selling Shares........................................ 9p Tax Information.................................................. 9p Financial Intermediary Compensation.............................. 9p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 10p Principal Investment Strategies of the Fund...................... 10p Principal Risks of Investing in the Fund......................... 11p More about Annual Fund Operating Expenses........................ 14p Other Investment Strategies and Risks............................ 15p Fund Management and Compensation................................. 17p FINANCIAL HIGHLIGHTS............................................. 20P GENERAL INFORMATION.............................................. 22P BUYING AND SELLING SHARES........................................ 25P Description of Fund Shares..................................... 25p Pricing and Valuing Fund Shares................................ 25p Purchasing and Selling Shares.................................. 26p DISTRIBUTIONS AND TAXES.......................................... 28P Reinvestments.................................................. 28p Taxes.......................................................... 28p
The Board of Directors of Seligman Investment Grade Fixed Income Portfolio (the Fund) has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. It is anticipated that the redemption of all shares of the Fund will take place before the end of the third quarter of 2010. -------------------------------------------------------------------------------- 2P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Investment Grade Fixed Income Portfolio (the Fund) seeks to provide shareholders with favorable current income. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 Management fees 0.35% Other expenses 3.17% Acquired fund fees and expenses 0.02% Total annual fund operating expenses 3.54% Less: Fee waiver/expense reimbursement(b) (2.73%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 0.81%
(a) The expense ratio has been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.79%. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $83 $832 $1,603 $3,633
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 284% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, 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. The Fund may invest in securities of any duration. Capital appreciation is a secondary consideration in selecting securities for purchase by the Fund. Up to 25% of the Fund's net assets may be invested in foreign investments, which may include investments in emerging markets. The Fund may invest in corporate debt securities (including bonds and debentures convertible into common stock or with rights and warrants), securities issued or guaranteed by the U.S. Treasury, its agencies or instrumentalities, mortgage- backed securities (including collateralized mortgage obligations and mortgage pass-through securities), and high-grade money market instruments. The Fund may also hold or sell any securities obtained through the exercise of conversion rights or warrants, or as a result of a reorganization, recapitalization, or liquidation proceeding of any issuer of securities owned by the Fund. The investment manager may use derivatives such as futures, options, forward contracts and swaps, including credit default swaps, in an effort to produce incremental earnings, to hedge existing positions, to increase market exposure and investment flexibility, or to obtain or reduce credit exposure. -------------------------------------------------------------------------------- 4P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. Credit risk is the risk that fixed-income securities in the Fund's portfolio will decline in price or fail to pay interest or repay principal when due because the issuer of the security or the counterparty to a contract will default or otherwise become unable or unwilling to honor its financial obligations. Unrated securities held by the Fund present increased credit risk. The Fund's investment in below-investment grade securities (i.e., high-yield or junk bonds) exposes the Fund to a greater amount of credit risk than a fund which invests solely in investment grade securities. DERIVATIVES RISK. The Fund's use of derivatives involves risks different from, and possibly greater than, the risks associated with investing directly in the investments underlying the derivatives. Derivatives may be volatile and involve significant risk, such as, among other things, correlation risk, counterparty credit risk, hedging risk, leverage risk and liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. RISKS OF FOREIGN/EMERGING MARKETS INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, social and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. Emerging markets risk includes the dramatic pace of change in these countries as well as the other considerations listed above. Because of the less developed markets and economics and less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers domiciled or doing substantial business in emerging markets. INTEREST RATE RISK. Interest rate risk is the risk of losses attributable to changes in interest rates. When interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. Interest rate changes also may increase prepayments of debt obligations. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 5P LIQUIDITY RISK. Liquidity risk is the risk associated with a lack of marketability of securities which may make it difficult or impossible to sell at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. PREPAYMENT AND EXTENSION RISK. Prepayment and extension risk is the risk that a loan, bond or other security might be called or otherwise converted, prepaid or redeemed before maturity, and the portfolio managers may not be able to reinvest the prepayment proceeds in securities or loans providing as high a level of income, resulting in a reduced yield to the Fund. As interest rates rise or spreads widen, the likelihood of prepayment decreases. The portfolio managers may be unable to capitalize on securities with higher interest rates or wider spreads because the Fund's investments are locked in at a lower rate for a longer period of time. MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK. Mortgage-related and other asset- backed securities are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, if a Fund holds mortgage-related securities, it may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner. -------------------------------------------------------------------------------- 6P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Intermediate Investment-Grade Debt Funds Index (the Lipper Index) replaced the Lipper Corporate Debt Funds BBB-Rated Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 7P CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) +10.25% +5.52% +9.83% +4.72% +2.41% +0.95% +3.61% +5.59% -0.70% +5.06% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +5.68% (quarter ended Sept. 30, 2002). - Lowest return for a calendar quarter was -2.80% (quarter ended June 30, 2004). AVERAGE ANNUAL TOTAL RETURNS
(FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS Seligman Investment Grade Fixed Income Portfolio -- Class 1 +5.06% +2.87% +4.67% Barclays Capital U.S. Aggregate Bond Index (reflects no deduction for fees, expenses or taxes) +5.93% +4.97% +6.33% Lipper Intermediate Investment-Grade Debt Funds Index (reflects no deduction for taxes) +14.30% +4.18% +5.74% Lipper Corporate Debt Funds BBB-Rated Average (reflects no deduction for taxes) +21.16% +4.04% +6.11%
-------------------------------------------------------------------------------- 8P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Tom Murphy, CFA Portfolio Manager Nov. 2008 Scott Schroepfer, CFA Portfolio Manager Nov. 2008 Todd White Portfolio Manager Nov. 2008
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 9P MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Investment Grade Fixed Income Portfolio (the Fund) seeks to provide shareholders with favorable current income. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, 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. The Fund may invest in securities of any duration. Capital appreciation is a secondary consideration in selecting securities for purchase by the Fund. Up to 25% of the Fund's net assets may be invested in foreign investments, which may include investments in emerging markets. The selection of debt obligations is the primary decision in building the investment portfolio. In pursuit of the Fund's objective, the investment manager chooses investments by: - Evaluating the Fund's total exposure to sectors, industries, issuers and securities relative to the Barclays Capital U.S. Aggregate Bond Index (the Index). - Analyzing factors such as credit quality, interest rate outlook and price in seeking to select the most attractive securities within each sector. - Targeting an average portfolio duration within two years of the duration of the Index which, as of March 31, 2010, was 4.68 years. Duration measures the sensitivity of bond prices to changes in interest rates. The longer the duration of a bond, the longer it will take to repay the principal and interest obligations and the more sensitive it will be to changes in interest rates. For example, a five-year duration means a bond is expected to decrease in value by 5% if interest rates rise 1% and increase in value by 5% if interest rates fall 1%. In evaluating whether to sell a security, the investment manager considers, among other factors: - Identification of more attractive investments based on relative value. - The Fund's total exposure to sectors, industries, issuers and securities relative to the Index. - Whether its assessment of the credit quality of an issuer has changed or is vulnerable to a change. - Whether a sector or industry is experiencing change. -------------------------------------------------------------------------------- 10P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS - Changes in the interest rate or economic outlook. The Fund may invest in corporate debt securities (including bonds and debentures convertible into common stock or with rights and warrants), securities issued or guaranteed by the U.S. Treasury, its agencies or instrumentalities, mortgage- backed securities (including collateralized mortgage obligations and mortgage pass-through securities), and high-grade money market instruments. The Fund may also hold or sell any securities obtained through the exercise of conversion rights or warrants, or as a result of a reorganization, recapitalization, or liquidation proceeding of any issuer of securities owned by the Fund. The investment manager may use derivatives such as futures, options, forward contracts and swaps, including credit default swaps, in an effort to produce incremental earnings, to hedge existing positions, to increase market exposure and investment flexibility, or to obtain or reduce credit exposure. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. CREDIT RISK. Credit risk is the risk that the issuer of a security, or the counterparty to a contract, will default or otherwise become unable or unwilling to honor a financial obligation, such as payments due on a bond or a note. If the Fund purchases unrated securities, or if the rating of a security is reduced after purchase, the Fund will depend on the investment manager's analysis of credit risk more heavily than usual. Non-investment grade securities, commonly called "high-yield" or "junk" bonds, may react more to perceived changes in the ability of the issuing entity or obligor to pay interest and principal when due than to changes in interest rates. Non-investment grade securities have greater price fluctuations and are more likely to experience a default than investment grade bonds. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 11P DERIVATIVES RISK. Derivatives are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, options, futures, indexes or currencies. Losses involving derivative instruments may be substantial, because a relatively small price movement in the underlying security(ies), instrument, currency or index may result in a substantial loss for the Fund. In addition to the potential for increased losses, the use of derivative instruments may lead to increased volatility within the Fund. Derivative instruments in which the Fund invests will typically increase the Fund's exposure to Principal Risks to which it is otherwise exposed, and may expose the Fund to additional risks, including correlation risk, counterparty credit risk, hedging risk, leverage risk, and liquidity risk. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Hedging risk is the risk that derivative instruments used to hedge against an opposite position may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including accepting a lower price for the derivative instrument, selling other investments or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. See the SAI for more information on derivative instruments and related risks. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: -------------------------------------------------------------------------------- 12P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. Emerging markets risk includes the dramatic pace of change (economic, social and political) in these countries as well as the other considerations listed above. These markets are in early stages of development and are extremely volatile. They can be marked by extreme inflation, devaluation of currencies, dependence on trade partners, and hostile relations with neighboring countries. INTEREST RATE RISK. Interest rate risk is the risk of losses attributable to changes in interest rates. Interest rate risk is generally associated with bond prices: when interest rates rise, bond prices fall. In general, the longer the maturity or duration of a bond, the greater its sensitivity to changes in interest rates. Interest rate changes also may increase prepayments of debt obligations, which in turn would increase prepayment risk. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. LIQUIDITY RISK. Liquidity risk is the risk associated with a lack of marketability of securities which may make it difficult or impossible to sell the security at desirable prices in order to minimize loss. The Fund may have to lower the selling price, sell other investments, or forego another, more appealing investment opportunity. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 13P MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. PREPAYMENT AND EXTENSION RISK. Prepayment and extension risk is the risk that a bond or other security might be called, or otherwise converted, prepaid, or redeemed, before maturity. This risk is primarily associated with asset-backed securities, including mortgage backed securities. If a security is converted, prepaid, or redeemed, before maturity, particularly during a time of declining interest rates, the investment manager may not be able to reinvest in securities providing as high a level of income, resulting in a reduced yield to the Fund. Conversely, as interest rates rise, the likelihood of prepayment decreases. The investment manager may be unable to capitalize on securities with higher interest rates because the Fund's investments are locked in at a lower rate for a longer period of time. MORTGAGE-RELATED AND OTHER ASSET-BACKED RISK. Mortgage-related and other asset- backed securities are subject to certain additional risks. Generally, rising interest rates tend to extend the duration of fixed rate mortgage-related securities, making them more sensitive to changes in interest rates. As a result, in a period of rising interest rates, if a Fund holds mortgage-related securities, it may exhibit additional volatility. This is known as extension risk. In addition, adjustable and fixed rate mortgage-related securities are subject to prepayment risk. When interest rates decline, borrowers may pay off their mortgages sooner. MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. -------------------------------------------------------------------------------- 14P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 15P Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- 16P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.36% of the Fund's average daily net assets. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 17P Effective May 11, 2009, the annual management fee rate is equal to 0.345% of the Fund's average daily net assets. Prior to May 11, 2009, the annual fee rate was equal to 0.40% of the Fund's average daily net assets. The reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 0.02% 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Tom Murphy, CFA, Portfolio Manager. - Managed the Fund since Nov. 2008. - Sector Leader of investment grade credit sector team. - Joined RiverSource Investments in 2002. - Managing Director and Portfolio Manager, BlackRock Financial Management, 2002; various positions, Zurich Scudder, 1992 to 2002. - Began investment career in 1986. - MBA, University of Michigan. Scott Schroepfer, CFA, Portfolio Manager - Managed the Fund since Nov. 2008. - Sector Manager of the high yield fixed income sector team. - Joined RiverSource Investments in 1990. - Began investment career in 1986. - MBA, University of Minnesota. -------------------------------------------------------------------------------- 18P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS Todd White, Portfolio Manager - Managed the Fund since Nov. 2008. - Managed the Portfolio since 2008. - Sector Leader of liquid and structured assets sector team. - Joined RiverSource Investments in 2008. - Managing Director, Global Head of the Asset-Backed and Mortgage-Backed Securities businesses, and North American Head of the Interest Rate business, HSBC, 2004 to 2008; Managing Director and Head of Business for Mortgage Pass- Through and Options, Lehman Brothers, 2000 to 2004. - Began investment career in 1986. - BS, Indiana University. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 19P FINANCIAL HIGHLIGHTS The financial highlights table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the table represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP. -------------------------------------------------------------------------------- 20P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS
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. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 21P GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. -------------------------------------------------------------------------------- 22P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 23P POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- 24P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 25P PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- 26P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS 27P There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- 28P SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 PROSPECTUS Seligman Investment Grade Fixed Income Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9919-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN LARGE-CAP VALUE PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN LARGE-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 6p Fund Management.................................................. 7p Buying and Selling Shares........................................ 7p Tax Information.................................................. 7p Financial Intermediary Compensation.............................. 7p MORE INFORMATION ABOUT THE FUND Investment Objective............................................. 8p Principal Investment Strategies of the Fund...................... 8p Principal Risks of Investing in the Fund......................... 9p More about Annual Fund Operating Expenses............................................. 10p Other Investment Strategies and Risks............................ 10p Fund Management and Compensation................................. 13p FINANCIAL HIGHLIGHTS............................................. 16P GENERAL INFORMATION.............................................. 18P BUYING AND SELLING SHARES........................................ 21P Description of Fund Shares..................................... 21p Pricing and Valuing of Fund Shares............................. 21p Purchasing and Selling Shares.................................. 22p DISTRIBUTIONS AND TAXES.......................................... 26P Reinvestments.................................................. 26p Taxes.......................................................... 26p
-------------------------------------------------------------------------------- 2P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Large-Cap Value Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1(a) CLASS 2(b) Management fees 0.76% 0.76% Distribution and/or service (12b-1) fees 0.00% 0.25% Other expenses 2.68% 2.68%(d) Total annual fund operating expenses 3.44% 3.69% Less: Fee waiver/expense reimbursement(c) (2.49%) (2.49%) Total annual fund operating expenses after fee waiver/expense reimbursement(c) 0.95% 1.20%
(a) The expense ratio has been adjusted to reflect current fees. (b) The expense ratio is based on estimated expenses. (c) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 0.95% for Class 1 and 1.20% for Class 2. (d) Other expenses are based on estimated amounts for the current fiscal year because no Class 2 shares of the Fund have been issued as of the date of this prospectus. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $ 97 $825 $1,575 $3,558 Class 2 $122 $899 $1,696 $3,728
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 39% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in the common stock of "value" companies with large market capitalizations ($4 billion or more) at the time of purchase by the Fund. The Fund considers "value" companies to be those companies believed by the investment manager to be undervalued, either historically, by the market, or by their peers. The investment manager seeks to identify value companies that it believes display certain characteristics, including but not limited to, a low price-to- earnings and/or low price-to-book ratio, positive change in senior management, positive corporate restructuring, temporary setback in price due to factors that no longer exist, positive shift in the company's business cycle, and/or a catalyst for increase in the rate of the company's earnings growth. The Fund may hold a small number of securities because the investment manager believes doing so allows it to adhere to its value investment approach. The Fund can invest in any economic sector and, at times, it may emphasize one or more particular sectors. -------------------------------------------------------------------------------- 4P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. VALUE SECURITIES RISK. Value securities involve the risk that they may never reach what the investment manager believes is their full market value either because the market fails to recognize the stock's intrinsic worth or the investment manager misgauged that worth. They also may decline in price, even though in theory they are already undervalued. Because different types of stocks tend to shift in and out of favor depending on market and economic conditions, the Fund's performance may sometimes be lower or higher than that of other types of funds (such as those emphasizing growth stocks). FOCUSED PORTFOLIO RISK. A fund that holds fewer securities is subject to greater risk of loss if any of those securities declines in price. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. SECTOR RISK. If a fund emphasizes one or more economic sectors, it may be more susceptible to the financial, market or economic events affecting the particular issuers and industries in which it invests than funds that do not emphasize particular sectors. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE As of the date of this prospectus no Class 2 shares have been issued and therefore performance information for this class is not shown. The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. On Jan. 1, 2010, the Lipper Large-Cap Value Funds Index (the Lipper Index) replaced the Lipper Large-Cap Value Funds Average (the Lipper Average) as one of the Fund's 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. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) +25.84% -8.28% -31.90% +33.91% +16.25% +10.63% +13.57% +9.43% -38.03% +30.23% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +24.90% (quarter ended June 30, 2009). - Lowest return for a calendar quarter was -25.59% (quarter ended Sept. 30, 2002). -------------------------------------------------------------------------------- 6P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS AVERAGE ANNUAL TOTAL RETURNS (FOR PERIODS ENDED DEC. 31, 2009)
1 YEAR 5 YEARS 10 YEARS Seligman Large-Cap Value Portfolio -- Class 1 +30.23% +2.10% +3.10% Russell 1000 Value Index (reflects no deduction for fees, expenses or taxes) +19.69% -0.25% +2.47% S&P 500 Index (reflects no deduction for fees, expenses or taxes) +26.46% +0.42% -0.95% Lipper Large-Cap Value Funds Index (reflects no deduction for taxes) +24.96% +0.28% +0.85% Lipper Large-Cap Value Funds Average (reflects no deduction for taxes) +23.16% -0.25% +2.05%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Neil T. Eigen Portfolio Manager 1997 Richard S. Rosen Portfolio Manager 1997
BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 7P MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Large-Cap Value Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, there is no assurance that this objective can be achieved. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in the common stock of "value" companies with large market capitalizations ($4 billion or more) at the time of purchase by the Fund. The Fund's Board of Directors may change the parameters by which large market capitalization is defined if it concludes such a change is appropriate. The Fund considers "value" companies to be those companies believed by the investment manager to be undervalued, either historically, by the market, or by their peers. The Fund can invest in any economic sector and, at times, it may emphasize one or more particular sectors. The Fund will provide shareholders with at least 60 days' written notice of any change in the 80% policy. The Fund uses a bottom-up stock selection approach. This means that the investment manager concentrates on individual company fundamentals, rather than on a particular industry. In selecting investments, the investment manager seeks to identify value companies that it believes display certain characteristics, including but not limited to, one or more of the following: - a low price-to-earnings and/or low price-to-book ratio; - positive change in senior management; - positive corporate restructuring; - temporary setback in price due to factors that no longer exist; - a positive shift in the company's business cycle; and/or - a catalyst for increase in the rate of the company's earnings growth. The Fund may hold a small number of securities because the investment manager believes doing so allows it to adhere to its disciplined value investment approach. The investment manager maintains close contact with the management of each company in which the Fund invests or the third-party analysts covering such companies, and continually monitors Fund holdings, remaining sensitive to overvaluation and deteriorating fundamentals. The Fund generally sells a stock if the investment manager believes it has become fully valued, its fundamentals have deteriorated, or ongoing evaluation reveals that there are more attractive investment opportunities available. -------------------------------------------------------------------------------- 8P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. VALUE SECURITIES RISK. Value securities involve the risk that they may never reach what the investment manager believes is their full market value either because the market fails to recognize the stock's intrinsic worth or the investment manager misgauged that worth. They also may decline in price, even though in theory they are already undervalued. Because different types of stocks tend to shift in and out of favor depending on market and economic conditions, the Fund's performance may sometimes be lower or higher than that of other types of funds (such as those emphasizing growth stocks). FOCUSED PORTFOLIO RISK. A fund that invests in a limited number of companies. Accordingly, the Fund may have more volatility and is considered to have more risk than a fund that invests in a greater number of companies because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund's net asset value. To the extent the Fund invests its assets in fewer securities, the Fund is subject to greater risk of loss if any of those securities declines in price. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. SECTOR RISK. If a fund emphasizes one or more economic sectors, it may be more susceptible to the financial, market or economic events affecting the particular issuers and industries in which it invests than funds that do not emphasize particular sectors. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 9P MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. -------------------------------------------------------------------------------- 10P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial loss for the Fund. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 11P Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- 12P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.77% of the Fund's average daily net assets. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 13P Effective May 11, 2009, the annual management fee rate 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 annual fee rate was 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 reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Neil T. Eigen, Portfolio Manager - Managed the Fund since 1997. - Prior to RiverSource Investments' acquisition of J. & W. Seligman & Co. Incorporated (Seligman) in Nov. 2008, Mr. Eigen was head of the Seligman Value Team since he joined Seligman in 1997. Mr. Eigen was also a Director and Managing Director of Seligman and Director of Seligman Advisors, Inc. and Seligman Services, Inc. - Prior to joining Seligman, Mr. Eigen was a Senior Managing Director of Bear, Stearns & Co., serving as Chief Investment Officer and Director of Equities of Bear, Stearns Asset Management. Prior to that, he was Executive Vice President and Senior Equity Manager at Integrated Resources Asset Management. Mr. Eigen also spent six years at The Irving Trust Company as a Senior Portfolio Manager and Chairman of the Equity Selection Committee. - BS, New York University. Richard S. Rosen, Portfolio Manager - Managed the Fund since 1997. -------------------------------------------------------------------------------- 14P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS - Prior to RiverSource Investments' acquisition of Seligman in Nov. 2008, Mr. Rosen was a Managing Director of Seligman. - Prior to joining Seligman in 1997, Mr. Rosen was a Senior Portfolio Manager at Bear, Stearns Asset Management, and a Managing Director at Bear, Stearns & Co. Inc. - MBA, New York University. Mr. Eigen and Mr. Rosen each have decision making authority with respect to the investments of the Fund, although Mr. Eigen typically makes the final decision with respect to investments made by the Fund. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 15P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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% ----------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------- 16P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 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. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 17P GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees on Class 2 shares. The distributor uses these fees to support its distribution and servicing activity for Class 2 shares. Fees paid by the Fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. More information on how these fees are used is set forth under "Buying and Selling Shares -- Description of Fund Shares" in this prospectus and in the SAI. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. -------------------------------------------------------------------------------- 18P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 19P POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- 20P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. Not all share classes may be available under your Contract or Qualified Plan. Under a Rule 12b-1 plan adopted by the Fund, Class 2 shares pay an annual shareholder servicing and distribution ("12b-1") fee of up to 0.25% of average net assets. The Fund pays this fee to the distributor. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners who invest in Class 2 shares, and for distribution related expenses. Additionally, the distributor may use this fee to make payments to Qualified Plan sponsors or their affiliates for similar services provided to Qualified Plans and their participants. Because these 12b-1 fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 21P When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. -------------------------------------------------------------------------------- 22P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 23P SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-party administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- 24P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 25P DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- 26P SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS Seligman Large-Cap Value Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9913-99 A (5/10) Prospectus (SELIGMAN LOGO) SELIGMAN SMALLER-CAP VALUE PORTFOLIO PROSPECTUS APRIL 30, 2010 SELIGMAN SMALLER-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies as well as qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by RiverSource Fund Distributors, Inc. (the distributor). There are no exchange ticker symbols associated with shares of the Fund. As with all mutual funds, the Securities and Exchange Commission has not approved or disapproved these securities or passed upon the adequacy of this prospectus. Any representation to the contrary is a criminal offense. NOT FDIC INSURED - MAY LOSE VALUE - NO BANK GUARANTEE TABLE OF CONTENTS SUMMARY OF THE FUND Investment Objective............................................. 3p Fees and Expenses of the Fund.................................... 3p Principal Investment Strategies of the Fund...................... 4p Principal Risks of Investing in the Fund......................... 5p Past Performance................................................. 6p Fund Management.................................................. 7p Buying and Selling Shares........................................ 8p Tax Information.................................................. 8p Financial Intermediary Compensation.............................. 8p MORE INFORMATION ABOUT THE FUND.................................. 9P Investment Objective............................................. 9p Principal Investment Strategies of the Fund...................... 9p Principal Risks of Investing in the Fund......................... 10p More about Annual Fund Operating Expenses........................ 12p Other Investment Strategies and Risks............................ 12p Fund Management and Compensation................................. 15p FINANCIAL HIGHLIGHTS............................................. 18P GENERAL INFORMATION.............................................. 20P BUYING AND SELLING SHARES........................................ 23P Description of Fund Shares..................................... 23p Pricing and Valuing of Fund Shares............................. 23p Purchasing and Selling Shares.................................. 24p DISTRIBUTIONS AND TAXES.......................................... 27P Reinvestments.................................................. 27p Taxes.......................................................... 27p
-------------------------------------------------------------------------------- 2P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS SUMMARY OF THE FUND INVESTMENT OBJECTIVE Seligman Smaller-Cap Value Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. FEES AND EXPENSES OF THE FUND This table describes the fees and expenses that you may pay as an investor in the Fund. The table does not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, which are disclosed in your separate Contract prospectus or Qualified Plan disclosure documents, or imposed on Accounts that may own shares directly. If the additional fees, expenses or sales charges were reflected, it would increase overall expenses. ANNUAL FUND OPERATING EXPENSES(a) (EXPENSES THAT YOU PAY EACH YEAR AS A PERCENTAGE OF THE VALUE OF YOUR INVESTMENT)
CLASS 1 CLASS 2 Management fees 0.94% 0.94% Distribution and/or service (12b-1) fees 0.00% 0.25% Other expenses 0.28% 0.28% Total annual fund operating expenses 1.22% 1.47% Less: Fee waiver/expense reimbursement(b) (0.20%) (0.20%) Total annual fund operating expenses after fee waiver/expense reimbursement(b) 1.02% 1.27%
(a) The expense ratios have been adjusted to reflect current fees. (b) The investment manager and its affiliates have contractually agreed to waive certain fees and to reimburse certain expenses (other than acquired fund fees and expenses, if any) until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board of Directors. Any amounts waived will not be reimbursed by the Fund. Under this agreement, net fund expenses (excluding acquired fund fees and expenses, if any) will not exceed 1.02% for Class 1 and 1.27% for Class 2. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 3P EXAMPLE The Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds. The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your investment at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund's operating expenses remain the same. The Example does not reflect the fees and expenses that apply to your Contract or Qualified Plan or to Accounts that may own shares directly. Inclusion of these charges would increase expenses for all periods shown. Although your actual costs may be higher or lower, based on these assumptions your costs would be:
1 YEAR 3 YEARS 5 YEARS 10 YEARS Class 1 $104 $368 $652 $1,465 Class 2 $129 $446 $785 $1,745
PORTFOLIO TURNOVER The Fund pays transaction costs, such as commissions, when it buys and sells securities (or "turns over" its portfolio). A higher portfolio turnover rate may indicate higher transaction costs. These costs, which are not reflected in annual fund operating expenses or in the Example, affect the Fund's performance. During the most recent fiscal year, the Fund's portfolio turnover rate was 8% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in the common stock of "value" companies with smaller market capitalizations ($3 billion or less) at the time of purchase by the Fund. The Fund considers "value" companies to be those companies believed by the investment manager to be undervalued, either historically, by the market, or by their peers. The Fund may invest up to 25% of its net assets in foreign investments. The investment manager seeks to identify value companies that it believes display certain characteristics, including but not limited to, a low price-to- earnings and/or low price-to-book ratio, positive change in senior management, positive corporate restructuring, temporary setback in price due to factors that no longer exist, positive shift in the company's business cycle, and/or a catalyst for increase in the rate of the company's earnings growth. The Fund may hold a small number of securities because the investment manager believes doing so allows it to adhere to its value investment approach. The Fund can invest in any economic sector and, at times, it may emphasize one or more particular sectors. -------------------------------------------------------------------------------- 4P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall, fail to rise or fluctuate, sometimes rapidly and unpredictably. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. These risks are generally greater for small and mid-sized companies. Focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. VALUE SECURITIES RISK. Value securities involve the risk that they may never reach what the investment manager believes is their full market value either because the market fails to recognize the stock's intrinsic worth or the investment manager misgauged that worth. They also may decline in price, even though in theory they are already undervalued. Because different types of stocks tend to shift in and out of favor depending on market and economic conditions, the Fund's performance may sometimes be lower or higher than that of other types of funds (such as those emphasizing growth stocks). FOCUSED PORTFOLIO RISK. A fund that holds fewer securities is subject to greater risk of loss if any of those securities declines in price. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline, which would negatively affect the Fund's performance. SECTOR RISK. If a fund emphasizes one or more economic sectors, it may be more susceptible to the financial, market or economic events affecting the particular issuers and industries in which it invests than funds that do not emphasize particular sectors. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. SMALL COMPANY RISK. Investments in small companies often involve greater risks than investments in larger, more established companies, including less predictable earnings, lack of experienced management, financial resources, product diversification and competitive strengths. Securities of small companies may trade only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less than is typical of larger companies. RISKS OF FOREIGN INVESTING. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, and other conditions of the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 5P PAST PERFORMANCE The following bar chart and table provide some illustration of the risks of investing in the Fund by showing, respectively: - how the Fund's Class 1 share performance has varied for each full calendar year shown on the bar chart; and - how the Fund's average annual total returns compare to recognized measures of market performance shown on the table. Both the bar chart and the table do not reflect the expenses that apply to subaccounts and Contracts. Inclusion of these charges would reduce total return for all periods shown. 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. As of the date of this prospectus, Lipper classifies the Fund as a Small-Cap Core Fund. How the Fund has performed in the past does not indicate how the Fund will perform in the future. Updated performance information is available by calling, without charge, 1(800) 221-2450. -------------------------------------------------------------------------------- 6P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS CLASS 1 ANNUAL TOTAL RETURNS (BAR CHART) +33.00% +23.52% -15.37% +49.94% +19.95% -3.98% +21.25% +4.14% -39.53% +35.46% 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
(CALENDAR YEAR) During the periods shown: - Highest return for a calendar quarter was +29.32% (quarter ended June 30, 2009). - Lowest return for a calendar quarter was -21.76% (quarter ended Dec. 31, 2008). AVERAGE ANNUAL TOTAL RETURNS
CLASS 2 SINCE INCEPTION (FOR PERIODS ENDED DEC. 31, 2009) 1 YEAR 5 YEARS 10 YEARS (5/1/2001) Seligman Smaller-Cap Value Portfolio: Class 1 +35.46% -0.14% +9.52% N/A Class 2 +35.09% -0.32% N/A +7.04% Russell 2000 Value Index (reflects no deduction for fees, expenses or taxes) +20.58% -0.01% +8.27% +7.93% Lipper Small-Cap Core Funds Index (reflects no deduction for taxes) +34.50% +1.55% +5.24% +4.71% Lipper Small-Cap Value Funds Index (reflects no deduction for taxes) +33.00% +1.42% +8.73% +8.59% Lipper Small-Cap Core Funds Average (reflects no deduction for taxes) +31.96% +0.65% +5.86% +5.38% Lipper Small-Cap Value Funds Average (reflects no deduction for taxes) +32.43% +0.91% +8.11% +7.95%
FUND MANAGEMENT INVESTMENT MANAGER: RiverSource Investments, LLC
PORTFOLIO MANAGER TITLE MANAGED FUND SINCE ----------------- ----- ------------------ Neil T. Eigen Portfolio Manager 1997 Richard S. Rosen Portfolio Manager 1997
-------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 7P BUYING AND SELLING SHARES As a Contract owner or Qualified Plan participant, you cannot buy (nor will you own) shares of the Fund directly. You invest by participating in a Qualified Plan or buying a Contract and making allocations to the Fund. Please see your Qualified Plan disclosure documents or Contract prospectus, as applicable, for more information. Participants in Qualified Plans are encouraged to consult with their plan administrator for additional information. TAX INFORMATION The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. Federal income taxation of subaccounts, life insurance companies and annuity contracts or life insurance policies is discussed in your annuity contract or life insurance policy prospectus. FINANCIAL INTERMEDIARY COMPENSATION If you make allocations to the Fund, the Fund, its distributor or other related companies may pay participating insurance companies or other financial intermediaries for the allocation (sale) of Fund shares and related services in connection with such allocations to the Fund. These payments may create a conflict of interest by influencing the participating insurance company, other financial intermediary or your salesperson to recommend an allocation to the Fund over another fund or other investment option. Ask your financial adviser or salesperson or visit your financial intermediary's web site for more information. -------------------------------------------------------------------------------- 8P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS MORE INFORMATION ABOUT THE FUND INVESTMENT OBJECTIVE Seligman Smaller-Cap Value Portfolio (the Fund) seeks to provide shareholders with long-term capital appreciation. Because any investment involves risk, there is no assurance that this objective can be achieved. Only shareholders can change the Fund's objective. PRINCIPAL INVESTMENT STRATEGIES OF THE FUND Under normal market conditions, the Fund invests at least 80% of its net assets (including the amount of any borrowings for investment purposes) in the common stock of "value" companies with smaller market capitalizations ($3 billion or less) at the time of purchase by the Fund. The Fund's Board of Directors may change the parameters by which smaller market capitalization is defined if it concludes such a change is appropriate. The Fund considers "value" companies to be those companies believed by the investment manager to be undervalued, either historically, by the market, or by their peers. The Fund may invest up to 25% of its net assets in foreign investments. The Fund can invest in any economic sector and, at times, it may emphasize one or more particular sectors. The Fund will provide shareholders with at least 60 days' written notice of any change in the 80% policy. The Fund uses a bottom-up stock selection approach. This means that the investment manager concentrates on individual company fundamentals, rather than on a particular industry. In selecting investments, the investment manager seeks to identify value companies that it believes display certain characteristics, including but not limited to, one or more of the following: - a low price-to-earnings and/or low price-to-book ratio; - positive change in senior management; - positive corporate restructuring; - temporary setback in price due to factors that no longer exist; - positive shift in the company's business cycle; and/or - a catalyst for increase in the rate of the company's earnings growth. The Fund may hold a small number of securities because the investment manager believes doing so allows it to adhere to its disciplined value investment approach. The investment manager maintains close contact with the management of each company in which the Fund invests or the third-party analysts covering such companies, and continually monitors Fund holdings, remaining sensitive to overvaluation and deteriorating fundamentals. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 9P The Fund generally sells a stock if the investment manager believes it has become fully valued, its fundamentals have deteriorated, or ongoing evaluation reveals that there are more attractive investment opportunities available. PRINCIPAL RISKS OF INVESTING IN THE FUND Please remember that with any mutual fund investment you may lose money. Principal risks associated with an investment in the Fund include: ACTIVE MANAGEMENT RISK. The Fund is actively managed and its performance therefore will reflect in part the ability of the portfolio managers to select securities and to make investment decisions that are suited to achieving the Fund's investment objective. Due to its active management, the Fund could underperform other mutual funds with similar investment objectives. MARKET RISK. The market value of securities may fall or fail to rise. Market risk may affect a single issuer, sector of the economy, industry, or the market as a whole. The market value of securities may fluctuate, sometimes rapidly and unpredictably. These risks are generally greater for small and mid-sized companies, which tend to be more vulnerable than large companies to adverse developments. In addition, focus on a particular style, for example, investment in growth or value securities, may cause the Fund to underperform other mutual funds if that style falls out of favor with the market. VALUE SECURITIES RISK. Value securities involve the risk that they may never reach what the investment manager believes is their full market value either because the market fails to recognize the stock's intrinsic worth or the investment manager misgauged that worth. They also may decline in price, even though in theory they are already undervalued. Because different types of stocks tend to shift in and out of favor depending on market and economic conditions, the Fund's performance may sometimes be lower or higher than that of other types of funds (such as those emphasizing growth stocks). FOCUSED PORTFOLIO RISK. A fund that invests in a limited number of companies. Accordingly, the Fund may have more volatility and is considered to have more risk than a fund that invests in a greater number of companies because changes in the value of a single security may have a more significant effect, either negative or positive, on the Fund's net asset value. To the extent the Fund invests its assets in fewer securities, the Fund is subject to greater risk of loss if any of those securities declines in price. ISSUER RISK. An issuer may perform poorly, and therefore, the value of its securities may decline. Poor performance may be caused by poor management decisions, competitive pressures, breakthroughs in technology, reliance on suppliers, labor problems or shortages, corporate restructurings, fraudulent disclosures or other factors. -------------------------------------------------------------------------------- 10P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS SECTOR RISK. If a fund emphasizes one or more economic sectors, it may be more susceptible to the financial, market or economic events affecting the particular issuers and industries in which it invests than funds that do not emphasize particular sectors. The more a fund diversifies across sectors, the more it spreads risk and potentially reduces the risks of loss and volatility. SMALL COMPANY RISK. Investments in small capitalization companies often involve greater risks than investments in larger, more established companies because small capitalization companies may lack the management experience, financial resources, product diversification, experience and competitive strengths of larger companies. In addition, in many instances the securities of small capitalization companies are traded only over-the-counter or on regional securities exchanges and the frequency and volume of their trading is substantially less and may be more volatile than is typical of larger companies. RISKS OF FOREIGN INVESTING. Foreign securities are securities of issuers based outside the United States. An issuer is deemed to be based outside the United States if it is organized under the laws of another country. Foreign securities are primarily denominated in foreign currencies. In addition to the risks normally associated with domestic securities of the same type, foreign securities are subject to the following foreign risks: Country risk includes the political, economic, and other conditions of the country. These conditions include lack of publicly available information, less government oversight (including lack of accounting, auditing, and financial reporting standards), the possibility of government-imposed restrictions, and even the nationalization of assets. The liquidity of foreign investments may be more limited than for most U.S. investments, which means that, at times it may be difficult to sell foreign securities at desirable prices. Currency risk results from the constantly changing exchange rate between local currency and the U.S. dollar. Whenever the Fund holds securities valued in a foreign currency or holds the currency, changes in the exchange rate add to or subtract from the value of the investment. Custody risk refers to the process of clearing and settling trades in foreign markets. It also covers holding securities with local agents and depositories. Low trading volumes and volatile prices in less developed markets make trades harder to complete and settle. Local agents are held only to the standard of care of the local market. Governments or trade groups may compel local agents to hold securities in designated depositories that are not subject to independent evaluation. The less developed a country's securities market is, the greater the likelihood of problems occurring. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 11P MORE ABOUT ANNUAL FUND OPERATING EXPENSES The following information is presented in addition to, and should be read in conjunction with, "Fees and Expenses of the Fund" that appears in the Summary of the Fund. Calculation of Annual Fund Operating Expenses. Annual fund operating expenses are based on expenses incurred during the Fund's most recently completed fiscal year and are expressed as a percentage (expense ratio) of the Fund's average net assets during the fiscal period. The expense ratios are adjusted to reflect current fee arrangements, but are not adjusted to reflect the Fund's average net assets as of a different period or a different point in time, as the Fund's asset levels will fluctuate. In general, the Fund's operating expenses will increase as its assets decrease, such that the Fund's actual expense ratios may be higher than the expense ratios presented in the table. The commitment by the investment manager and its affiliates to waive fees and/or cap (reimburse) expenses is expected to limit the impact of any increase in the Fund's operating expenses that would otherwise result because of a decrease in the Fund's assets in the current fiscal year. OTHER INVESTMENT STRATEGIES AND RISKS Other Investment Strategies. In addition to the principal investment strategies previously described, the Fund may utilize investment strategies that are not principal investment strategies, including investment in affiliated and nonaffiliated pooled investment vehicles (including mutual funds and exchange traded funds (ETFs), also referred to as "acquired funds"), ownership of which results in the Fund bearing its proportionate share of the acquired funds' fees and expenses and proportionate exposure to the risks associated with acquired funds' underlying investments. ETFs are generally designed to replicate the price and yield of a specified market index. An ETF's share price may not track its specified market index and may trade below its net asset value, resulting in potential losses for the Fund. ETFs generally use a "passive" investment strategy and will not attempt to take defensive positions in volatile or declining markets. An active secondary market in an ETF's shares may not develop or be maintained and may be halted or interrupted due to actions by its listing exchange, unusual market conditions or other reasons. There can be no assurance an ETF's shares will continue to be listed on an active exchange. -------------------------------------------------------------------------------- 12P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS Additionally, the Fund may use derivatives such as futures, options, forward contracts, and swaps (which are financial instruments that have a value which depends upon, or is derived from, the value of something else, such as one or more underlying securities, pools of securities, indexes or currencies). These derivative instruments are used to produce incremental earnings, to hedge existing positions, to increase or reduce market or credit exposure, or to increase flexibility. Derivative instruments will typically increase the Fund's exposure to the principal risks to which it is otherwise exposed, and may expose the Fund to additional risks, including counterparty credit risk, leverage risk, hedging risk, correlation risk, and liquidity risk. Counterparty credit risk is the risk that a counterparty to the derivative instrument becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, and the Fund may obtain no recovery of its investment or may only obtain a limited recovery, and any recovery may be delayed. Leverage risk is the risk that losses from the derivative instrument may be greater than the amount invested in the derivative instrument. Hedging risk is the risk that derivative instruments used to hedge against an opposite position, may offset losses, but they may also offset gains. There is no guarantee that a hedging strategy will eliminate the risk which the hedging strategy is intended to offset, which may lead to losses within the Fund. Correlation risk is related to hedging risk and is the risk that there may be an incomplete correlation between the hedge and the opposite position, which may result in increased or unanticipated losses. Liquidity risk is the risk that the derivative instrument may be difficult or impossible to sell or terminate, which may cause the Fund to be in a position to do something the investment manager would not otherwise choose, including, accepting a lower price for the derivative instrument, selling other investments, or foregoing another, more appealing investment opportunity. Derivative instruments which are not traded on an exchange, including, but not limited to, forward contracts, swaps and over-the-counter options, may have increased liquidity risk. In addition, a relatively small price movement in the underlying security, currency or index may result in a substantial loss for the Fund. Certain derivatives have the potential for unlimited losses, regardless of the size of the initial investment. Even though the Fund's policies permit the use of derivatives in this manner, the portfolio managers are not required to use derivatives. For more information on strategies, and the risks of such strategies, including derivative instruments that the Fund may use, see the Fund's SAI and its annual and semiannual reports. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 13P Unusual Market Conditions. The Fund may, from time to time take temporary defensive positions, including investing more of its assets in money market securities in an attempt to respond to adverse market, economic, political, or other conditions. Although investing in these securities would serve primarily to attempt to avoid losses, this type of investing also could prevent the Fund from achieving its investment objective. During these times, the portfolio managers may make frequent securities trades that could result in increased fees, expenses and taxes, and decreased performance. Instead of investing in money market securities directly, the Fund may invest in shares of an affiliated or unaffiliated money market fund. See "Cash Reserves" under the section "General Information" for more information. Securities Transaction Commissions. Securities transactions involve the payment by the Fund of brokerage commissions to broker-dealers, on occasion as compensation for research or brokerage services (commonly referred to as "soft dollars"), as the portfolio managers buy and sell securities for the Fund in pursuit of its objective. A description of the policies governing the Fund's securities transactions and the dollar value of brokerage commissions paid by the Fund are set forth in the SAI. The brokerage commissions set forth in the SAI do not include implied commissions or mark-ups (implied commissions) paid by the Fund for principal transactions (transactions made directly with a dealer or other counterparty), including most fixed income securities (and certain other instruments, including derivatives). Brokerage commissions do not reflect other elements of transaction costs, including the extent to which the Fund's purchase and sale transactions may cause the market to move and change the market price for an investment. Although brokerage commissions and implied commissions are not reflected in the expense table under "Fees and Expenses of the Fund" that appears in the Summary of the Fund, they are reflected in the total return of the Fund. Portfolio Turnover. Trading of securities may produce capital gains, which are taxable to shareholders when distributed. Active trading may also increase the amount of brokerage commissions paid or mark-ups to broker-dealers that the Fund pays when it buys and sells securities. Capital gains and increased brokerage commissions or mark-ups paid to broker-dealers may adversely affect a fund's performance. The Fund's historical portfolio turnover rate, which measures how frequently the Fund buys and sells investments, is shown in the "Financial Highlights." Directed Brokerage. The Fund's Board of Directors (the Board) has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Fund as a factor in the selection of broker-dealers through which to execute securities transactions. Additional information regarding securities transactions can be found in the SAI. -------------------------------------------------------------------------------- 14P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS FUND MANAGEMENT AND COMPENSATION INVESTMENT MANAGER RiverSource Investments, LLC (the investment manager or RiverSource Investments), 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is the investment manager to the RiverSource Family of Funds (including the RiverSource funds, RiverSource Partners funds, Threadneedle funds and Seligman funds) and is a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial). Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. For all of its clients, RiverSource Investments seeks to allocate investment opportunities in an equitable manner over time. See the SAI for more information. The RiverSource Family of Funds has received an order from the Securities and Exchange Commission that permits RiverSource Investments, subject to the approval of the Board, to appoint a subadviser or change the terms of a subadvisory agreement for a fund without first obtaining shareholder approval. The order permits the Fund to add or change unaffiliated subadvisers or change the fees paid to subadvisers from time to time without the expense and delays associated with obtaining shareholder approval of the change. If the Fund was to seek to rely on the order, holders of a majority of the Fund's outstanding voting securities would need to approve operating the Fund in this manner. There is no assurance shareholder approval, if sought, would be received, and no changes will be made without shareholder approval until that time. For more information, see the SAI. RiverSource Investments or its affiliates may have other relationships, including significant financial relationships, with current or potential subadvisers or their affiliates, which may create a conflict of interest. In making recommendations to the Board to appoint or to change a subadviser, or to change the terms of a subadvisory agreement, RiverSource Investments does not consider any other relationship it or its affiliates may have with a subadviser, and RiverSource Investments discloses the nature of any material relationships it has with a subadviser to the Board. The Fund pays RiverSource Investments a fee for managing its assets. Under the Investment Management Services Agreement (Agreement), the fee for the most recent fiscal year was 0.96% of the Fund's average daily net assets. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 15P Effective May 11, 2009, the annual management fee rate 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 annual fee rate was 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 reduction in the investment management services fee schedule is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through an Administrative Services Agreement with Ameriprise Financial. Under the Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial an annual fee for administrative 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. The administrative services fee for the period from May 11, 2009 through Dec. 31, 2009 was equal to 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. Under the Agreement, the Fund also pays taxes, brokerage commissions, and nonadvisory expenses. A discussion regarding the basis for the Board approving the Agreement was included in the Fund's proxy statement, dated Aug. 27, 2008, and is available in the Fund's annual shareholder report for the period ended Dec. 31, 2008. Portfolio Managers. The portfolio managers responsible for the day-to-day management of the Fund are: Neil T. Eigen, Portfolio Manager - Managed the Fund since 1997. - Prior to RiverSource Investments' acquisition of J. & W. Seligman & Co. Incorporated (Seligman) in Nov. 2008, Mr. Eigen was head of the Seligman Value Team since he joined Seligman in 1997. Mr. Eigen was also a Director and Managing Director of Seligman and Director of Seligman Advisors, Inc. and Seligman Services, Inc. - Prior to joining Seligman, Mr. Eigen was a Senior Managing Director of Bear, Stearns & Co., serving as Chief Investment Officer and Director of Equities of Bear, Stearns Asset Management. Prior to that, he was Executive Vice President and Senior Equity Manager at Integrated Resources Asset Management. Mr. Eigen also spent six years at The Irving Trust Company as a Senior Portfolio Manager and Chairman of the Equity Selection Committee. - BS, New York University. Richard S. Rosen, Portfolio Manager - Managed the Fund since 1997. -------------------------------------------------------------------------------- 16P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS - Prior to RiverSource Investments' acquisition of Seligman in Nov. 2008, Mr. Rosen was a Managing Director of Seligman. - Prior to joining Seligman in 1997, Mr. Rosen was a Senior Portfolio Manager at Bear, Stearns Asset Management, and a Managing Director at Bear, Stearns & Co. Inc. - MBA, New York University. Mr. Eigen and Mr. Rosen each have decision making authority with respect to the investments of the Fund, although Mr. Eigen typically makes the final decision with respect to investments made by the Fund. The SAI provides additional information about portfolio manager compensation, management of other accounts and ownership of shares in the Fund. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 17P FINANCIAL HIGHLIGHTS The financial highlights tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single Fund share. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. The total returns in the tables represent the rate that an investor would have earned or lost on an investment in the Fund (assuming reinvestment of all dividends and distributions, if any). Total returns do not reflect any fees, expenses or sales charges imposed by your Contract or Qualified Plan, or imposed on Accounts that may own shares directly. Inclusion of these charges would reduce total returns for all periods shown. Total returns are not annualized for periods of less than one year. The information for the fiscal year ended Dec. 31, 2009 has been derived from the financial statements audited by Ernst & Young LLP, whose report, along with the Fund's financial statements and financial highlights, is included in the annual report which, if not included with this prospectus, is available upon request. The information for the periods ended Dec. 31, 2007 and Dec. 31, 2008 was audited by Deloitte & Touche LLP. The information for the periods ended on or before Dec. 31, 2006 was audited by Ernst & Young LLP.
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. -------------------------------------------------------------------------------- 18P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS
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). -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 19P GENERAL INFORMATION ADDITIONAL SERVICES AND COMPENSATION In addition to acting as the Fund's investment manager, RiverSource Investments and its affiliates also receive compensation for providing other services to the Fund. Administration Services. Ameriprise Financial, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, provides or compensates others to provide the Fund with certain services, including administrative, accounting, treasury and other services. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. Distribution and Shareholder Services. RiverSource Fund Distributors, Inc., 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55474, (the distributor) provides underwriting and distribution services to the Fund. Under the Distribution Agreement and related distribution and shareholder servicing plans, the distributor receives distribution and shareholder servicing fees on Class 2 shares. The distributor uses these fees to support its distribution and servicing activity for Class 2 shares. Fees paid by the Fund for these services are set forth under "Distribution and/or service (12b-1) fees" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. More information on how these fees are used is set forth under "Buying and Selling Shares -- Description of Fund Shares" in this prospectus and in the SAI. Transfer Agency Services. RiverSource Service Corporation, 734 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (the transfer agent or RiverSource Service Corporation), provides or compensates others to provide services to the Fund. The Fund pays the transfer agent a fee as set forth in the SAI and reimburses the transfer agent for its out-of-pocket expenses incurred while providing these services to the Fund. Fees paid by the Fund for these services are included under "Other expenses" in the table "Fees and Expenses of the Fund" located in the "Summary of the Fund" section of this prospectus. RiverSource Service Corporation may pay a portion of these fees to participating insurance companies or other financial intermediaries that provide sub- recordkeeping and other services to Contract owners, Qualified Plan participants and the Accounts. The SAI provides additional information about the services provided under the agreements set forth above. PAYMENTS TO AFFILIATED AND UNAFFILIATED PARTICIPATING INSURANCE COMPANIES The Fund may be sold as an underlying investment option under Contracts offered by RiverSource Life Insurance Company (RiverSource Life), its wholly- -------------------------------------------------------------------------------- 20P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS owned subsidiary, RiverSource Life Insurance Co. of New York (together, the Affiliated Insurance Companies) and other unaffiliated participating insurance companies (collectively, the participating insurance companies). RiverSource Investments and its affiliates may make or support payments out of their own resources to the participating insurance companies including the Affiliated Insurance Companies as a result of their agreement to include the Fund as an investment option under the Contracts. These Contracts may also include mutual funds other than the Fund as investment options, and the participating insurance companies including the Affiliated Insurance Companies may receive payments from the sponsors of these other mutual funds as a result of including those funds as underlying investment options under the Contracts. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the Fund in products offered by the Affiliated Insurance Companies, as employee compensation and business unit operating goals at all levels are tied to the success of Ameriprise Financial. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the Fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Fund. The amount of payment from sponsors of other funds that are offered as investment options under the Contracts or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation participating insurance companies receive from a fund may create an incentive for the companies and may influence their decision regarding which funds to include under a Contract. These arrangements are sometimes referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, sub-accounting or recordkeeping services provided directly by the participating insurance companies. See your Contract prospectus for more information regarding these payments and allocations. POTENTIAL CONFLICTS OF INTEREST Shares of the Fund may serve as the underlying investments for both variable annuity contracts and variable life insurance policies issued by participating life insurance companies. Due to differences in tax treatment or other considerations, the interests of various Contract owners might at some time be in conflict. The Fund currently does not foresee any such conflicts. However, if they do arise, the Board intends to consider what action, if any, should be taken in response to such conflicts. If such a conflict were to occur, one or more Accounts of the participating insurance companies might be required to withdraw its investments in the Fund. This might force the Fund to sell securities at disadvantageous prices. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 21P ADDITIONAL MANAGEMENT INFORMATION Cash Reserves. The Fund may invest its daily cash balance in a money market fund selected by RiverSource Investments, including, but not limited to, RiverSource Short-Term Cash Fund (Short-Term Cash Fund), a money market fund established for the exclusive use of funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. While Short-Term Cash Fund does not pay an advisory fee to RiverSource Investments, it does incur other expenses, and is expected to operate at a very low expense ratio. The Fund will invest in Short-Term Cash Fund or any other money market fund selected by RiverSource Investments only to the extent it is consistent with the Fund's investment objectives and policies. Short-Term Cash Fund is not insured or guaranteed by the FDIC or any other government agency. Fund Holdings Disclosure. The Board has adopted policies and procedures that govern the timing and circumstances of disclosure to shareholders and third parties of information regarding the securities owned by the Fund. A description of these policies and procedures is included in the SAI. Legal Proceedings. 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 Fund is 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 Fund or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Fund. Information regarding certain pending and settled legal proceedings may be found in the Fund's shareholder reports and in the SAI. Additionally, 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. -------------------------------------------------------------------------------- 22P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS BUYING AND SELLING SHARES DESCRIPTION OF FUND SHARES The Fund may offer Class 1 and Class 2 shares to separate accounts (Accounts) funding variable annuity contracts and variable life insurance policies (Contracts) issued by affiliated and unaffiliated life insurance companies, Accounts funding qualified pension and retirement plans (Qualified Plans) and other qualified institutional investors authorized by the distributor. Not all share classes may be available under your Contract or Qualified Plan. Under a Rule 12b-1 plan adopted by the Fund, Class 2 shares pay an annual shareholder servicing and distribution ("12b-1") fee of up to 0.25% of average net assets. The Fund pays this fee to the distributor. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners who invest in Class 2 shares, and for distribution related expenses. Additionally, the distributor may use this fee to make payments to Qualified Plan sponsors or their affiliates for similar services provided to Qualified Plans and their participants. Because these 12b-1 fees are paid out of the Fund's assets on an ongoing basis, over time they will increase the cost of your investment and may cost you more than other types of sales charges. PRICING AND VALUING OF FUND SHARES The net asset value (NAV) is the value of a single share of a Fund. The NAV is determined by dividing the value of the Fund's assets, minus any liabilities, by the number of shares outstanding. The NAV is calculated as of the close of business on the New York Stock Exchange (NYSE), normally 4:00 p.m. Eastern time, on each day that the NYSE is open. Securities are valued primarily on the basis of market quotations and floating rate loans are valued primarily on the basis of indicative bids. Both market quotations and indicative bids are obtained from outside pricing services approved and monitored under procedures adopted by the Board. Certain short-term securities with maturities of 60 days or less are valued at amortized cost. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 23P When reliable market quotations or indicative bids are not readily available, investments are priced at fair value based on procedures adopted by the Board. These procedures are also used when the value of an investment held by the Fund is materially affected by events that occur after the close of a securities market but prior to the time the Fund's NAV is determined. Valuing investments at fair value involves reliance on judgment. The fair value of an investment is likely to differ from any available quoted or published price. To the extent that the Fund has significant holdings of small cap stocks, high yield bonds, floating rate loans, tax-exempt securities or foreign securities that may trade infrequently, fair valuation may be used more frequently than for other funds. The Fund uses an unaffiliated service provider to assist in determining fair values for foreign securities. Foreign investments are valued in U.S. dollars. Some of the Fund's securities may be listed on foreign exchanges that trade on weekends or other days when the Fund does not price its shares. In that event, the NAV of the Fund's shares may change on days when shareholders will not be able to purchase or sell the Fund's shares. PURCHASING AND SELLING SHARES As a Contract owner or participant in a Qualified Plan, you may not buy (nor will you own) shares of the Fund directly. You invest by buying a Contract or contributing to a Qualified Plan and making allocations to the Fund. Allocation rights and information on how to purchase or surrender a Contract or Qualified Plan, including any minimum and maximum payments and submission and acceptance of your application, as well as any sales charges and other expenses imposed by the Contracts or Qualified Plans, and any charges that apply to Accounts that may own shares directly, are described in the separate Contract prospectus or Qualified Plan disclosure documents, as applicable, that accompany this prospectus. The Accounts may purchase and sell shares of the Fund in accordance with allocation instructions received from Contract owners or Qualified Plan participants. There is no sales charge associated with the purchase or sale of Fund shares. An Account may purchase or sell Fund shares at the next NAV calculated after its request is received in good order by the Fund. The amount received for the sale of Fund shares may be more or less than the amount invested. -------------------------------------------------------------------------------- 24P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS Fund shares that are sold are entitled to any dividends that have been declared as payable to record owners up to and including the day the sale is effected. Payment of the sale price will normally be made within seven days after receipt of such sale. In addition, the right to sell shares may be suspended and the date of payment of the sale price may be postponed for any period during which the NYSE is closed (other than customary weekend and holiday closings) or during which the Securities and Exchange Commission (SEC) determines that trading thereon is restricted, or for any period during which an emergency (as determined by the SEC) exists as a result of which the sale of the applicable Fund shares is not reasonably practical or as a result of which it is not reasonably practicable for the Fund to fairly determine the value of its net assets, or for such other periods as the SEC may by order permit for the protection of shareholders. The Fund reserves the right to accept an in kind contribution of securities as payment for its shares. Contributions received in kind will be valued at the Fund's determination of their fair market value. Additionally, for redemptions in excess of 15% of the Fund, the Fund reserves the right to satisfy such redemption request with an in kind transfer of securities. Shareholders receiving a payment in the form of securities may incur expenses, including brokerage expenses, in converting these securities into cash. Redemptions made in kind will be made on a pro rata basis so as not to disadvantage any individual shareholder. No shareholder will have the right to require any distribution of any assets of the Fund in kind. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 25P SHORT-TERM OR EXCESSIVE TRADING The Board has adopted a policy that the Fund will not knowingly permit market timing. Market timing is frequent or short-term trading activity by certain investors in a fund intending to profit at the expense of other investors in a fund; for example, short-term trading of funds that invest in securities that trade on overseas securities markets in order to take advantage of inefficiencies in the fund's pricing of those securities (the change in values of such securities between the close of the overseas markets and the close of the U.S. markets). This type of short-term trading is sometimes referred to as "arbitrage" market timing. Market timing may adversely impact a fund's performance by preventing the investment manager from fully investing the assets of the fund, diluting the value of shares held by long-term shareholders, or increasing the fund's transaction costs. Funds that invest directly in securities that trade infrequently may be vulnerable to market timers. To the extent the Fund has significant holdings in foreign securities, small cap stocks, floating rate loans and/or high yield bonds, the risks of market timing may be greater for the Fund than for other funds. See "Principal Investment Strategies of the Fund" in the "More Information About the Fund" section for a discussion of the types of securities in which the Fund invests. See "Pricing and Valuing of Fund Shares" for a discussion of the Fund's policy on fair value pricing, which is intended, in part, to reduce the frequency and effect of market timing. The Fund is currently offered as an investment option under Contracts offered by participating insurance companies and to Qualified Plans, which are administered by third-part administrators (TPAs). Because the participating insurance companies and TPAs process Fund trades on an omnibus basis and the Fund cannot generally ascertain the identity of a particular Contract owner or Qualified Plan participant whether the same has placed a particular purchase or sale order, the Board has adopted procedures intended to detect and deter market timing activity at the omnibus account level. As required by SEC rules, the Fund has entered into agreements with participating insurance companies and TPAs (each, a Sponsoring Entity) whereby the Fund or its agents may require a Sponsoring Entity to provide individual account level information about you and your trading activities in the Fund. If the Fund detects market timing activities at the omnibus level, the Fund may require the Sponsoring Entity to take actions to curtail the activity, which may include restricting your trading activity in the Fund. The procedures that are designed to detect and deter market timing activity at the omnibus account level cannot provide a guarantee that all market timing activity will be identified and restricted. In addition, state law and the terms of some Contracts may prevent or restrict the effectiveness of the market timing procedures. Market timing activity that is not identified, prevented or restricted may impact the performance of the Fund. -------------------------------------------------------------------------------- 26P SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS There can be no assurances that the Sponsoring Entities will be able to prevent or stop frequent trading activity by Contract owners and Qualified Plan participants. The ability of a Sponsoring Entity to detect and curtail excessive trading may be limited by operational systems and technological limitations. Also, Contract owners and Qualified Plan participants seeking to engage in market timing may deploy a variety of strategies to avoid detection. Please refer to your Contract prospectus or Qualified Plan documents for specific details on transfers between investment options and market timing policies and procedures. DISTRIBUTIONS AND TAXES REINVESTMENTS All distributions by the Fund are automatically reinvested in additional Fund shares. The reinvestment price is the next calculated NAV after the distribution is paid. TAXES The Fund intends to distribute dividends and capital gains to shareholders in order to qualify as a regulated investment company and to avoid paying corporate income and excise taxes. The Fund intends to comply with the regulations relating to the diversification requirements under section 817(h) of the Internal Revenue Code. IMPORTANT: This information is a brief and selective summary of some of the tax rules that apply to an investment in the Fund. Because tax matters are highly individual and complex, you should consult a qualified tax advisor. Federal income taxation of Accounts funding Contracts is discussed in your annuity contract or life insurance policy prospectus. Federal income taxation of Accounts funding Qualified Plans is discussed in your Qualified Plan disclosure documents. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 PROSPECTUS 27P Seligman Smaller-Cap Value Portfolio 734 Ameriprise Financial Center Minneapolis, MN 55474 Additional information about the Fund and its investments is available in the Fund's SAI and annual and semiannual reports to shareholders. In the Fund's annual report, you will find a discussion of market conditions and investment strategies that significantly affected the Fund's performance during its most recent fiscal year. The SAI is incorporated by reference in this prospectus. For a free copy of the SAI, the annual report, or the semiannual report, or to request other information about the Fund contact the RiverSource Family of Funds at 1(800) 221-2450 or your financial intermediary. To make a shareholder inquiry, contact the financial intermediary through whom you purchased the Fund. The Fund's SAI and most recent annual and semiannual reports are also available, free of charge, at seligman.com. Information about the Fund, including the SAI, can be viewed at the Securities and Exchange Commission's (Commission) Public Reference Room in Washington, D.C. (for information about the public reference room call 1-202-551-8090). Reports and other information about the Fund are available on the EDGAR Database on the Commission's Internet site at www.sec.gov. Copies of this information may be obtained, after paying a duplicating fee, by electronic request at the following E-mail address: publicinfo@sec.gov, or by writing to the Commission's Public Reference Section, Washington, D.C. 20549-1520. Investment Company Act File #: 811-5221 (SELIGMAN LOGO) SL-9917-99 A (5/10) STATEMENT OF ADDITIONAL INFORMATION APRIL 30, 2010 SELIGMAN PORTFOLIOS, INC. (THE "FUND") Effective November 7, 2008, RiverSource Investments, LLC ("RiverSource Investments" or "investment manager"), investment manager to the RiverSource Family of Funds, and a wholly owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), completed its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("Seligman"). With the Acquisition completed and shareholders of each of the Portfolios offered herein having previously approved (at a special meeting held on November 3, 2008) a new investment management services agreement ("Management Agreement") between RiverSource Investments and the Fund (on behalf of each Portfolio), RiverSource Investments is the new investment manager of the Fund (and each of its Portfolios) effective November 7, 2008. Shareholders of Seligman International Growth Portfolio (the "Subadvised Portfolio") also approved at the November meeting a subadvisory agreement (the "Subadvisory Agreement") between RiverSource Investments and Wellington Management Company, LLP ("Wellington Management"). This Statement of Additional Information ("SAI") expands upon and supplements the information contained in the Fund's current Prospectus, dated May 1, 2010, offering Class 1 shares for each of Seligman Capital Portfolio, Seligman Common Stock Portfolio, Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio, Seligman International Growth Portfolio, Seligman Investment Grade Fixed Income Portfolio, Seligman Large-Cap Value Portfolio and Seligman Smaller-Cap Value Portfolio, three separate Prospectuses, each dated May 1, 2010, also offering Class 1 shares for Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio and Seligman Smaller-Cap Value Portfolio, and five separate Prospectuses offering Class 2 shares, each dated May 1, 2010, for Seligman Capital Portfolio, Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio, Seligman Large-Cap Value Portfolio and Seligman Smaller-Cap Value Portfolio. Each of the Portfolios named above is referred to as a "Portfolio" and collectively such Portfolios are referred to as the "Portfolios". This SAI, although not in itself a Prospectus, is incorporated by reference into each of the Portfolio's Prospectuses in its entirety. It should be read in conjunction with each of the Portfolio's Prospectuses, which you may obtain by writing or calling the Fund at the above address or telephone numbers, respectively. Each fund's financial statements for its most recent fiscal period are contained in the fund's annual or semiannual report to shareholders. The Independent Registered Public Accounting Firm's Report and the Financial Statements, including Notes to the Financial Statements and the Schedule of Investments in Securities and any applicable Schedule of Affiliated Funds, contained in the Annual Report, are incorporated in this SAI by reference. No other portion of the Annual Report is incorporated by reference. For a free copy of a fund prospectus, annual or semiannual report, contact your financial intermediary or write to the RiverSource Family of Funds, which includes RiverSource funds, Seligman funds and Threadneedle funds, 734 Ameriprise Financial Center, Minneapolis, MN 55474, call 1(800) 221-2450, or visit seligman.com. The Fund is governed by a Board that meets regularly to review a wide variety of matters affecting the Portfolios. Detailed information about Fund governance, the Fund's investment manager, RiverSource Investments, and other aspects of Fund management can be found by referencing the Table of Contents below. The website references in this SAI are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this SAI. TABLE OF CONTENTS Fund History..................................................................... p. 3 Description of the Fund and its Investments and Risks............................ p. 3 Management of the Fund........................................................... p. 17 Control Persons and Principal Holders of Securities.............................. p. 26 Investment Advisory and Other Services........................................... p. 27 Portfolio Managers............................................................... p. 32 Securities Transactions.......................................................... p. 34 Capital Stock and Other Securities............................................... p. 37 Purchase, Redemption, and Pricing of Shares...................................... p. 38 Taxation of the Fund............................................................. p. 39 Underwriters..................................................................... p. 40 Financial Statements............................................................. p. 42 Information Regarding Pending and Settled Legal Proceedings...................... p. 42 General Information.............................................................. p. 43
Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 2 FUND HISTORY The Fund was incorporated under the laws of the state of Maryland on June 24, 1987 under the name Seligman Mutual Benefit Portfolios, Inc. The Fund's name was changed to Seligman Portfolios, Inc. on April 15, 1993. As of November 7, 2008, the Fund and its Portfolios are a part of the RiverSource Family of Funds. The RiverSource Family of Funds includes a comprehensive array of funds managed by RiverSource Investments, including the Fund and the other Seligman mutual funds. Shares of the Portfolios are sold exclusively as underlying investment options of variable insurance policies and variable annuity contracts offered by affiliated and unaffiliated insurance companies and are part of the RiverSource Family of Funds. DESCRIPTION OF THE FUND AND ITS INVESTMENTS AND RISKS CLASSIFICATION The Fund is a diversified open-end management investment company, or mutual fund, which consists of the following eight separate Portfolios: Seligman Capital Portfolio Seligman International Growth Portfolio (Capital) (International Growth) Seligman Common Stock Portfolio Seligman Investment Grade Fixed Income (Common Stock) Portfolio (Investment Grade Fixed Income) Seligman Communications and Information Seligman Large-Cap Value Portfolio Portfolio (Large-Cap Value) (Communications and Information) Seligman Global Technology Portfolio Seligman Smaller-Cap Value Portfolio (Global Technology) (Smaller-Cap Value)
Shares in the Fund's Portfolios are only being offered to: (1) separate accounts ("Accounts") established by participating insurance companies to fund benefits of variable annuity and variable life insurance contracts ("Contracts") and (2) with respect to Class 2 shares of Seligman Communications and Information Portfolio, certain domestic 401(k) plans with plan assets in excess of $300,000,000 or a minimum investment of $20,000,000, and retirement plans with at least 200 employees or a minimum investment of $3,000,000 ("Qualified Plans" or "Plans"). The Accounts may invest in shares of the Portfolios in accordance with allocation instructions received from the owners of the Contracts. A more detailed description of such allocation rights and information on how to purchase or surrender a Contract, as well as any sales charges and other expenses imposed by Contracts on their owners can be found in the separate prospectuses and disclosure documents issued by the participating insurance companies and those accompanying each Portfolio's Prospectus. Qualified Plans may invest in Class 2 shares of Seligman Communications and Information Portfolio in accordance with applicable law and their own governing documents. Participants of such Plans are encouraged to consult with their plan administrators for additional information. The Fund reserves the right to reject any order for the purchase of shares of the Fund's Portfolios. INVESTMENT STRATEGIES AND RISKS The Prospectuses discuss the investment objectives of each of the Fund's Portfolios and the policies each Portfolio employs to achieve its investment objectives. The following information regarding the Fund's Portfolios' investment policies supplements the information contained in the Prospectuses. CONVERTIBLE BONDS. Each Portfolio may purchase convertible bonds. Convertible bonds are convertible at a stated exchange rate or price into common stock. Before conversion, convertible securities are similar to non-convertible debt securities in that they provide a steady stream of income with generally higher yields than an issuer's equity securities. The market value of all debt securities, including convertible securities, tends to decline as interest rates increase and to increase as interest rates decline. In general, convertible securities may provide lower interest or dividend yields than non-convertible debt securities of similar quality, but they may also allow investors to benefit from increases in the market price of the underlying common stock. When the market price of the underlying common stock increases, the price of the convertible security tends to reflect the increase. When the market price of the underlying common stock declines, the convertible security tends to trade on the basis of yield, and may not depreciate to the same extent as the underlying common stock. In an issuer's capital structure, convertible securities are senior to common stocks. They are therefore of higher quality and involve less risk than the issuer's common stock, but the extent to which risk is reduced depends largely on the extent to which the convertible security sells above its value as a fixed-income security. In selecting convertible securities for a Portfolio, such factors as economic and business conditions involving the issuer, future earnings growth potential of the issuer, potential for price appreciation of the underlying equity, the value of individual securities relative to other investment alternatives, trends in the Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 3 determinants of corporate profits, and capability of management are considered. In evaluating a convertible security, emphasis is placed on the attractiveness of the underlying common stock and the capital appreciation opportunities that the convertible security presents. Convertible securities can be callable or redeemable at the issuer's discretion, in which case alternative investments would be sought. The Portfolios may invest in debt securities convertible into equity securities rated as low as "CC" by Standard & Poor's Ratings Services ("S&P") or "Ca" by Moody's Investors Service ("Moody's"). Debt securities rated below investment-grade (frequently referred to as "junk bonds") often have speculative characteristics and are subject to greater market fluctuations and risk of loss of income and principal than higher-rated securities. The investment manager does not rely on the ratings of these securities in making investment decisions but performs its own analysis, based on the factors described above, in connection with a Portfolio's investment objective(s). DERIVATIVES. Each of the Portfolios may invest in financial instruments commonly known as "derivatives" for hedging or investment purposes. A derivative is generally defined as an instrument whose value is derived from, or based upon, some underlying index, reference rate (e.g., interest rates or currency exchange rates), security, commodity or other asset. A Portfolio will not invest in a specific type of derivative without prior approval from its Board of Directors, after consideration of, among other things, how the derivative instrument serves the Portfolio's investment objective, and the risk associated with the investment. The types of derivatives in which the Portfolios are currently permitted to invest, as described more fully below, are forward currency exchange contracts, commodities and commodity contracts, options, equity linked securities, rights and warrants, access trades, index futures, treasury futures and options on such futures. FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS. Each of the Portfolios, other than Seligman Investment Grade Fixed Income Portfolio, will generally enter into forward foreign currency exchange contracts to fix the US dollar value of a security it has agreed to buy or sell for the period between the date the trade was entered into and the date the security is delivered and paid for, or, to hedge the US dollar value of securities it owns. A forward foreign currency exchange contract is an agreement to purchase or sell a specific currency at a future date and at a price set at the time the contract is entered into. A Portfolio may enter into a forward contract to sell or buy the amount of a foreign currency it believes may experience a substantial movement against the US dollar. In this case the contract would approximate the value of some or all of the Portfolio's securities denominated in such foreign currency. The precise matching of the forward contract amounts and the value of securities involved will not generally be possible since the future value of such securities in foreign currencies will change as a consequence of market movement in the value of those securities between the date the forward contract is entered into and the date it matures. The projection of short-term currency market movement is extremely difficult, and the successful execution of a short-term hedging strategy is highly uncertain. Under certain circumstances, a Portfolio may commit a substantial portion or the entire value of its assets to the consummation of these contracts. The potential effect a substantial commitment of a Portfolio's assets to forward contracts would have on the investment program of a Portfolio and its ability to purchase additional securities is considered. A Portfolio, in order to avoid excess transactions and transaction costs, may maintain a net exposure to forward contracts in excess of the value of the Portfolio's securities or other assets denominated in that currency provided the excess amount is "covered" by cash and/or liquid, high-grade debt securities, denominated in any currency, having a value at least equal at all times to the amount of such excess. Under normal circumstances, consideration of the prospect for currency parities will be incorporated into the longer-term investment decisions made with regard to overall diversification strategies. However, it is believed that it is important to have the flexibility to enter into such forward contracts when it is determined that the best interests of a Portfolio will be served. At the maturity of a forward contract, a Portfolio may either sell the security and make delivery of the foreign currency, or it may retain the security and terminate its contractual obligation to deliver the foreign currency by purchasing an "offsetting" contract obligating it to purchase, on the same maturity date, the same amount of the foreign currency. As indicated above, it is impossible to forecast with absolute precision the market value of portfolio securities at the expiration of the forward contract. Accordingly, it may be necessary for a Portfolio to purchase additional foreign currency on the spot market (and bear the expense of such purchase) if the market value of the security is less than the amount of foreign currency the Portfolio is obligated to deliver and if a decision is made to sell the security and make delivery of the foreign currency. Conversely, it may be necessary to sell on the spot market some of the foreign currency received upon the sale of the portfolio security if its market value exceeds the amount of foreign currency a Portfolio is obligated to deliver. However, a Portfolio may use liquid, high-grade debt securities, denominated in any currency, to cover the amount by which the value of a forward contract exceeds the value of the securities to which it relates. If a Portfolio retains the portfolio security and engages in offsetting transactions, the Portfolio will incur a gain or a loss (as described below) to the extent that there has been movement in forward contract prices. If the Portfolio engages in an Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 4 offsetting transaction, it may subsequently enter into a new forward contract to sell the foreign currency. Should forward prices decline during the period between the Portfolio's entering into a forward contract for the sale of a foreign currency and the date it enters into an offsetting contract for the purchase of the foreign currency, the Portfolio will realize a gain to the extent the price of the currency it has agreed to sell exceeds the price of the currency it has agreed to purchase. Should forward prices increase, the Portfolio will suffer a loss to the extent the price of the currency it has agreed to purchase exceeds the price of the currency it has agreed to sell. Each Portfolio's dealing in forward foreign currency exchange contracts will be limited to the transactions described above. A Portfolio is not required to enter into forward contracts with regard to its foreign currency-denominated securities and will not do so unless deemed appropriate. It also should be realized that this method of hedging against a decline in the value of a currency does not eliminate fluctuations in the underlying prices of the securities. It simply establishes a rate of exchange at a future date. Additionally, although such contracts tend to minimize the risk of loss due to a decline in the value of a hedged currency, at the same time, they tend to limit any potential gain which might result from an increase in the value of that currency. Shareholders should be aware of the costs of currency conversion. Although foreign exchange dealers do not charge a fee for conversion, they do realize a profit based on the difference (the "spread") between the prices at which they are buying and selling various currencies. Thus, a dealer may offer to sell a foreign currency to a Portfolio at one rate, while offering a lesser rate of exchange should the Portfolio desire to resell that currency to the dealer. COMMODITIES AND COMMODITY CONTRACTS. Each of the Portfolios may purchase and sell commodities and commodity contracts only to the extent that such activities do not result in the Portfolio being a "commodity pool" as defined in the Commodity Exchange Act and the Commodity Futures Trading Commission's regulations and interpretations thereunder. Use of these instruments can involve substantial risks. For example, derivative instruments can present investment risk to a Portfolio if the fluctuations in interest rates, currency values or the market to which the financial instrument is tied are not accurately predicted. Certain derivative instruments may involve the use of leverage and, as a result, there is the risk that a Portfolio could lose more than the amount of its original investment. For example, a Portfolio may purchase futures contracts by making a relatively small "margin deposit" and, if such contracts are thereafter sold at a loss, that Portfolio could lose substantially more than the original margin deposit. Although a Portfolio will only utilize exchange-traded futures and options thereon, there can be no assurance that they will be able to close out positions when they wish to. In addition, a futures or options strategy may not provide an exact hedge to a position. OPTIONS. Each of the Portfolios, other than Seligman Investment Grade Fixed Income Portfolio, is permitted to purchase put options, call options, put spreads, call spreads and collars, and to sell covered call options (i.e., where the Portfolio owns the underlying security) and covered put options (i.e., where the Portfolio maintains the cash or collateral to cover the obligation created by the put). These instruments are described below. An option is a contract that gives the holder the right to purchase ("call") or sell ("put") a specified security for an agreed upon price at any time before the contract's expiration date. The amount paid for an option is known as the premium, and the exercise price is known as the strike price. The purchaser of an option has the right, but not the obligation, to purchase or sell a security. The seller (or "writer") of an option, conversely, has an obligation to sell or purchase a security if the option is exercised. Some options have standardized terms and are traded on securities exchanges. Others are privately negotiated and have no or only a limited trading market. Options may be used individually or in combinations (e.g., put spreads and collars) to hedge securities positions or to seek increased investment returns. Put spreads and collars are designed to protect against a decline in value of a security an investor owns. A collar involves the purchase of a put and the simultaneous writing of a call on the same security at a higher strike price. The put protects the investor from a decline in the price of the security below the put's strike price. The call means that the investor will not benefit from increases in the price of the security beyond the call's strike price. In a put spread, an investor purchases a put and simultaneously writes a put on the same security at a lower strike price. This combination protects the investor against a decline in the price down to the lower strike price. The premium received for writing the call (in the case of a collar) or writing the put (in the case of a put spread) offsets, in whole or in part, the premium paid to purchase the put. In a call spread, an investor purchases a call and simultaneously sells a call on the same security, with the call sold having a higher strike price than the call purchased. The purchased call is designed to provide exposure to a potential increase in the value of a security an investor owns. The premium received for writing the call offsets, in part, the premium paid to purchase the corresponding call, but it also means that the investor will not benefit from increases in the price of the security beyond the sold call's strike price. Options offer large amounts of leverage, which will result in the Portfolio's net asset value being more sensitive to changes in the value of the underlying security. The successful use of options depends in part on the ability of the investment manager to manage future price fluctuations, and the degree of correlation between the options and the prices of the Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 5 underlying securities. If the investment manager is incorrect in its expectation of changes in market prices or the correlation between the instruments or indices on which such options may be written and purchased and the instruments in the Portfolio's investment portfolio, the Portfolio may incur losses that it would not otherwise incur. The use of options can also increase a Portfolio's transaction costs. Options transactions can involve a high degree of risk, including the possibility of a total loss of the amount invested. The purchaser of an option runs the risk of losing the entire premium paid if the option expires "out of the money" (i.e., if the strike price for a call option is higher than the market price, or the strike price for a put option is lower than the market price). The seller of an option earns premium income but is subject to the risk of having to sell the underlying security at significantly less than its market price (or buy a security at significantly more than its market price). When options are purchased on the over-the-counter market, there is a risk that the counterparty that wrote the option will be unable to perform its obligations under the option contract. Such over-the-counter options may also be illiquid and, in such cases, the Portfolio may have difficulty closing out its position, in which case the Portfolio could lose money in the event of adverse price movements. EQUITY-LINKED SECURITIES (ELS). An ELS is a debt instrument whose value is based on the value of a single equity security, basket of equity securities or an index of equity securities (each, an "Underlying Equity"). An ELS typically provides interest income, thereby offering a yield advantage over investing directly in an Underlying Equity. However, the holder of an ELS may have limited or no benefit from any appreciation in the Underlying Equity, but is exposed to downside market risk. The Portfolio may purchase ELSs that trade on a securities exchange or those that trade on the over-the-counter markets, including Rule 144A securities. The Portfolio may also purchase ELSs in a privately negotiated transaction with the issuer of an ELS (or its broker-dealer affiliate, collectively referred to in this section as the "issuer"). The Portfolio may or may not hold an ELS until its maturity. Investments in ELSs subject the Portfolio to risks, primarily to the downside market risk associated with the Underlying Equity, and to additional risks not typically associated with investments in listed equity securities, such as liquidity risk, credit risk of the issuer, and concentration risk. Most ELSs do not have any downside protection (though some ELSs provide for a floor on the downside). In general, an investor in an ELS has the same downside risk as an investor in the Underlying Equity. The liquidity of an ELS that is not actively traded on an exchange is linked to the liquidity of the Underlying Equity. The issuer of an ELS generally purchases the Underlying Equity as a hedge. If the Portfolio wants to sell an ELS back to the issuer prior to its maturity, the issuer may sell the Underlying Equity to unwind the hedge and, therefore, must take into account the liquidity of the Underlying Equity in negotiating the purchase price the issuer will pay to the Portfolio to acquire the ELS. The liquidity of unlisted ELSs is normally determined by the willingness of the issuer to make a market in the ELS. While the Portfolio will seek to purchase ELSs only from issuers that it believes to be willing to, and capable of, repurchasing the ELS at a reasonable price, there can be no assurance that the Portfolio will be able to sell any ELS at such a price or at all. This may impair the Portfolio's ability to enter into other transactions at a time when doing so might be advantageous. In addition, because ELSs are senior unsecured notes of the issuer, the Portfolio would be subject to the credit risk of the issuer and the potential risk of being too concentrated in the securities (including ELSs) of that issuer. The Portfolio bears the risk that the issuer may default on its obligations under the ELS. In the event of insolvency of the issuer, the Portfolio will be unable to obtain the intended benefits of the ELS. Moreover, it may be difficult to obtain market quotations for purposes of valuing the Portfolio's ELSs and computing the Portfolio's net asset value. Price movements of an ELS will likely differ significantly from price movements of the Underlying Equity, resulting in the risk of loss if the investment manager is incorrect in its expectation of fluctuations in securities prices, interest rates or currency prices or other relevant features of an ELS. PREFERRED SECURITIES. Certain of the Portfolios may invest in preferred securities. There are special risks associated with investing in preferred securities, including: - DEFERRAL. Preferred securities may include provisions that permit the issuer, at its discretion, to defer distributions for a stated period without adverse consequences to the issuer. If the Portfolio owns a preferred security that is deferring its distributions, the Portfolio may be required to report income for tax purposes although it has not yet received such income. - SUBORDINATION. Preferred securities are subordinated to bonds and other debt instruments in an issuer's capital structure with respect to priority to corporate income and liquidation payments, and therefore will be subject to greater credit risk than more senior debt instruments. - LIQUIDITY. Preferred securities may be substantially less liquid than many other securities, such as common stocks or US government securities. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 6 - LIMITED VOTING RIGHTS. Generally, preferred security holders have no voting rights with respect to the issuing company unless preferred dividends have been in arrears for a specified number of periods, at which time the preferred security holders may elect a number of directors to the issuer's board. Generally, once all the arrearages have been paid, the preferred security holders no longer have voting rights. In the case of certain trust preferred securities, holders generally have no voting rights, except (i) if the issuer fails to pay dividends for a specified period of time or (ii) if a declaration of default occurs and is continuing. In such an event, rights of holders of trust preferred securities generally would include the right to appoint and authorize a trustee to enforce the trust or special purpose entity's rights as a creditor under the agreement with its operating company. - SPECIAL REDEMPTION RIGHTS. In certain varying circumstances, an issuer of preferred securities may redeem the securities prior to a specified date. For instance, for certain types of preferred securities, a redemption may be triggered by a change in income tax or securities laws. As with call provisions, a redemption by the issuer of the preferred securities may negatively impact the return of the security held by the Portfolio. RIGHTS AND WARRANTS. Each Portfolio, other than Seligman Investment Grade Fixed Income Portfolio, may invest in common stock rights and warrants believed to provide capital appreciation opportunities. Common stock rights and warrants received as part of a unit or attached to securities purchased (i.e., not separately purchased) are not included in each Portfolio's investment restrictions regarding such securities. ACCESS TRADES. Each Portfolio, other than Seligman Investment Grade Fixed Income Portfolio, may participate in access trades with a global securities broker as counterparty. Access trades are over-the-counter transactions that provide access to a designated security, group of securities or market index without directly investing in the reference security/index. For a commission, the counterparty, agrees to provide a return based on the return of the reference security/index. Access trades are typically used in foreign markets where limits on direct foreign ownership can affect prices and/or where there are significant complexities in directly purchasing or selling shares in the reference security/index. Since access trades are over-the-counter transactions, a Portfolio bears the risk that the counterparty will be unable or unwilling to meet its obligations. In addition, since over-the-counter markets are generally less liquid than exchanges, the Portfolio may not be able to sell when it is deemed advantageous to do so. These risks will be potentially mitigated by dealing with counterparties believed to be reputable. FUTURES CONTRACTS. Seligman Investment Grade Fixed Income Portfolio may utilize treasury futures and Seligman Capital Portfolio, Seligman Common Stock Portfolio, Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio, Seligman International Growth Portfolio, Seligman Large- Cap Value Portfolio and Seligman Smaller-Cap Value Portfolio may utilize index futures. Futures contracts, which trade on a securities exchange, are standardized as to quantity, delivery date and settlement conditions, including specific securities acceptable for delivery against the futures contract. A treasury futures contract is an agreement to buy or sell a specified amount of a specific security issued by the U.S. Treasury for a specified price at a designated date and time in the future. In the case of index futures, settlement is made in cash based on the value of a specified underlying index. More commonly, futures contracts are closed out prior to expiration by an offsetting purchase or sale. Since the counterparty to every futures contact is a securities exchange, offsetting transactions are netted to close out positions. A Portfolio may incur a loss if the closing transaction occurs at an unfavorable price as compared with that of the opening trade (including transaction costs). There can be no assurance that the Portfolio will be able to enter into an offsetting transaction with respect to a particular contract at a particular time. If a Portfolio is not able to enter into an offsetting transaction, it will continue to be required to maintain the position, including the maintenance of margins, which could result in substantial losses. Margin deposits must be made at the time a futures contract position is acquired. A Portfolio is required to deposit in a segregated account, typically with its custodian, in the name of the futures broker through whom the transaction was effected, "initial margin" consisting of cash and/or other appropriate liquid assets in an amount generally equal to 10% or less of the contract value. Margin must also be deposited when writing a call or put option on a futures contract, in accordance with applicable exchange rules. Initial margin on futures contracts is returned to the Portfolio at the termination of the transaction if all contractual obligations have been satisfied. Under certain circumstances, such as periods of high volatility, the Portfolio may be required by a securities exchange to increase the level of its initial margin payment, and initial margin requirements might be increased generally in the future by regulatory action. Subsequent "variation margin" payments are made daily to and from the futures broker as the value of the futures position varies, a process known as "marking- to-market." When a Portfolio purchases or sells a futures contract, it is subject to daily variation margin calls that could be substantial in the event of adverse price movements. If the Portfolio has insufficient cash to meet daily variation margin requirements, it might need to sell securities at a time when such sales are disadvantageous. Purchasers and sellers of futures positions can enter into offsetting closing transactions by selling or purchasing, respectively, an instrument identical to the instrument held or written. Under certain circumstances, exchanges upon which futures contracts trade may establish daily limits on the amount that the price of a future contract can vary from the previous day's Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 7 settlement price; once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions. If a Portfolio were unable to liquidate a futures contract position, it could incur substantial losses. The Portfolio would continue to be subject to market risk with respect to the position. In addition, the Portfolio would continue to be required to make daily variation margin payments and might be required to maintain the position being hedged by the futures contract or to designate liquid assets on its books and records. Certain characteristics of the futures markets might increase the risk that movements in the prices of futures contracts might not correlate perfectly with movements in the prices of the investments being hedged. For example, all participants in the futures contracts markets are subject to daily variation margin calls and might be compelled to liquidate futures contracts positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, since initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the futures markets. This participation also might cause temporary price distortions. In addition, activities of large traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions. The Fund would deal only in standardized contracts on recognized exchanges. Each exchange guarantees performance under contract provisions through a clearing corporation, a nonprofit organization managed by the exchange membership. At the maturity of a futures contract, the Portfolio may either accept or make delivery of the security specified in the contract or, prior to maturity, enter into a closing transaction involving the purchase or sale of an offsetting contract. The Fund will only enter into a futures contract if it is expected that the Fund will readily be able to close out such contract. There can, however, be no assurance that it will be able to do so in any particular case, in which case the Fund may suffer losses in the event of adverse price movements. OPTIONS ON FUTURES. The Portfolios that may utilize treasury futures and index futures also intend to seek the Board's permission to utilize options on treasury futures and index futures respectively (collectively, "options on futures"). Options on futures are effectively options on the asset or index that underlies a futures contract. A call option on a futures contract gives the holder the right to enter into a long futures contract at a fixed futures price. A put option on a futures contract gives the holder the right to enter into a short futures contract at a fixed futures price. Purchasers and sellers of options on futures can enter into offsetting closing transactions by selling or purchasing, respectively, an offsetting option on the same futures contract. There is also risk that the Portfolio may have difficulty in closing out positions in options on futures. Although the Portfolios intend to close out any positions on a securities market, there can be no assurance that such a market will exist for a particular contract at a particular time. Under certain circumstances, exchanges upon which futures are traded may establish daily limits on the amount that the price of an option on a futures contract can vary from the previous day's settlement price. Once that limit is reached, no trades may be made that day at a price beyond the limit. Daily price limits do not limit potential losses because prices could move to the daily limit for several consecutive days with little or no trading, thereby preventing liquidation of unfavorable positions held by the Portfolios. Options on futures held by a Portfolio, to the extent not exercised, will expire and the Portfolio would experience a loss to the extent of any premium paid for the option. If a Portfolio were unable to liquidate an option on a futures contract position due to the absence of a liquid secondary market or the imposition of price limits, it could incur substantial losses. The Portfolio would continue to be subject to market risk with respect to the position. Certain characteristics of the futures market might increase the risk that movements in the prices of options on futures contracts might not correlate perfectly with movements in the prices of any exposure being hedged. For example, all participants in the options on futures markets are subject to daily variation margin calls and might be compelled to liquidate options on futures positions whose prices are moving unfavorably to avoid being subject to further calls. These liquidations could increase price volatility of the instruments and distort the normal price relationship between the futures or options and the investments being hedged. Also, because initial margin deposit requirements in the futures markets are less onerous than margin requirements in the securities markets, there might be increased participation by speculators in the futures markets. This participation also might cause temporary price distortions. In addition, activities of traders in both the futures and securities markets involving arbitrage, "program trading" and other investment strategies might result in temporary price distortions. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 8 FUNDING AGREEMENTS. The Investment Grade Fixed Income Portfolio may invest in funding agreements issued by domestic insurance companies. Funding agreements are short-term, privately placed, debt obligations of insurance companies that offer a fixed- or floating-rate of interest. These investments are not readily marketable and therefore are considered to be illiquid securities. (See also Illiquid Securities.) The largest risks associated with funding agreements include credit risk and liquidity risk. QUANTITATIVE MODEL RISK. The Common Stock Portfolio is subject to quantitative model risk. Securities selected using quantitative methods may perform differently from the market as a whole as a result of the factors used in the quantitative method, the weight placed on each factor, and changes in the factors historical trends. The quantitative methodology employed by the investment manager has been extensively tested using historical securities market data, but has only recently begun to be used to manage open-end mutual funds. There can be no assurance that the methodology will enable the fund to achieve its objective. FOREIGN INVESTMENT RISK FACTORS. Each of the Portfolios may invest up to 25% of its total assets in foreign securities (except Seligman Global Technology Portfolio and Seligman International Growth Portfolio, which may invest up to 100% of their total assets in foreign securities), except that this 25% limit does not apply to (i) foreign securities held through Depositary Receipts which are traded in the US or to commercial paper and certificates of deposit issued by foreign banks, or (ii) Seligman Capital Portfolio, the 25% limit of which is described in the Fund's Prospectuses. Foreign investments may be affected favorably or unfavorably by changes in currency rates and exchange control regulations. There may be less information available about a foreign company than about a US company, and foreign companies may not be subject to reporting standards and requirements comparable to those applicable to US companies. Foreign securities may not be as liquid as US securities. Securities of foreign companies may involve greater market risk than securities of US companies, and foreign brokerage commissions and custody fees are generally higher than in the United States. Investments in foreign securities may also be subject to local economic or political risks, political instability and possible nationalization of issuers. By investing in foreign securities, the Portfolios will attempt to take advantage of differences among economic trends and the performance of securities markets in various countries. It is believed that, in comparison with investment companies investing solely in domestic securities, it may be possible to obtain significant appreciation from a portfolio of foreign investments and securities from various markets that offer different investment opportunities and are affected by different economic trends. Global diversification reduces the effect that events in any one country will have on the entire investment portfolio. Of course, a decline in the value of a Portfolio's investments in one country may offset potential gains from investments in another country. Diversification does not assure a profit or protect against loss in a declining market. Investments in securities of foreign issuers may involve risks that are not associated with domestic investments, and there can be no assurance that the Portfolios' foreign investments will present less risk than a portfolio of domestic securities. Foreign issuers may lack uniform accounting, auditing and financial reporting standards, practices and requirements, and there is generally less publicly available information about foreign issuers than there is about US issuers. Governmental regulation and supervision of foreign stock exchanges, brokers and listed companies may be less pervasive than is customary in the United States. Securities of some foreign issuers are less liquid and their prices are more volatile than securities of comparable domestic issuers. Foreign securities settlements may in some instances be subject to delays and related administrative uncertainties which could result in temporary periods when assets of a Portfolio are uninvested and no return is earned thereon and may involve a risk of loss to a Portfolio. Foreign securities markets may have substantially less volume than US markets and far fewer traded issues. Fixed brokerage commissions on foreign securities exchanges are generally higher than in the United States, and transaction costs with respect to smaller capitalization companies may be higher than those of larger capitalization companies. Income from foreign securities may be reduced by a withholding tax at the source or other foreign taxes. In some countries, there may also be the possibility of nationalization, expropriation or confiscatory taxation (in which a Portfolio could lose its entire investment in a certain market), limitations on the removal of monies or other assets of the Portfolios, higher rates of inflation, political or social instability or revolution, or diplomatic developments that could affect investments in those countries. In addition, it may be difficult to obtain and enforce a judgment in a court outside the United States. Some of the risks described in the preceding paragraph may be more severe for investments in emerging or developing countries. By comparison with the United States and other developed countries, emerging or developing countries may have relatively unstable governments, economies based on a less diversified industrial base and securities markets that trade a smaller number of securities. Companies in emerging markets may generally be smaller, less experienced and more recently organized than many domestic companies. Prices of securities traded in the securities markets of emerging or developing countries tend to be volatile. Furthermore, foreign investors are subject to many restrictions in emerging or developing countries. These restrictions may require, among other things, governmental approval prior to making investments or repatriating income or capital, or may impose limits on the amount or type of securities held by foreigners or on the companies in which the foreigners may invest. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 9 The economies of individual emerging countries may differ favorably or unfavorably from the US economy in such respects as growth of gross domestic product, rates of inflation, currency depreciation, capital reinvestment, resource self-sufficiency and balance of payment position and may be based on a substantially less diversified industrial base. Further, the economies of developing countries generally are heavily dependent upon international trade and, accordingly, have been, and may continue to be, adversely affected by trade barriers, exchange controls, managed adjustments in relative currency values and other protectionist measures imposed or negotiated by the countries with which they trade. These economies also have been, and may continue to be, adversely affected by economic conditions in the countries with which they trade. Investments in foreign securities will usually be denominated in foreign currencies, and each Portfolio may temporarily hold funds in foreign currencies. The value of a Portfolio's investments denominated in foreign currencies may be affected, favorably or unfavorably, by the relative strength of the US dollar, changes in foreign currency and US dollar exchange rates and exchange control regulations. A Portfolio may incur costs in connection with conversions between various currencies. A Portfolio's net asset value per share will be affected by changes in currency exchange rates. Changes in foreign currency exchange rates may also affect the value of dividends and interest earned, gains and losses realized on the sale of securities and net investment income and gains, if any, to be distributed to shareholders by the Portfolios. The rate of exchange between the US dollar and other currencies is determined by the forces of supply and demand in the foreign exchange markets (which in turn are affected by interest rates, trade flows and numerous other factors, including, in some countries, local governmental intervention). TECHNOLOGY INVESTMENT RISK FACTORS. The value of the Seligman Communications and Information Portfolio and Seligman Global Technology Portfolio shares may be susceptible to factors affecting technology and technology-related industries and to greater risk and market fluctuation than an investment in a fund that invests in a broader range of portfolio securities. Technology and technology- related industries may be subject to greater governmental regulation than many other industries in certain countries, as well as changes in governmental policies, and the need for regulatory approvals may have a material adverse effect on these industries. Additionally, these companies may be subject to risks of developing technologies, competitive pressures, and other factors and are dependent upon consumer and business acceptance as new technologies evolve. Securities of smaller, less experienced companies also may involve greater risks, such as limited product lines, limited markets and limited financial and managerial resources, and trading in such securities may be subject to more abrupt price movements than trading in the securities of larger companies. OTHER INVESTMENT COMPANIES. Each Portfolio, other than Seligman Investment Grade Fixed Income Portfolio, may invest in securities issued by other investment companies. Such investments are subject to the limitations on investments in other investment companies imposed by the Investment Company Act of 1940, as amended ("1940 Act"), which generally prohibits a Portfolio from holding more than 3% of the outstanding voting securities of another investment company, and from investing more than 5% of its total assets in any one investment company, or more than 10% of its total assets in other investment companies overall. A Portfolio's investments in other investment companies may include investments in exchange-traded funds ("ETFs") if appropriate investment opportunities arise. ETFs are registered funds that trade on a stock exchange or otherwise traded in the over-the-counter market and generally seek to track the performance of a specified securities index or a basket of securities. Securities traded in the over-the-counter market present additional risks, such as counterparty and liquidity risks. If a Portfolio invests in other investment companies, shareholders would bear not only that Portfolio's expenses (including operating expenses and advisory fees), but also similar expenses of the underlying investment companies, and a Portfolio's returns will therefore be lower. To the extent a Portfolio invests in ETFs, the Portfolio is exposed to the risks associated with the underlying investments of the ETFs and the Portfolio's performance may be negatively affected if the value of those underlying investments declines. DEPOSITARY RECEIPTS. Depositary Receipts are instruments generally issued by domestic banks or trust companies that represent the deposits of a security of a foreign issuer. American Depositary Receipts ("ADRs"), which are traded in dollars on US Exchanges or over-the-counter, are issued by domestic banks and evidence ownership of securities issued by foreign corporations. European Depositary Receipts ("EDRs") are typically traded in Europe. Global Depositary Receipts ("GDRs") (collectively, "Depositary Receipts") are typically traded in both Europe and the United States. Depositary Receipts may be issued as sponsored or unsponsored programs. In sponsored programs, the issuer has made arrangements to have its securities trade in the form of Depositary Receipts. In unsponsored programs, the issuer may not be directly involved in the creation of the program. Although regulatory requirements with respect to sponsored and unsponsored programs are generally similar, the issuers of unsponsored Depositary Receipts are not obligated to disclose material information in the US, and therefore, the import of such information may not be reflected in the market value of such instruments. ILLIQUID SECURITIES. Each Portfolio may invest up to 15% of its net assets in illiquid securities, including restricted securities (i.e., securities not readily marketable without registration under the Securities Act of 1933, as amended ("1933 Act")) and other securities that are not readily marketable. These include restricted securities that can be offered and sold to "qualified Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 10 institutional buyers" under Rule 144A of the 1933 Act. The Fund's Board of Directors may adopt procedures pursuant to which the investment manager may determine, when appropriate, that specific Rule 144A securities are liquid and not subject to the 15% limitation on illiquid securities. Should the Board of Directors or the investment manager (as the case may be) make this determination, it will carefully monitor the security (focusing on such factors, among others, as trading activity and availability of information) to determine that the Rule 144A security continues to be liquid. It is not possible to predict with assurance exactly how the market for Rule 144A securities will further evolve. This investment practice could have the effect of increasing the level of illiquidity in a Portfolio, if and to the extent that qualified institutional buyers become for a time uninterested in purchasing Rule 144A securities. MONEY MARKET INSTRUMENTS. Each of the Portfolios may invest a portion of their assets in the following money market instruments. US Government Obligations. US Government obligations are obligations issued or guaranteed as to both principal and interest by the US Government or backed by the full faith and credit of the United States, such as US Treasury Bills, securities issued or guaranteed by a US Government agency or instrumentality, and securities supported by the right of the issuer to borrow from the US Treasury. Bank Obligations. Bank obligations include US dollar-denominated certificates of deposit, banker's acceptances, fixed time deposits and commercial paper of domestic banks, including their branches located outside the United States, and of domestic branches of foreign banks. Commercial Paper and Short-Term Corporate Debt Securities. Commercial paper and short-term debt securities include short-term unsecured promissory notes with maturities not exceeding nine months issued in bearer form by bank holding companies, corporations and finance companies. MORTGAGE RELATED SECURITIES. Mortgage Pass-Through Securities. Each Portfolio may invest in mortgage pass- through securities. Mortgage pass-through securities include securities that represent interests in pools of mortgage loans made by lenders such as savings and loan institutions, mortgage bankers, and commercial banks. Such securities provide a "pass-through" of monthly payments of interest and principal made by the borrowers on their residential mortgage loans (net of any fees paid to the issuer or guarantor of such securities). Although the residential mortgages underlying a pool may have maturities of up to 30 years, a pool's effective maturity may be reduced by prepayments of principal on the underlying mortgage obligations. Factors affecting mortgage prepayments include, among other things, the level of interest rates, general economic and social conditions and the location and age of the mortgages. High interest rate mortgages are more likely to be prepaid than lower-rate mortgages; consequently, the effective maturities of mortgage-related obligations that pass-through payments of higher-rate mortgages are likely to be shorter than those of obligations that pass-through payments of lower-rate mortgages. If such prepayment of mortgage-related securities in which the Portfolio invests occurs, the Portfolio may have to invest the proceeds in securities with lower yields. The Government National Mortgage Association ("GNMA") is a US Government corporation within the Department of Housing and Urban Development, authorized to guarantee, with the full faith and credit of the US Government, the timely payment of principal and interest on securities issued by institutions approved by GNMA (such as savings and loan institutions, commercial banks and mortgage bankers) and backed by pools of Federal Housing Administration insured or Veterans Administration guaranteed residential mortgages. These securities entitle the holder to receive all interest and principal payments owed on the mortgages in the pool, net of certain fees, regardless of whether or not the mortgagors actually make the payments. Other government-related issuers of mortgage-related securities include the Federal National Mortgage Association ("FNMA"), a government-sponsored corporation subject to general regulation by the Secretary of Housing and Urban Development but owned entirely by private stockholders, and the Federal Home Loan Mortgage Corporation ("FHLMC"), a corporate instrumentality of the US Government created for the purpose of increasing the availability of mortgage credit for residential housing that is owned by the twelve Federal Home Loan Banks. FHLMC issues Participation Certificates ("PCs"), which represent interests in mortgages from FHLMC's national portfolio. FHLMC guarantees the timely payment of interest and ultimate collection of principal, but PCs are not backed by the full faith and credit of the US Government. Pass-through securities issued by FNMA are backed by residential mortgages purchased from a list of approved seller/servicers and are guaranteed as to timely payment of principal and interest by FNMA, but are not backed by the full faith and credit of the US Government. Commercial banks, savings and loan institutions, private mortgage insurance companies, mortgage bankers and other secondary market issuers also create pass- through securities based on pools of conventional residential mortgage loans. Securities created by such non-governmental issuers may offer a higher rate of interest than government-related securities; however, timely payment of interest and principal may or may not be supported by insurance or guarantee arrangements, and there can be no assurance that the private issuers can meet their obligations. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 11 Collateralized Mortgage Obligations. Seligman Investment Grade Fixed Income Portfolio may invest in Collateralized Mortgage Obligations ("CMOs"), including certain CMOs that have elected to be treated as Real Estate Mortgage Investment Conduits ("REMICs"). CMOs are fixed-income securities collateralized by pooled mortgages and separated into short-, medium-, and long-term positions (called "tranches"). Tranches pay different rates of interest depending upon their maturity. CMOs may be collateralized by (a) pass through securities issued or guaranteed by GNMA, FNMA or FHLMC, (b) unsecuritized mortgage loans insured by the Federal Housing Administration or guaranteed by the Department of Veteran's Affairs, (c) unsecuritized conventional Mortgages, (d) other mortgage related securities or (e) any combination thereof. Each tranche of a CMO is issued at a specific coupon rate and has a stated maturity. As the payments on the underlying mortgage loans are collected, the CMO issuer generally pays the coupon rate of interest to the holders of each tranche. In a common structure referred to as a "Pay" CMO, all scheduled and unscheduled principal payments generated by the collateral, as loans are repaid or prepaid, go initially to investors in the first tranches. Investors in later tranches do not start receiving principal payments until the prior tranches are paid in full. Sometimes, CMOs are structured so that the prepayment and/or market risks are transferred from one tranche to another. Most CMOs are issued by Federal agencies. However, the only CMOs backed by the full faith and credit of the US Government are CMOs collateralized by pass- through securities guaranteed by GNMA. All CMOs are subject to reinvestment risk; that is, as prepayments on the underlying pool of mortgages increase, the maturity of the tranches in the CMO will decrease. As a result, the Portfolio may have to invest the proceeds that were invested in such CMOs in securities with lower yields. Factors affecting reinvestment risk include the level of interest rates, general economic and social conditions and the location and age of the mortgages. REPURCHASE AGREEMENTS. Each Portfolio may hold cash or cash equivalents and may enter into repurchase agreements with respect to securities; normally repurchase agreements relate to money market obligations backed by the full faith and credit of the US Government. Repurchase agreements are transactions in which an investor (e.g., any of the Fund's Portfolios) purchases a security from a bank, recognized securities dealer, or other financial institution and simultaneously commits to resell that security to such institution at an agreed upon price, date and market rate of interest unrelated to the coupon rate or maturity of the purchased security. A repurchase agreement thus involves the obligation of the bank or securities dealer to pay the agreed upon price on the date agreed to, which obligation is in effect secured by the value of the underlying security held by the Portfolio. Repurchase agreements could involve certain risks in the event of bankruptcy or other default by the seller, including possible delays and expenses in liquidating the securities underlying the agreement, decline in value of the underlying securities and loss of interest. Although repurchase agreements carry certain risks not associated with direct investments in securities, each Portfolio intends to enter into repurchase agreements only with financial institutions believed to present minimum credit risks in accordance with guidelines established by the investment manager or subadviser, as the case may be. The investment manager or subadviser, as the case may be, has implemented measures to review and monitor the creditworthiness of such institutions. The Portfolios will invest only in repurchase agreements collateralized in an amount at least equal at all times to the purchase price plus accrued interest. Repurchase agreements usually are for short periods, such as one week or less, but may be for longer periods. No Portfolio will enter into a repurchase agreement with a maturity of more than seven days if, as a result, more than 15% of the value of its net assets would then be invested in such repurchase agreements and other illiquid investments. WHEN-ISSUED AND FORWARD COMMITMENT SECURITIES. Certain Portfolios may purchase securities on a when-issued or forward commitment basis. Settlement of such transactions (i.e., delivery of securities and payment of purchase price) normally takes place within 45 days after the date of the commitment to purchase. A Portfolio may purchase a security on a when-issued or forward commitment basis with or without the intention of actually acquiring the securities, and may sell these securities before the purchase settlement date if it is deemed advisable. At the time a Portfolio enters into such a commitment both payment and interest terms will be established prior to settlement; there is a risk that prevailing interest rates on the settlement date will be greater than the interest rate terms established at the time the commitment was entered into. When-issued and forward commitment securities are subject to changes in market value prior to settlement based upon changes, real or anticipated, in the level of interest rates or creditworthiness of the issuer. If a Portfolio remains substantially fully invested at the same time that it has purchased securities on a when- issued or forward commitment basis, the market value of that Portfolio's assets may fluctuate more than otherwise would be the case. For this reason, when investing in when-issued or forward commitment securities, cash and/or liquid securities equal to the amount of each Portfolio's when-issued or forward commitment securities will be segregated at the Portfolio's custodian, and marked to market daily, with additional cash and/or liquid securities added when necessary. When the time comes to pay for when-issued or forward commitment securities, a Portfolio will meet its respective obligations from then available cash flow, sale of securities (those segregated or otherwise), or, although a Portfolio would not normally expect to do so, from the sale of the when-issued or forward commitment securities themselves (which may Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 12 have a value greater or less than a Portfolio's payment obligations). Sale of securities to meet when-issued and forward commitment obligations carries with it a greater potential for the realization of capital gain or loss. SHORT SALES. Each Portfolio may sell securities short "against-the-box." A short sale "against-the-box" is a short sale in which the Portfolio owns an equal amount of the securities sold short or securities convertible into or exchangeable without payment of further consideration for securities of the same issue as, and equal in amount to, the securities sold short. LENDING OF PORTFOLIO SECURITIES. Each of the Portfolios may lend portfolio securities to broker-dealers, banks or other institutional borrowers, provided that securities loaned by each of the Portfolios may not exceed 33 1/3% of the Portfolios' total assets taken at market value. The borrower must maintain with the Fund's custodian bank cash or equivalent collateral equal to at least 100% of the market value of the securities loaned. During the time portfolio securities are on loan, the borrower pays the lending Portfolio an amount equal to any dividends or interest paid on the securities. The lending Portfolio may invest the collateral and earn additional income or receive an agreed upon amount of interest income from the borrower. Loans made by the Portfolios will generally be short-term. Loans are subject to termination at the option of the lending Portfolio or the borrower. The lending Portfolio may pay reasonable administrative and custodial fees in connection with a loan and may pay a negotiated portion of the interest earned on the collateral to the borrower or placing broker. The lending Portfolio does not have the right to vote securities on loan, but would terminate the loan and regain the right to vote if that were considered important with respect to the investment. The lending Portfolio may lose money if a borrower defaults on its obligation to return securities and the value of the collateral held by the lending Portfolio is insufficient to replace the loaned securities. In addition, the lending Portfolio is responsible for any loss that might result from its investment of the borrower's collateral. BORROWING. Except as noted below, a Portfolio may from time to time, borrow money to increase its portfolio of securities or for other purposes. Under the 1940 Act, each Portfolio is generally permitted to borrow from banks in amounts not exceeding one-third of the value of its total assets, less liabilities other than such borrowings. Borrowings may be secured by a mortgage or pledge of a Portfolio's assets. Borrowed money creates an opportunity for greater capital appreciation, but at the same time increases exposure to capital risk. The net cost of any money borrowed would be an expense that otherwise would not be incurred, and this expense will reduce a Portfolio's net investment income in any given period. Except as otherwise specifically noted above, each of the Fund's Portfolios' investment strategies are not fundamental and the Fund, with the approval of the Board of Directors, may change such strategies without the vote of a majority of a Portfolio's outstanding voting securities. FUNDAMENTAL RESTRICTIONS Each Portfolio is subject to fundamental policies that place restrictions on certain types of investments. Except as otherwise indicated below, restrictions 1 through 8 may not be changed without the affirmative vote of the holders of a majority of a Portfolio's outstanding voting securities; restrictions 9 through 12 may be changed by the Fund's Board of Directors without such a vote. Under these restrictions, none of the Portfolios may: 1. Purchase or sell commodities or commodity contracts, except to the extent permissible under applicable law and interpretations, as they may be amended from time to time; 2. Purchase securities on margin except as permitted by the 1940 Act or any rule thereunder, any Securities and Exchange Commission (the "SEC") or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; 3. Issue senior securities or borrow money, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; 4. Make loans, except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC; 5. Underwrite the securities of other issuers, except insofar as the Fund may be deemed an underwriter under the 1933 Act in disposing of a portfolio security or in connection with investments in other investment companies; 6. Purchase or hold any real estate, except the Fund may invest in securities secured by real estate or interests therein or issued by persons (including real estate investment trusts) which deal in real estate or interests therein; 7. Make any investment inconsistent with the Fund's classification as a diversified company under the 1940 Act; Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 13 8. Invest 25% or more of its total assets, at market value, in the securities of issuers in any particular industry, provided that: o this limitation shall exclude securities issued or guaranteed by the US Government or any of its agencies or instrumentalities; o for the purpose of this limitation, mortgage-related securities do not constitute an industry; and o Seligman Communications and Information Portfolio will invest at least 80% of the value of its total assets in securities of companies principally engaged in the communications, information and related industries, except when investing for temporary defensive purposes. 9. Purchase illiquid securities for any Portfolio including repurchase agreements maturing in more than seven days and securities that cannot be sold without registration or the filing of a notification under Federal or state securities laws, if, as a result, such investment would exceed 15% of the value of such Portfolio's net assets. 10. Invest in oil, gas or other mineral exploration or development programs; provided, however, that this investment restriction shall not prohibit a Portfolio from purchasing publicly-traded securities of companies engaging in whole or in part in such activities. 11. Purchase securities from or sell securities to any of its officers or Directors, except with respect to its own shares and as permissible under applicable statutes, rules and regulations. 12. Invest more than 5% of the value of its net assets, valued at the lower of cost or market, in warrants, of which no more than 2% of net assets may be invested in warrants and rights not listed on the New York or American Stock Exchange. For this purpose, warrants acquired by the Fund in units or attached to securities may be deemed to have been purchased without cost. For purposes of applying the 25% limitation on the securities of issuers in any particular industry (as described above), the Fund will generally use the industry classifications provided by the Global Industry Classification System. Certain of the Portfolios' fundamental policies set forth above prohibit transactions "except as permitted by the 1940 Act or any rule thereunder, any SEC or SEC staff interpretations thereof or any exemptions therefrom which may be granted by the SEC." The following discussion explains the flexibility that a Portfolio gains from these exceptions. PURCHASE OF SECURITIES ON MARGIN -- A purchase on margin involves a loan from the broker-dealer arranging the transaction. The "margin" is the cash or securities that the borrower places with the broker-dealer as collateral against the loan. However, the purchase of securities on margin is effectively prohibited by the 1940 Act because a Portfolio generally may borrow only from banks. Thus, under current law, this exception does not provide any additional flexibility to the Portfolio. ISSUING SENIOR SECURITIES -- A "senior security" is an obligation with respect to the earnings or assets of a company that takes precedence over the claims of that company's common stock with respect to the same earnings or assets. The 1940 Act prohibits a mutual fund from issuing senior securities other than certain borrowings, but SEC staff interpretations allow a fund to engage in certain types of transactions that otherwise might raise senior security concerns (such as short sales, buying and selling financial futures contracts and selling put and call options), provided that the fund maintains segregated deposits or portfolio securities, or otherwise covers the transaction with offsetting portfolio securities, in amounts sufficient to offset any liability associated with the transaction. The exception in the fundamental policy allows a Portfolio to operate in reliance upon these staff interpretations. BORROWING MONEY -- The 1940 Act permits a fund to borrow up to 33 1/3% of its total assets (including the amounts borrowed) from banks, plus an additional 5% of its total assets for temporary purposes, which may be borrowed from banks or other sources. MAKING LOANS -- The 1940 Act generally prohibits a Portfolio from making loans to affiliated persons but does not otherwise restrict a Portfolio's ability to make loans. If a percentage restriction is adhered to at the time of an investment, a later increase or decrease in such percentage resulting from a change in the value of assets will not constitute a violation of such restriction. In order to permit the sale of the Fund's shares in certain states, the Fund may make commitments more restrictive than the investment restrictions described above. Should the Fund determine that any such commitment is no longer in the best interest of the Fund it will revoke the commitment by terminating sales in the state involved. The Fund also intends to comply with the diversification requirements under Section 817(h) of the Internal Revenue Code of 1986, as amended. For a description of these requirements, see the separate account prospectuses or disclosure documents of the participating insurance companies. Under the 1940 Act, a "vote of a majority of the outstanding voting securities" of the Fund or of a particular Portfolio means the affirmative vote of the lesser of (1) more than 50% of the outstanding shares of the Fund or of such Portfolio or (2) 67% Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 14 or more of the shares of the Fund or of such Portfolio present at a shareholder's meeting if more than 50% of the outstanding shares of the Fund or of such Portfolio are represented at the meeting in person or by proxy. TEMPORARY DEFENSIVE POSITION Each Portfolio may, from time to time, take a temporary defensive position in seeking to minimize extreme volatility caused by adverse market, economic, political, or other conditions, or in anticipation of significant withdrawals. When it is believed that market conditions warrant a temporary defensive position, a Portfolio may invest up to 100% of its assets in cash or cash equivalents, including, but not limited to, prime commercial paper, bank certificates of deposit, bankers' acceptances, or repurchase agreements for such securities, and securities of the US Government and its agencies and instrumentalities, as well as cash and cash equivalents denominated in foreign currencies. A Portfolio's investments in foreign cash equivalents will be limited to those that are believed to equate generally to the standards established for US cash equivalents. PORTFOLIO TURNOVER The portfolio turnover rates for each Portfolio are calculated by dividing the lesser of purchases or sales of portfolio securities for the year by the monthly average of the value of the portfolio securities owned during the year. Securities whose maturity or expiration date at the time of acquisition was one year or less are excluded from the calculation. The Portfolio's portfolio turnover rate will not be a limiting factor when the Portfolio deems it desirable to sell or purchase securities. The portfolio turnover rates for each Portfolio for the years ended December 31, 2009 and 2008 were as follows:
PORTFOLIO TURNOVER ----------- PORTFOLIO 2009 2008 --------- ---- ---- Capital 144% 240% Common Stock 77 131 Communications and Information 147 129 Global Technology 153 161 International Growth 327 365 Investment Grade Fixed Income 284(a) 232 Large-Cap Value 39 18 Smaller-Cap Value 8 14
(a) 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. DISCLOSURE OF PORTFOLIO HOLDINGS Each fund's Board and the investment manager believe that the investment ideas of the investment manager with respect to management of a fund should benefit the fund and its shareholders, and do not want to afford speculators an opportunity to profit by anticipating fund trading strategies or by using fund portfolio holdings information for stock picking. However, each fund's Board also believes that knowledge of the fund's portfolio holdings can assist shareholders in monitoring their investments, making asset allocation decisions, and evaluating portfolio management techniques. Each fund's Board has therefore adopted the investment manager's policies and approved the investment manager's procedures, including the investment manager's oversight of subadviser practices, relating to disclosure of the fund's portfolio securities. These policies and procedures are intended to protect the confidentiality of fund portfolio holdings information and generally prohibit the release of such information until such information is made public, unless such persons have been authorized to receive such information on a selective basis, as described below. It is the policy of the fund not to provide or permit others to provide holdings information on a selective basis, and the investment manager does not intend to selectively disclose holdings information or expect that such holdings information will be selectively disclosed, except where necessary for the fund's operation or where there are legitimate business purposes for doing so and, in any case, where conditions are met that are designed to protect the interests of the fund and its shareholders. Although the investment manager seeks to limit the selective disclosure of portfolio holdings information and such selective disclosure is monitored under the fund's compliance program for conformity with the policies and procedures, there can be no assurance that these policies will protect the fund from the potential misuse of holdings information by individuals or firms in possession of that information. Under no circumstances may the investment manager, its affiliates or any employee thereof receive any consideration or compensation for disclosing such holdings information. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 15 A complete schedule of each Portfolio's portfolio holdings is available semi- annually and annually in shareholder reports filed on Form N-CSR and, after the first and third fiscal quarters, in regulatory filings on Form N-Q. These shareholder reports and regulatory filings are filed with the SEC in accordance with federal securities laws and are generally available within sixty (60) days of the end of a Portfolio's fiscal quarter, on the SEC's website. Once holdings information is filed with the SEC, it will also be posted on the website for the RiverSource funds at riversource.com/funds and for the Seligman funds at seligman.com, and it may be mailed, e-mailed or otherwise transmitted to any person. In addition, the investment manager makes publicly available information regarding a fund's top ten holdings (including name and percentage of a fund's assets invested in each such holding) and the percentage breakdown of a fund's investments by country, sector and industry, as applicable. This holdings information is generally made available through the website, marketing communications (including printed advertisements and sales literature), and/or telephone customer service centers that support the fund. This holdings information is generally as of a month-end and is not released until it is at least fifteen (15) days old. From time to time, the investment manager may make partial or complete fund holdings information that is not publicly available on the website or otherwise available in advance of the time restrictions noted above (1) to its affiliated and unaffiliated service providers that require the information in the normal course of business in order to provide services to the fund (including, without limitation entities identified by name in the fund's prospectus or this SAI, such as custodians, auditors, subadvisers, independent consultants, financial printers (Cenveo, Inc., Vestek, Morningstar Associates, LLC, Data Communique, Inc.), pricing services (including Reuters Pricing Service, FT Interactive Data Corporation, Bear Stearns Pricing Service, and Kenny S&P), proxy voting services (Risk Metrics Group, formerly Institutional Shareholder Services), and companies that deliver or support systems that provide analytical or statistical information (including Factset Research Systems, Bloomberg, L.P. Investment Technology Group, Inc.), operational functions (Brown Brothers Harriman & Co. (2) to facilitate the review and/or rating of the fund by ratings and rankings agencies (including Morningstar, Inc., Thomson Financial and Lipper Inc.), (3) entities that provide trading, research or other investment related services (including Citigroup, Lehman Brothers Holdings, Merrill Lynch & Co., and Morgan Stanley), and (4) fund intermediaries that include the funds in discretionary wrap or other investment programs that request such information in order to support the services provided to investors in the programs. In such situations, the information is released subject to confidentiality agreements, duties imposed under applicable policies and procedures (for example, applicable codes of ethics) designed to prevent the misuse of confidential information, general duties under applicable laws and regulations, or other such duties of confidentiality. In addition, the fund discloses holdings information as required by federal, state or international securities laws, and may disclose holdings information in response to requests by governmental authorities, or in connection with litigation or potential litigation, a restructuring of a holding, where such disclosure is necessary to participate or explore participation in a restructuring of the holding (e.g., as part of a bondholder group), or to the issuer of a holding, pursuant to a request of the issuer or any other party who is duly authorized by the issuer. Each fund's Board has adopted the policies of the investment manager and approved the procedures Ameriprise Financial has established to ensure that the fund's holdings information is only disclosed in accordance with these policies. Before any selective disclosure of holdings information is permitted, the person seeking to disclose such holdings information must submit a written request to the Portfolio Holdings Committee ("PHC"). The PHC is comprised of members from the investment manager's General Counsel's Office, Compliance, and Communications. The PHC has been authorized by the fund's Board to perform an initial review of requests for disclosure of holdings information to evaluate whether there is a legitimate business purpose for selective disclosure, whether selective disclosure is in the best interests of a fund and its shareholders, to consider any potential conflicts of interest between the fund, the investment manager, and its affiliates, and to safeguard against improper use of holdings information. Factors considered in this analysis are whether the recipient has agreed to or has a duty to keep the holdings information confidential and whether risks have been mitigated such that the recipient has agreed or has a duty to use the holdings information only as necessary to effectuate the purpose for which selective disclosure was authorized, including a duty not to trade on such information. Before portfolio holdings may be selectively disclosed, requests approved by the PHC must also be authorized by a fund's Chief Compliance Officer or the fund's General Counsel. On at least an annual basis the PHC reviews the approved recipients of selective disclosure and, where appropriate, requires a resubmission of the request, in order to re-authorize any ongoing arrangements. These procedures are intended to be reasonably designed to protect the confidentiality of fund holdings information and to prohibit their release to individual investors, institutional investors, intermediaries that distribute the fund's shares, and other parties, until such holdings information is made public or unless such persons have been authorized to receive such holdings information on a selective basis, as set forth above. Although the investment manager has set up these procedures to monitor and control selective disclosure of holdings information, there can be no assurance that these procedures will protect a fund from the potential misuse of holdings information by individuals or firms in possession of that information. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 16 MANAGEMENT OF THE FUND BOARD MEMBERS AND OFFICERS Shareholders elect a Board that oversees the Funds' operations. The Board appoints officers who are responsible for day-to-day business decisions based on policies set by the Board. On November 7, 2008, RiverSource Investments, a wholly-owned subsidiary of Ameriprise Financial, announced the closing of its Acquisition of Seligman. With the Acquisition completed and shareholders having previously elected (at special meetings held on November 3, 2008) ten new directors (collectively, the "New Board Members"), the New Board Members took office on November 7, 2008. The New Board Members are Kathleen Blatz, Arne H. Carlson, Pamela G. Carlton, Patricia M. Flynn, Anne P. Jones, Jeffrey Laikind, Stephen R. Lewis, Jr. (Chairman), Catherine James Paglia, Alison Taunton-Rigby and William F. Truscott. The New Board Members also became directors/trustees of the other Seligman funds in November 2008 and also serve as directors/trustees of the other funds in the RiverSource Family of Funds. Messrs. Leroy C. Richie and John F. Maher, who were members of the Board prior to November 7, 2008, have continued to serve on the Board after the Acquisition, which has resulted in an overall increase from ten directors to 12 directors. Information with respect to the members of the Board is shown below. Each member oversees 126 funds in the RiverSource Family of Funds managed by RiverSource Investments. Under current Board policy, members may serve until the next regular shareholders' meeting, until he or she reaches the mandatory retirement age established by the Board or the fifteenth anniversary of the first Board meeting they attended as members of the Board. INDEPENDENT BOARD MEMBERS
POSITION WITH OTHER PRESENT FUND OR PAST AND LENGTH OF PRINCIPAL OCCUPATION DIRECTORSHIPS COMMITTEE NAME, ADDRESS, AGE TIME SERVED DURING LAST FIVE YEARS (WITHIN PAST 5 YEARS) MEMBERSHIPS --------------------------------------------------------------------------------------------------------------------- Kathleen Blatz Board member Attorney; Chief Justice, None Board Governance, 901 S. Marquette Ave. since November Minnesota Supreme Court, 1998- Compliance, Minneapolis, MN 55402 7, 2008 2006 Investment Review, Age 54 Audit --------------------------------------------------------------------------------------------------------------------- Arne H. Carlson Board member Chair, RiverSource Funds, None Board Governance, 901 S. Marquette Ave. since November 1999-2006; former Governor of Compliance, Minneapolis, MN 55402 7, 2008 Minnesota Contracts, Age 74 Executive, Investment Review --------------------------------------------------------------------------------------------------------------------- Pamela G. Carlton Board member President, Springboard- None Distribution, 901 S. Marquette Ave. since November Partners in Cross Cultural Investment Review, Minneapolis, MN 55402 7, 2008 Leadership (consulting Audit Age 54 company) --------------------------------------------------------------------------------------------------------------------- Patricia M. Flynn Board member Trustee Professor of Economics None Board Governance, 901 S. Marquette Ave. since November and Management, Bentley Contracts, Minneapolis, MN 55402 7, 2008 University; Former Dean, Investment Review Age 58 McCallum Graduate School of Business, Bentley University --------------------------------------------------------------------------------------------------------------------- Anne P. Jones Board member Attorney and Consultant None Board Governance, 901 S. Marquette Ave. since November Compliance, Minneapolis, MN 55402 7, 2008 Executive, Age 74 Investment Review, Audit --------------------------------------------------------------------------------------------------------------------- Jeffrey Laikind, CFA Board member Former Managing Director, American Progressive Distribution, 901 S. Marquette Ave. since November Shikiar Asset Management Insurance and Hapoalim Executive, Minneapolis, MN 55402 7, 2008 Securities USA, Inc. Investment Review, Age 73 Audit --------------------------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Board member and President Emeritus and Valmont Industries, Board Governance, 901 S. Marquette Ave. Chair of Board Professor of Economics, Inc. (manufactures Compliance, Minneapolis, MN 55402 since November Carleton College irrigation systems) Contracts, Age 70 7, 2008 Executive, Investment Review ---------------------------------------------------------------------------------------------------------------------
Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 17
POSITION WITH OTHER PRESENT FUND OR PAST AND LENGTH OF PRINCIPAL OCCUPATION DIRECTORSHIPS COMMITTEE NAME, ADDRESS, AGE TIME SERVED DURING LAST FIVE YEARS (WITHIN PAST 5 YEARS) MEMBERSHIPS --------------------------------------------------------------------------------------------------------------------- John F. Maher Board member Retired President and Chief None Distribution, 901 S. Marquette Ave. since 2006 Executive Officer and former Investment Review, Minneapolis, MN 55402 Director, Great Western Audit Age 65 Financial Corporation (financial services), 1986- 1997 --------------------------------------------------------------------------------------------------------------------- Catherine James Paglia Board member Director, Enterprise Asset None Board Governance, 901 S. Marquette Ave. since November Management, Inc. (private real Compliance, Minneapolis, MN 55402 7, 2008 estate and asset management Contracts, Age 56 company) Executive, Investment Review --------------------------------------------------------------------------------------------------------------------- Leroy C. Richie Board member Counsel, Lewis & Munday, P.C. Digital Ally, Inc. Contracts, 901 S. Marquette Ave. since 2000 (law firm) since 1987; and (digital imaging); Distribution, Minneapolis, MN 55402 Vice President and General Infinity, Inc. (oil Investment Review Age 66 Counsel, Automotive Legal and gas exploration Affairs, Chrysler Corporation, and production); and, 1990-1997 OGE Energy Corp. (energy and energy services) --------------------------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Board member Chief Executive Officer and Idera Pharmaceuticals, Contracts, 901 S. Marquette Ave. since November Director, RiboNovix, Inc. Inc. (biotechnology); Distribution, Minneapolis, MN 55402 7, 2008 since 2003 (biotechnology); Healthways, Inc. Executive, Age 65 former President, Forester (health management Investment Review Biotech programs) ---------------------------------------------------------------------------------------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
POSITION WITH FUND AND LENGTH OF PRINCIPAL OCCUPATION OTHER COMMITTEE NAME, ADDRESS, AGE TIME SERVED DURING LAST FIVE YEARS DIRECTORSHIPS MEMBERSHIPS --------------------------------------------------------------------------------------------------------------------- William F. Truscott Board member and President -- U.S. Asset None None 53600 Ameriprise Vice President Management and Chief Financial Center since November Investment Officer, Ameriprise Minneapolis, MN 55474 7, 2008 Financial, Inc. since 2005; Age 48 President, Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC since 2001; 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; and Senior Vice President -- Chief Investment Officer, Ameriprise Financial, Inc., 2001-2005 ---------------------------------------------------------------------------------------------------------------------
* Interested person (as defined under the 1940 Act) by reason of being an officer, director, security holder and/or employee of RiverSource Investments and Ameriprise Financial. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 18 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 other officers are: FUND OFFICERS
POSITION HELD WITH THE FUND AND LENGTH OF PRINCIPAL OCCUPATION NAME, ADDRESS, AGE SERVICE DURING PAST FIVE YEARS -------------------------------------------------------------------------------------------------- Patrick T. Bannigan President since Director and Senior Vice President - Asset 172 Ameriprise Financial Center November 7, 2008 Management, Products and Marketing, Minneapolis, MN 55474 RiverSource Investments, LLC and; Director and Age 43 Vice President - Asset Management, Products and Marketing, RiverSource Distributors, Inc. 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 -------------------------------------------------------------------------------------------------- Amy K. Johnson Vice President Chief Administrative Officer, RiverSource 172 Ameriprise Financial Center since November Investments, LLC since 2009; Vice Minneapolis, MN 55474 7, 2008 President - Asset Management and Trust Company Age 43 Services, RiverSource Investments, LLC, 2006- 2009; Vice President - Operations and Compliance, RiverSource Investments, LLC, 2004- 2006; Director of Product Development - Mutual Funds, Ameriprise Financial, Inc., 2001-2004 -------------------------------------------------------------------------------------------------- Scott R. Plummer Vice President, Vice President and Chief Counsel - Asset 172 Ameriprise Financial Center General Counsel Management, Ameriprise Financial, Inc. since Minneapolis, MN 55474 and Secretary 2005; Chief Counsel, RiverSource Distributors, Age 49 since November Inc. and Chief Legal Officer and Assistant 7, 2008 Secretary, RiverSource Investments, LLC 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 -------------------------------------------------------------------------------------------------- Lawrence P. Vogel Treasurer since Vice President, Managed Assets, Investment 100 Park Avenue, 2000 Accounting of Ameriprise Financial, Inc. since New York, NY 10017 2009; Treasurer, Seligman Data Corp. since Age 52 2000. Senior Vice President, Investment Companies, J. & W. Seligman & Co. Incorporated, 992-2008; former Vice President of the Seligman funds -------------------------------------------------------------------------------------------------- Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource 100 Park Avenue, Officer since Investments, LLC, Ameriprise Certificate New York, NY 10017 2004; Anti-Money Company, and RiverSource Service Corporation Age 58 Laundering since 2009; Chief Compliance Officer for each Prevention of the Seligman funds since 2004; Money Officer and Laundering Prevention Officer and Identity Identity Theft Theft Prevention Officer for each of the Prevention Seligman funds 2008-2009; and Managing Officer since Director, J. & W. Seligman & Co. Incorporated, 2008 and Vice- President for each of the Seligman funds, 2004-2008 --------------------------------------------------------------------------------------------------
* All officers are elected annually by the Board of Directors and serve until their successors are elected and qualify or their earlier resignation. RESPONSIBILITIES OF BOARD WITH RESPECT TO FUND MANAGEMENT The Board is chaired by an Independent Director who has significant additional responsibilities compared to the other Board members, including, among other things: setting the agenda for Board meetings, communicating and meeting regularly with Board members between Board and committee meetings on fund- related matters with the funds' Chief Compliance Officer, counsel to the Independent Directors, and representatives of the funds' service providers and overseeing Board Services. The Board initially approves an Investment Management Services Agreement and other contracts with the investment manager and its affiliates, and other service providers. Once the contracts are approved, the Board monitors the level and quality of services including commitments of service providers to achieve expected levels of investment performance and shareholder services. In addition, the Board oversees that processes are in place to assure compliance with applicable rules, regulations and investment policies and addresses possible conflicts of interest. Annually, the Board evaluates the services received under Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 19 the contracts by receiving reports covering investment performance, shareholder services, marketing, and the investment manager's profitability in order to determine whether to continue existing contracts or negotiate new contracts. The Board also oversees fund risks, primarily through the functions (described below) performed by the Investment Review Committee, the Audit Committee and the Compliance Committee. COMMITTEES OF THE BOARD The Board has organized the following standing committees to facilitate its work: Board Governance Committee, Compliance Committee, Contracts Committee, Distribution Committee, Executive Committee, Investment Review Committee and Audit Committee. These Committees are comprised solely of Independent Directors (persons who are not "interested persons" of the fund as that term is defined in the 1940 Act. The table above describing each Director also includes their respective committee memberships. The duties of these committees are described below. Mr. Lewis, as Chair of the Board, acts as a point of contact between the Independent Directors and the investment manager between Board meetings in respect of general matters. BOARD GOVERNANCE COMMITTEE -- Recommends to the Board the size, structure and composition of the Board and its committees; the compensation to be paid to members of the Board; and a process for evaluating the Board's performance. The committee also reviews candidates for Board membership including candidates recommended by shareholders. The committee also makes recommendations to the Board regarding responsibilities and duties of the Board, oversees proxy voting and supports the work of the Board Chair in relation to furthering the interests of the Funds and their shareholders on external matters. The committee also reviews candidates for Board membership, including candidates recommended by shareholders. To be considered as a candidate for director, recommendations must include a curriculum vitae and be mailed to the Chair of the Board, RiverSource Family of Funds, 901 Marquette Avenue South, Suite 2810, Minneapolis, MN 55402-3268. To be timely for consideration by the committee, the submission, including all required information, must be submitted in writing not less than 120 days before the date of the proxy statement for the previous year's annual meeting of stockholders, if such a meeting is held. The committee will consider only one candidate submitted by such a shareholder or group for nomination for election at a meeting of shareholders. The committee will not consider self-nominated candidates or candidates nominated by members of a candidate's family, including such candidate's spouse, children, parents, uncles, aunts, grandparents, nieces and nephews. The committee will consider and evaluate candidates submitted by the nominating shareholder or group on the basis of the same criteria as those used to consider and evaluate candidates submitted from other sources. The committee may take into account a wide variety of factors in considering director candidates, including (but not limited to): (i) the candidate's knowledge in matters relating to the investment company industry; (ii) any experience possessed by the candidate as a director or senior officer of other public or private companies; (iii) the candidate's educational background; (iv) the candidate's reputation for high ethical standards and personal and professional integrity; (v) any specific financial, technical or other expertise possessed by the candidate, and the extent to which such expertise would complement the Board's existing mix of skills and qualifications; (vi) the candidate's perceived ability to contribute to the ongoing functions of the Board, including the candidate's ability and commitment to attend meetings regularly, work collaboratively with other members of the Board and carry out his or her duties in the best interests of the fund; (vii) the candidate's ability to qualify as an independent director; and (viii) such other criteria as the committee determines to be relevant in light of the existing composition of the Board and any anticipated vacancies or other factors. Members of the committee (and/or the Board) also meet personally with each nominee to evaluate the candidate's ability to work effectively with other members of the Board, while also exercising independent judgment. Although the Board does not have a formal diversity policy, the Board endeavors to comprise itself of members with a broad mix of professional and personal backgrounds. Thus, the committee and the Board accorded particular weight to the individual professional background of each Independent Director, as encapsulated in their bios included in the above table. Further, in considering nominations, the Committee takes the following matrix into account in assessing how a candidate's professional background would fit into the mix of experiences represented by the then-current Board. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 20
PROFESSIONAL BACKGROUND - 2010 ------------------------------------------------------------------------------------------------ Audit For Profit; Non-Profit; Committee; CIO/CFO; Government; Legal; Distribution; Financial NAME Geographic CEO/COO CEO Investment Regulatory Political Academic Marketing Expert ---- ---------- ----------- ----------- ---------- ---------- --------- -------- ------------- ---------- ---------------------------------------------------------------------------------------------------------------------------- Blatz MN X X X ---------------------------------------------------------------------------------------------------------------------------- Carlson MN X X ---------------------------------------------------------------------------------------------------------------------------- Carlton NY X X X ---------------------------------------------------------------------------------------------------------------------------- Flynn MA X ---------------------------------------------------------------------------------------------------------------------------- Jones MD X X ---------------------------------------------------------------------------------------------------------------------------- Laikind NY X X X X ---------------------------------------------------------------------------------------------------------------------------- Lewis MN X X ---------------------------------------------------------------------------------------------------------------------------- Maher CT X X X ---------------------------------------------------------------------------------------------------------------------------- Paglia NY X X X ---------------------------------------------------------------------------------------------------------------------------- Richie MI X X ---------------------------------------------------------------------------------------------------------------------------- Taunton-Rigby MA X X X ----------------------------------------------------------------------------------------------------------------------------
With respect to the directorship of Mr. Truscott, who is not an Independent Director, the committee and the Board have concluded that having a senior member of the investment manager serve on the Board can facilitate the Independent Directors' increased access to information regarding the funds' investment manager, which is the funds' most significant service provider. COMPLIANCE COMMITTEE -- This committee supports the Fund's maintenance of a strong compliance program by providing a forum for independent Board members to consider compliance matters impacting the Corporation or its key service providers; developing and implementing, in coordination with the Fund's Chief CCO, a process for the review and consideration of compliance reports that are provided to the Board; and providing a designated forum for the Fund's CCO to meet with independent Board members on a regular basis to discuss compliance matters. This committee held 5 meetings during the last fiscal year. CONTRACTS COMMITTEE -- This committee reviews and oversees the contractual relationships with service providers and receives and analyzes reports covering the level and quality of services provided under contracts with the Fund. It also advises the Board regarding actions taken on these contracts during the annual review process. The committee held 6 meetings during the last fiscal year. DISTRIBUTION COMMITTEE -- This committee reviews and supports product development, marketing, sales activity and practices related to the Portfolios, and reports to the Board as appropriate. The committee held 4 meetings during the last fiscal year. EXECUTIVE COMMITTEE -- This committee acts for the Board between meetings of the Board. The committee held 2 meetings during the last fiscal year. INVESTMENT REVIEW COMMITTEE -- This committee reviews and oversees the management of the Portfolios' assets and considers investment management policies and strategies; investment performance; risk management techniques; and securities trading practices and reports areas of concern to the Board. The committee held 6 meetings during the last fiscal year. AUDIT COMMITTEE -- This committee oversees the accounting and financial reporting processes of the Fund and internal controls over financial reporting and oversees the quality and integrity of the Fund's financial statements and independent audits as well as the Fund's compliance with legal and regulatory requirements relating to the Fund's accounting and financial reporting, internal controls over financial reporting and independent audits. The committee also makes recommendations regarding the selection of the Fund's independent registered public accounting firm and reviews and evaluates the qualifications, independence and performance of such firm. The committee oversees the funds' risks by, among other things, meeting with the funds' internal auditors, establishing procedures for the confidential, anonymous submission by employees of concerns about accounting or audit matters, and overseeing the funds' Disclosure Controls and Procedures. This committee operates pursuant to a written charter. The committee held 6 meetings during the last fiscal year. PROCEDURES FOR COMMUNICATIONS TO THE BOARD OF DIRECTORS The Board of Directors has adopted a process for shareholders to send communications to the Board. To communicate with the Board of Directors or an individual Director, a shareholder must send written communications to Board Services Corporation, 901 Marquette Avenue South, Minneapolis, Minnesota 55402, addressed to the Board of Directors of the Fund Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 21 or the individual Director. All shareholder communications received in accordance with this process will be forwarded to the Board of Directors or the individual Director. BENEFICIAL OWNERSHIP OF SHARES The following table shows the dollar range of equity securities beneficially owned on Dec. 31, 2009 of all funds overseen by the Board members. The Portfolios are available only to participating insurance companies to fund benefits of variable annuity and variable life insurance contracts and, in respect of Seligman Communications and Information Portfolio Class 2 shares, also to certain qualified pension and retirement plans. As such, a direct ownership of shares in the Portfolios is not available to individual investors, including the Directors.
AGGREGATE DOLLAR RANGE OF SHARES OWNED BY DIRECTOR IN THE NAME RIVERSOURCE FAMILY OF FUNDS --------------------------------------------------------------------------------------------------- INDEPENDENT BOARD MEMBERS --------------------------------------------------------------------------------------------------- Kathleen Blatz Over $100,000 --------------------------------------------------------------------------------------------------- Arne H. Carlson Over $100,000 --------------------------------------------------------------------------------------------------- Pamela G. Carlton Over $100,000* --------------------------------------------------------------------------------------------------- Patricia M. Flynn $50,000 - $100,000 --------------------------------------------------------------------------------------------------- Anne P. Jones Over $100,000 --------------------------------------------------------------------------------------------------- Jeffrey Laikind Over $100,000 --------------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr. Over $100,000* --------------------------------------------------------------------------------------------------- John F. Maher Over $100,000* --------------------------------------------------------------------------------------------------- Catherine James Paglia Over $100,000* --------------------------------------------------------------------------------------------------- Leroy C. Richie Over $100,000* --------------------------------------------------------------------------------------------------- Alison Taunton-Rigby Over $100,000 --------------------------------------------------------------------------------------------------- AFFILIATED BOARD MEMBERS --------------------------------------------------------------------------------------------------- William F. Truscott Over $100,000 ---------------------------------------------------------------------------------------------------
* Total includes deferred compensation invested in share equivalents. COMPENSATION Total Directors' fees paid by the Fund to the current independent Directors for the year ended December 31, 2009 were as follows:
TOTAL CASH COMPENSATION FROM RIVERSOURCE FUNDS NAME PAID TO DIRECTORS ----------------------------------------------------------------------------------------------- Kathleen Blatz $172,500 ----------------------------------------------------------------------------------------------- Arne H. Carlson 177,500 ----------------------------------------------------------------------------------------------- Pamela G. Carlton 160,000(a) ----------------------------------------------------------------------------------------------- Patricia M. Flynn(a) 165,000(a) ----------------------------------------------------------------------------------------------- Anne P. Jones 172,500 ----------------------------------------------------------------------------------------------- Jeffrey Laikind 160,000 ----------------------------------------------------------------------------------------------- Stephen R. Lewis, Jr.(a) 400,000(a) ----------------------------------------------------------------------------------------------- John F. Maher(a) 155,000(a) ----------------------------------------------------------------------------------------------- Catherine James Paglia(a) 177,500 ----------------------------------------------------------------------------------------------- Leroy C. Richie 165,000 ----------------------------------------------------------------------------------------------- Alison Taunton-Rigby 165,000 -----------------------------------------------------------------------------------------------
(a) Ms. Carlton, Ms. Flynn, Mr. Lewis and Mr. Maher elected to defer a portion of the total compensation payable during the period in the amount of $64,000, $49,500, $60,000 and $155,000, respectively (none of which was in respect of the Fund). The Independent Directors determine the amount of compensation that they receive, including the amount paid to the Chair of the Board. In determining compensation for the Independent Directors, the Independent Directors take into account a variety of factors including, among other things, their collective significant work experience (e.g., in business and finance, Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 22 government or academia). The Independent Directors also recognize that these individuals' advice and counsel are in demand by other organizations, that these individuals may reject other opportunities because the time demands of their duties as Independent Directors, and that they undertake significant legal responsibilities. The Independent Directors also consider the compensation paid to independent board members of other mutual fund complexes of comparable size. In determining the compensation paid to the Chair, the Independent Directors take into account, among other things, the Chair's significant additional responsibilities (e.g., setting the agenda for Board meetings, communicating or meeting regularly with the Funds' Chief Compliance Officer, Counsel to the Independent Directors, and the Funds' service providers) which result in a significantly greater time commitment required of the Board Chair. The Chair's compensation, therefore, has generally been set at a level between 2.5 and 3 times the level of compensation paid to other independent Board members. Effective Jan. 1, 2010, independent Board members are paid an annual retainer of $125,000. Committee and sub- committee Chairs each receive an additional annual retainer of $5,000. In addition, independent Board members are paid the following fees for attending Board and committee meetings: $5,000 per day of in- person Board meetings and $2,500 per day of in-person committee or sub-committee meetings (if such meetings are not held on the same day as a Board meeting). Independent Board members are not paid for special meetings conducted by telephone. In 2010, the Board's Chair will receive total annual cash compensation of $430,000. The Independent Directors may elect to defer payment of up to 100% of the compensation they receive in accordance with a Deferred Compensation Plan (the Deferred Plan). Under the Deferred Plan, a Board member may elect to have his or her deferred compensation treated as if they had been invested in shares of one or more funds in the RiverSource Family of Funds and the amount paid to the Board member under the Deferred Plan will be determined based on the performance of such investments. Distributions may be taken in a lump sum or over a period of years. The Deferred Plan will remain unfunded for federal income tax purposes under the Internal Revenue Code of 1986, as amended. It is anticipated that deferral of Board member compensation in accordance with the Deferred Plan will have, at most, a negligible impact on fund assets and liabilities. COMPENSATION FROM EACH FUND. The following table shows the compensation paid to independent Board members from each fund during the fiscal year ended Dec. 31, 2009.
AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------------- FUND BLATZ CARLSON CARLTON FLYNN JONES LAIKIND --------------------------------------------------------------------------------------- Capital -- total 17 18 16 16 17 16 Amount deferred 0 0 6 5 0 0 --------------------------------------------------------------------------------------- Common Stock -- total 6 6 6 6 6 6 Amount deferred 0 0 2 2 0 0 --------------------------------------------------------------------------------------- Communications and Information -- total 110 113 102 105 110 102 Amount deferred 0 0 41 32 0 0 --------------------------------------------------------------------------------------- Global 13 13 12 13 13 12 Technology -- total Amount deferred 0 0 5 4 0 0 --------------------------------------------------------------------------------------- International 4 4 4 4 4 4 Growth -- total Amount deferred 0 0 1 1 0 0 --------------------------------------------------------------------------------------- Investment Grade Fixed Income -- total 5 5 4 4 5 4 Amount deferred 0 0 2 1 0 0 --------------------------------------------------------------------------------------- Large-Cap 5 5 4 5 5 4 Value -- total Amount deferred 0 0 2 1 0 0 --------------------------------------------------------------------------------------- Smaller-Cap 211 216 196 201 211 196 Value -- total Amount deferred 0 0 78 60 0 0 --------------------------------------------------------------------------------------- AGGREGATE COMPENSATION FROM FUND -------------------------------------------------------- TAUNTON- FUND LEWIS MAHER PAGLIA RICHIE RIGBY --------------------------------------------------------------------------------- Capital -- total 39 15 17 16 16 Amount deferred 6 15 0 0 0 --------------------------------------------------------------------------------- Common Stock -- total 15 6 7 6 6 Amount deferred 2 6 0 0 0 --------------------------------------------------------------------------------- Communications and Information -- total 253 99 113 105 105 Amount deferred 38 99 0 0 0 --------------------------------------------------------------------------------- Global 30 12 13 12 12 Technology -- total Amount deferred 4 12 0 0 0 --------------------------------------------------------------------------------- International 9 3 4 4 4 Growth -- total Amount deferred 1 3 0 0 0 --------------------------------------------------------------------------------- Investment Grade Fixed Income -- total 11 4 5 4 4 Amount deferred 2 4 0 0 0 --------------------------------------------------------------------------------- Large-Cap 11 4 5 5 5 Value -- total Amount deferred 2 4 0 0 0 --------------------------------------------------------------------------------- Smaller-Cap 485 189 216 201 201 Value -- total Amount deferred 73 189 0 0 0 ---------------------------------------------------------------------------------
CODE OF ETHICS RIVERSOURCE INVESTMENTS The funds in the RiverSource Family of Funds, RiverSource Investments, the investment manager for the funds and the distributor have each adopted a Code of Ethics (collectively, the "Codes") and related procedures reasonably designed to prevent violations of Rule 204A-1 under the Investment Advisers Act of 1940 and Rule 17j-1 under the 1940 Act. The Codes contain provisions reasonably necessary to prevent a fund's access persons from engaging in any conduct prohibited Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 23 by paragraph (b) of Rule 17j-1, which indicates that it is unlawful for any affiliated person of or principal underwriter for a fund, or any affiliated person of an investment adviser of or principal underwriter for a fund, in connection with the purchase or sale, directly or indirectly, by the person of a security held or to be acquired by a fund (i) to employ any device, scheme or artifice to defraud a fund; (ii) to make any untrue statement of a material fact to a fund or omit to state a material fact necessary in order to make the statements made to a fund, in light of the circumstances under which they are made, not misleading; (iii) to engage in any act, practice or course of business that operates or would operate as a fraud or deceit on a fund; or (iv) to engage in any manipulative practice with respect to a fund. The Codes prohibit affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the fund. WELLINGTON MANAGEMENT Wellington Management, subadviser for the Subadvised Portfolio, has adopted its own Code of Ethics meeting the requirements of Rule 17j-1 under the 1940 Act and Rule 204A-1 under the Investment Advisers Act of 1940, which permits personnel covered by the rule to invest in securities that may be purchased or held by the Subadvised Portfolio. The Fund's Board of Directors reviews the Code of Ethics of Wellington Management at least annually and receives certifications from Wellington Management regarding compliance with such Code of Ethics annually. PROXY VOTING POLICIES GENERAL GUIDELINES, POLICIES AND PROCEDURES The funds in the RiverSource Family of Funds uphold a long tradition of supporting sound and principled corporate governance. The Board, which consists of a majority of independent Board members, determines policies and votes proxies. The funds' investment manager, RiverSource Investments, and the funds' administrator, Ameriprise Financial, provide support to the Board in connection with the proxy voting process. GENERAL GUIDELINES CORPORATE GOVERNANCE MATTERS -- The Board supports proxy proposals that it believes are tied to the interests of shareholders and votes against proxy proposals that appear to entrench management. For example: - The Board generally votes in favor of proposals for an independent chairman or, if the chairman is not independent, in favor of a lead independent director. - The Board supports annual election of all directors and proposals to eliminate classes of directors. - In a routine election of directors, the Board will generally vote with management's recommendations because the Board believes that management and nominating committees of independent directors are in the best position to know what qualifications are required of directors to form an effective board. However, the Board will generally vote against a nominee who has been assigned to the audit, compensation, or nominating committee if the nominee is not independent of management based on established criteria. The Board will also withhold support for any director who fails to attend 75% of meetings or has other activities that appear to interfere with his or her ability to commit sufficient attention to the company and, in general, will vote against nominees who are determined to have been involved in options backdating. - The Board generally supports proposals requiring director nominees to receive a majority of affirmative votes cast in order to be elected to the board, and opposes cumulative voting based on the view that each director elected should represent the interests of all shareholders. - Votes in a contested election of directors are evaluated on a case-by-case basis. In general, the Board believes that incumbent management and nominating committees, with access to more and better information, are in the best position to make strategic business decisions. However, the Board will consider an opposing slate if it makes a compelling business case for leading the company in a new direction. SHAREHOLDER RIGHTS PLANS -- The Board generally supports shareholder rights plans based on a belief that such plans force uninvited bidders to negotiate with a company's board. The Board believes these negotiations allow time for the company to maximize value for shareholders by forcing a higher premium from a bidder, attracting a better bid from a competing bidder or allowing the company to pursue its own strategy for enhancing shareholder value. The Board supports proposals to submit shareholder rights plans to shareholders and supports limiting the vote required for approval of such plans to a majority of the votes cast. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 24 AUDITORS -- The Board values the independence of auditors based on established criteria. The Board supports a reasonable review of matters that may raise concerns regarding an auditor's service that may cause the Board to vote against a management recommendation, including, for example, auditor involvement in significant financial restatements, options backdating, material weaknesses in control, attempts to limit auditor liability or situations where independence has been compromised. STOCK OPTION PLANS AND OTHER MANAGEMENT COMPENSATION ISSUES -- The Board expects company management to give thoughtful consideration to providing competitive long-term employee incentives directly tied to the interest of shareholders. The Board votes against proxy proposals that it believes dilute shareholder value excessively. The Board believes that equity compensation awards can be a useful tool, when not abused, for retaining employees and giving them incentives to engage in conduct that will improve the performance of the company. In this regard, the Board generally favors minimum holding periods of stock obtained by senior management pursuant to an option plan and will vote against compensation plans for executives that it deems excessive. SOCIAL AND CORPORATE POLICY ISSUES -- The Board believes proxy proposals should address the business interests of the corporation. Shareholder proposals sometime seek to have the company disclose or amend certain business practices based purely on social or environmental issues rather than compelling business arguments. In general, the Board recognizes our fund shareholders are likely to have differing views of social and environmental issues and believes that these matters are primarily the responsibility of a company's management and its board of directors. POLICIES AND PROCEDURES The policy of the Board is to vote all proxies of the companies in which a fund holds investments. Because of the volume and complexity of the proxy voting process, including inherent inefficiencies in the process that are outside the control of the Board or the Proxy Team (below), not all proxies may be voted. The Board has implemented policies and procedures that have been reasonably designed to vote proxies and to ensure that there are no conflicts between interests of a fund's shareholders and those of the funds' principal underwriters, RiverSource Investments, or other affiliated persons. In exercising its proxy voting responsibilities, the Board may rely upon the research or recommendations of one or more third party service providers. The administration of the proxy voting process is handled by the RiverSource Proxy Administration Team ("Proxy Team"). In exercising its responsibilities, the Proxy Team may rely upon one or more third party service providers. The Proxy Team assists the Board in identifying situations where its guidelines do not clearly require a vote in a particular manner and assists in researching matters and making voting recommendations. RiverSource Investments may recommend that a proxy be voted in a manner contrary to the Board's guidelines. In making recommendations to the Board about voting on a proposal, the investment manager relies on its own investment personnel (or the investment personnel of a fund's subadviser(s)) and information obtained from an independent research firm. The investment manager makes the recommendation in writing. The process requires that Board members who are independent from the investment manager consider the recommendation and decide how to vote the proxy proposal or establish a protocol for voting the proposal. On an annual basis, or more frequently as determined necessary, the Board reviews recommendations to revise the existing guidelines or add new guidelines. Recommendations are based on, among other things, industry trends and the frequency that similar proposals appear on company ballots. The Board considers management's recommendations as set out in the company's proxy statement. In each instance in which a fund votes against management's recommendation (except when withholding votes from a nominated director), the Board sends a letter to senior management of the company explaining the basis for its vote. This permits both the company's management and the Board to have an opportunity to gain better insight into issues presented by the proxy proposal(s). VOTING IN COUNTRIES OUTSIDE THE UNITED STATES (NON-U.S. COUNTRIES) -- Voting proxies for companies not domiciled in the United States may involve greater effort and cost due to the variety of regulatory schemes and corporate practices. For example, certain non-U.S. countries require securities to be blocked prior to a vote, which means that the securities to be voted may not be traded within a specified number of days before the shareholder meeting. The Board typically will not vote securities in non-U.S. countries that require securities to be blocked as the need for liquidity of the securities in the funds will typically outweigh the benefit of voting. There may be additional costs associated with voting in non-U.S. countries such that the Board may determine that the cost of voting outweighs the potential benefit. SECURITIES ON LOAN -- The Board will generally refrain from recalling securities on loan based upon its determination that the costs and lost revenue to the funds, combined with the administrative effects of recalling the securities, generally outweigh the benefit of voting the proxy. While neither the Board nor the funds' administrator assesses the economic impact and benefits of voting loaned securities on a case-by-case basis, situations may arise where the Board requests that loaned Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 25 securities be recalled in order to vote a proxy. In this regard, if a proxy relates to matters that may impact the nature of a company, such as a proposed merger or acquisition, and the funds' ownership position is more significant, the Board has established a guideline to direct the funds' administrator to use its best efforts to recall such securities based upon its determination that, in these situations, the benefits of voting such proxies generally outweigh the costs or lost revenue to the funds, or any potential adverse administrative effects to the funds, of not recalling such securities. INVESTMENT IN AFFILIATED FUNDS -- Certain funds may invest in shares of other Seligman funds (referred to in this context as "underlying funds") and may own substantial portions of these underlying funds. The proxy policy of the funds is to ensure that direct public shareholders of underlying funds control the outcome of any shareholder vote. To help manage this potential conflict of interest, recognizing that the direct public shareholders of these underlying funds may represent only a minority interest, the policy of the funds is to vote proxies of the underlying funds in the same proportion as the vote of the direct public shareholders. If there are no direct public shareholders of an underlying fund, the policy is to cast votes in accordance with instructions from the independent members of the Board. A NOTE WITH RESPECT TO UNDERLYING FUNDS: The underlying funds and the funds-of- funds share the same officers, Board members, and investment manager, RiverSource Investments. The funds-of-funds do not invest in an underlying fund for the purpose of exercising management or control; however, from time to time, investments by the funds-of-funds in a fund may represent a significant portion of a fund. Because the funds-of-funds may own a substantial portion of the shares of a fund, procedures have been put into place to assure that public shareholders will determine the outcome of all actions taken at underlying fund shareholder meetings. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30, is available (i) without charge upon request by calling toll free (800) 221-2450 in the US or collect (212) 682-7600 outside the US and (ii) on the SEC's website at www.sec.gov. Information for each new 12-month period ending June 30 will be available no later than August 31 of that year. CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES The following table identifies those investors who, as of March 31, 2010, owned 5% or more of any class of a fund's shares and those investors who owned 25% or more of a fund's shares (all share classes taken together). Investors who own more than 25% of a fund's shares are presumed under securities laws to control the fund and would be able to determine the outcome of most issues that are submitted to shareholders for vote.
PORTFOLIO NAME, CITY AND STATE OF INVESTOR SHARE CLASS PERCENTAGE PERCENT OF FUND ---------------------------------------------------------------------------------------------------------------------------------- Capital Great-West Life & Annuity, Greenwood Class 1 93.34% 32.20% Village, CO -------------------------------------------------------------------------------------------- First Great West Life, Denver, CO Class 1 6.66% -- -------------------------------------------------------------------------------------------- Kansas City Life Insurance Company, Class 2 91.88% 60.19% Kansas City, MO ---------------------------------------------------------------------------------------------------------------------------------- Common Stock Great-West Life & Annuity, Greenwood Class 1 95.36% 95.36% Village, CO ---------------------------------------------------------------------------------------------------------------------------------- Communications and Information Great-West Life & Annuity, Greenwood Class 1 96.20% 42.49% Village, CO Guardian Insurance & Annuity Co., New Class 2 40.39% -- York, NY -------------------------------------------------------------------------------------------- Jefferson National Life Insurance, Class 2 11.61% -- Louisville, KY -------------------------------------------------------------------------------------------- Great-West Life & Annuity, Greenwood Class 2 10.39% -- Village, CO -------------------------------------------------------------------------------------------- Kansas City Life Insurance Company, Class 2 8.74% -- Kansas City, MO -------------------------------------------------------------------------------------------- AMERITAS Life Inc., Lincoln, NE Class 2 7.84% -- ---------------------------------------------------------------------------------------------------------------------------------- Global Technology Great-West Life & Annuity, Greenwood Class 1 52.79% 34.04% Village, CO -------------------------------------------------------------------------------------------- Allianz Life, Minneapolis, MN Class 1 42.23% 27.23% -------------------------------------------------------------------------------------------- Jefferson National Life Insurance, Class 2 94.41% 33.54% Louisville, KY ---------------------------------------------------------------------------------------------------------------------------------- International Growth Great-West Life & Annuity, Greenwood Class 1 95.02% 95.02% Village, CO ---------------------------------------------------------------------------------------------------------------------------------- Investment Grade Fixed Income Great-West Life & Annuity, Greenwood Class 1 99.81% 99.81% Village, CO ---------------------------------------------------------------------------------------------------------------------------------- Large-Cap Value Great-West Life & Annuity, Greenwood Class 1 83.14% 83.14% Village, CO -------------------------------------------------------------------------------------------- Jefferson National Life Insurance, Class 1 11.29% -- Louisville, KY -------------------------------------------------------------------------------------------- Great West, Denver, CO Class 1 5.57% -- ----------------------------------------------------------------------------------------------------------------------------------
Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 26
PORTFOLIO NAME, CITY AND STATE OF INVESTOR SHARE CLASS PERCENTAGE PERCENT OF FUND ---------------------------------------------------------------------------------------------------------------------------------- <- C> Smaller-Cap Value Allianz Life, Minneapolis, MN Class 1 83.77% 63.44% -------------------------------------------------------------------------------------------- Merrill Lynch Life Insurance Co., Cedar Class 1 10.47% -- Rapids, IA -------------------------------------------------------------------------------------------- The Union Central Life Insurance Class 2 81.37% -- Company, Lincoln, NE -------------------------------------------------------------------------------------------- Kansas City Life Insurance Company, Class 2 7.19% -- Kansas City, MO ----------------------------------------------------------------------------------------------------------------------------------
INVESTMENT ADVISORY AND OTHER SERVICES INVESTMENT MANAGER With the completion of the Acquisition of Seligman by RiverSource Investments and with shareholders having previously approved (at a special meeting held on November 3, 2008) the Management Agreement between the Fund (on behalf of each Portfolio) and RiverSource Investments, RiverSource Investments is the new investment manager effective November 7, 2008. Shareholders of Seligman International Growth Portfolio also approved at the November meeting the Subadvisory Agreement between RiverSource Investments and Wellington Management. RiverSource Investments, 200 Ameriprise Financial Center, Minneapolis, Minnesota 55474, is also the investment manager of the other funds in the RiverSource Family of Funds and is a wholly-owned subsidiary of Ameriprise Financial. Ameriprise Financial is a financial planning and financial services company that has been offering solutions for clients' asset accumulation, income management and protection needs for more than 110 years. In addition to managing investments for the RiverSource Family of Funds, RiverSource Investments manages investments for itself and its affiliates. For institutional clients, RiverSource Investments and its affiliates provide investment management and related services, such as separate account asset management, and institutional trust and custody, as well as other investment products. Effective November 7, 2008, each Portfolio pays RiverSource Investments a fee for managing its assets. The fee paid is equal to a percentage of the Portfolio's average daily net assets. INVESTMENT MANAGEMENT FEE SCHEDULE The table below outlines the investment management fees charged to the funds by RiverSource Investments for providing investment management services. The asset charge for each calendar day of each year will be equal to the total of 1/365th (1/366th in each leap year) of the amount computed in accordance with the fee schedule in the table below:
-------------------------------------------------------------------------------------------------------------------------- DAILY RATE ON LAST DAY OF MOST FUND NET ASSETS (BILLIONS) ANNUAL RATE AT EACH ASSET LEVEL RECENT FISCAL PERIOD -------------------------------------------------------------------------------------------------------------------------- Capital All asset levels 0.355% 0.355% -------------------------------------------------------------------------------------------------------------------------- Common Stock All asset levels 0.355% 0.355% -------------------------------------------------------------------------------------------------------------------------- Communications and Information All asset levels 0.705% 0.705% -------------------------------------------------------------------------------------------------------------------------- Global Technology First $2 billion 0.950% 0.950% Next $2 billion 0.910% Over $4 billion 0.870% -------------------------------------------------------------------------------------------------------------------------- International Growth First $50 million 0.950% 0.950% Next $1 billion 0.900% Over $1.05 billion 0.860% -------------------------------------------------------------------------------------------------------------------------- Investment Grade Fixed Income All asset levels 0.345% 0.345% -------------------------------------------------------------------------------------------------------------------------- Large-Cap Value First $500 million 0.755% 0.755% Next $500 million 0.660% Over $1 billion 0.565% -------------------------------------------------------------------------------------------------------------------------- Smaller-Cap Value First $500 million 0.935% 0.935% Next $500 million 0.840% Over $1 billion 0.745% --------------------------------------------------------------------------------------------------------------------------
The following table shows the Investment management fee schedule for the fiscal years ended December 31, 2008 and 2007. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 27
MANAGEMENT FEE RATE (AS A% OF AVERAGE DAILY NET PORTFOLIO ASSETS) --------- -------------------------------- Capital 0.40% ----------------------------------------------------------------------------------------- Common Stock 0.40% ----------------------------------------------------------------------------------------- Communications and Information 0.75% ----------------------------------------------------------------------------------------- Global Technology 1.00% on first $2 billion; 0.95% on next $2 billion; 0.90% thereafter ----------------------------------------------------------------------------------------- International Growth 1.00% on first $50 million; 0.95% on next $1 billion; 0.90% thereafter ----------------------------------------------------------------------------------------- Investment Grade Fixed Income 0.40% ----------------------------------------------------------------------------------------- Large-Cap Value 0.80% on first $500 million; 0.70% on next $500 million; 0.60% thereafter ----------------------------------------------------------------------------------------- Smaller-Cap Value 1.00% on first $500 million; 0.90% on next $500 million; 0.80% thereafter -----------------------------------------------------------------------------------------
The following table indicates the management fees paid and the amount of management and other fees waived/reimbursed for the years ended December 31, 2009, 2008 and 2007.
2009 2008 2007 ------------------------ -------------------------- -------------------------- WAIVER/ WAIVER/ WAIVER/ PORTFOLIO FEE REIMBURSEMENT FEE REIMBURSEMENT FEE REIMBURSEMENT --------- -------- ------------- ---------- ------------- ---------- ------------- Capital $ 24,523 $ -- $ 34,357 $ -- $ 44,328 $ -- Common Stock 9,201 18,885 16,622 -- 28,080 -- Communications and Information 305,415 -- 333,001 -- 430,167 -- Global Technology 48,653 93,220 61,619 101,372 85,706 97,403 International Growth 15,188 96,059 30,535 80,200 42,745 86,100 Investment Grade Fixed Income 6,562 47,932 7,772 26,207 7,934 32,224 Large-Cap Value 14,699 37,711 23,120 11,906 34,194 -- Smaller-Cap Value 798,571 830 1,319,550 -- 2,203,083 --
Subject to the control of the Board of Directors, RiverSource Investments is responsible for the investments of each Portfolio (with the assistance of Wellington Management in the case of the Subadvised Portfolio). Other than the Subadvisory Agreement with Wellington Management, there are no other management- related service contracts under which services are or may be provided to the Portfolios. No person or persons, other than the directors, officers, employees of RiverSource Investments, or the Fund regularly advise the Fund or the Portfolios with respect to their investments (other than Wellington Management, as discussed below). Under the Management Agreement, RiverSource Investments, subject to the control of the Board of Directors, manages the affairs of the Subadvised Portfolio and provides the services described in such agreement on the terms set forth therein. The Management Agreement provides that RiverSource Investments will enter into a subadvisory agreement, pursuant to which Wellington Management will provide the Subadvised Portfolio with investment management services, including investment research, advice and supervision, determining which securities will be purchased or sold by the Subadvised Portfolio, making purchases and sales of securities on behalf of the Subadvised Portfolio and determining how voting and other rights with respect to securities of the Subadvised Portfolio shall be exercised, subject in each case to the control of the Board of Directors and in accordance with the objectives, policies and principles set forth in the Prospectus and the requirements of the 1940 Act and other applicable law. Pursuant to the Management Agreement, RiverSource Investments continues to have responsibility for investment management services provided under the Subadvisory Agreement. Further, in the event Wellington Management ceases to provide such investment management services to the Subadvised Portfolio, they shall be provided by RiverSource Investments or by such other firm as may be selected by the Subadvised Portfolio and approved in accordance with applicable requirements. The Management Agreement provides that it is effective on November 7, 2008 and shall continue in full force and effect until November 7, 2010, and from year to year thereafter if such continuance is approved in the manner required by the 1940 Act (i.e., by a vote of a majority of the Board of Directors or of the outstanding voting securities of a Portfolio and by a vote of a majority of Directors who are not parties to the Management Agreement or interested persons of any such party). The Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 28 Management Agreement may be terminated by either a Portfolio or RiverSource Investments at any time by giving the other party 60 days' written notice of such intention to terminate, provided that any termination shall be made without the payment of any penalty, and provided further that termination may be effected either by the Board or by a vote of the majority of the outstanding voting shares of a Portfolio. The Management Agreement will terminate automatically in the event of its assignment, as such term is defined in the 1940 Act. Except for bad faith, intentional misconduct or negligence in regard to the performance of its duties under the Management Agreement, neither RiverSource Investments, nor any of its respective directors, officers, partners, principals, employees, or agents will be liable for any acts or omissions or for any loss suffered by the Fund, the Portfolios or its shareholders or creditors. Each of RiverSource Investments, and its respective directors, officers, partners, principals, employees and agents, will be entitled to rely, and will be protected from liability in reasonably relying, upon any information or instructions furnished to it (or any of them as individuals) by the Fund or its agents which is believed in good faith to be accurate and reliable. RiverSource Investments does not warrant any rate of return, market value or performance of any assets in a Portfolio. Notwithstanding the foregoing, the federal securities laws impose liabilities under certain circumstances on persons who act in good faith and, therefore, the Portfolio does not waive any right which it may have under such laws or regulations. SUBADVISORY ARRANGEMENT On September 15, 2003, Wellington Management assumed responsibility for providing investment advisory services to the Subadvised Portfolio under a subadvisory arrangement between Wellington Management and Seligman, the Fund's predecessor investment manager. The subadvisory arrangement was initially approved by the Board of Directors of the Fund in respect of the Subadvised Portfolio on September 4, 2003. The engagement of Wellington Management was approved by the shareholders of the Subadvised Portfolio at a Special Meeting of Shareholders held on December 4, 2003. The Subadvisory Agreement between RiverSource Investments and Wellington Management was initially approved by the Directors on July 29, 2008 and by the shareholders of the Subadvised Portfolio at a special meeting held on November 3, 2008. The Subadvisory Agreement became effective on November 7, 2008. The fees payable by the Subadvised Portfolio did not increase as a result of the engagement of Wellington Management. The fees of Wellington Management are paid by RiverSource Investments (not by the Subadvised Portfolio), and the fees payable by the Subadvised Portfolio to RiverSource Investments were unchanged. Wellington Management is a Massachusetts limited liability partnership with principal offices at 75 State Street, Boston, Massachusetts 02109. Wellington Management is a professional investment counseling firm that provides investment services to investment companies, employee benefit plans, endowments, foundations, and other institutions. Wellington Management and its predecessor organizations have provided investment advisory services for over 70 years. Under the Subadvisory Agreement, Wellington Management is responsible for providing investment advisory services to the Subadvised Portfolio. Wellington Management is also responsible for selecting brokers for the execution of purchases and sales on behalf of the Subadvised Portfolio. TERMS OF THE SUBADVISORY AGREEMENT SERVICES. Under the Subadvisory Agreement, Wellington Management, subject to the control of the Board of Directors and in accordance with the objectives, policies and principles of the Subadvised Portfolio set forth in the applicable Prospectus and Statement of Additional Information and the requirements of the 1940 Act and other applicable law, furnishes RiverSource Investments and the Subadvised Portfolio with such investment advice, research and assistance as RiverSource Investments or the Subadvised Portfolio shall from time to time reasonably request. In this regard, it is the responsibility of Wellington Management, in respect of the Subadvised Portfolio: (i) to participate in the development of the Subadvised Portfolio's overall investment strategy and in the determination of investment allocations; (ii) to provide investment advice and research to the Subadvised Portfolio with respect to existing and potential investments in securities, including company visits and meetings with management; (iii) to determine securities and other assets for investment; (iv) to select brokers and dealers; (v) to cause the execution of trades, including foreign exchange dealings; and (vi) unless otherwise agreed to by RiverSource Investments, vote proxies solicited by or with respect to issuers of securities in which assets of the Series may be invested from time to time. Wellington Management's responsibilities extend to the Subadvised Portfolio's assets. Under the Management Agreement, RiverSource Investments continues to have responsibility for investment management services provided under the Subadvisory Agreement. LIABILITY. The Subadvisory Agreement provides that, subject to Section 36 of the 1940 Act, Wellington Management shall not be liable to the Fund for any error of judgment or mistake of law or for any loss arising out of any investment or for any act or omission in the performance of its duties under the Subadvisory Agreement except for willful misfeasance, bad faith or negligence in the performance of its duties or by reason of reckless disregard of its obligations and duties under the Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 29 Subadvisory Agreement, provided, however, that Wellington Management will be liable for any loss incurred by the Fund, the Subadvised Portfolio, the Manager or their respective affiliates to the extent such losses arise out of any act or omission directly attributable to Wellington Management which results, directly or indirectly, in a material error in the net asset value of the Subadvised Portfolio. COMPENSATION. Under the Subadvisory Agreement, Wellington Management receives in respect of the Subadvised Portfolio, each month a fee calculated on each day during such month at the annual rates set forth below:
SUBADVISORY FEE AS A PERCENTAGE OF SUBADVISED PORTFOLIO AVERAGE DAILY NET ASSETS -------------------- ------------------------ International Growth - up to $50 million 0.45% - over $50 million 0.40%
This fee is paid by RiverSource Investments and does not affect the fee paid by the Subadvised Portfolio to RiverSource Investments pursuant to the Management Agreement. EXPENSES. Pursuant to the Subadvisory Agreement, Wellington Management pays all of its expenses arising from the performance of its duties under the Subadvisory Agreement, other than the cost of securities, including brokerage commissions and similar fees and charges for the acquisition, disposition, lending or borrowing of the Subadvised Portfolio's investments. TERMINATION. The Subadvisory Agreement provides that it is effective November 7, 2008 and will continue in effect until November 7, 2010 and from year to year if such continuance is approved in the manner required by the 1940 Act. The Subadvisory Agreement may be terminated at any time, with respect to the Subadvised Portfolio, without payment of penalty, by the Fund on 60 days' written notice to Wellington Management by vote of the Directors or by vote of the majority of the outstanding voting securities of the Subadvised Portfolio, as defined by the 1940 Act. The Subadvisory Agreement also provides that it may also be terminated, with respect to the Subadvised Portfolio, by Wellington Management or RiverSource Investments at any time upon not less than 60 days' written notice to the other and to the Fund. The Subadvisory Agreement will automatically terminate in the event of its assignment in respect of the Subadvised Portfolio, and upon termination of the Management Agreement in respect of the Subadvised Portfolio. SERVICES PROVIDED BY THE INVESTMENT MANAGER Under the Management Agreement, dated November 7, 2008, subject to the control of the Fund's Board of Directors, RiverSource Investments manages the investment of the assets of the Portfolios, including making purchases and sales of portfolio securities consistent with the Portfolios' investment objectives and policies. ADMINISTRATIVE SERVICES Under an Administrative Services Agreement, Ameriprise Financial provides the Portfolios with administration and accounting services. Effective May 11, 2009, the Portfolios pay Ameriprise Financial a fee for its services (which would be reflected in each Portfolio's "Other Expenses" in the fee table of the prospectus). Prior to May 11, 2009, the Portfolios did not pay an administrative services fee. There will be no net impact to the fees that a Portfolio will pay because the administrative fee will be fully offset by a reduction in the investment management fees charged to the Portfolio. ADMINISTRATIVE SERVICES FEE SCHEDULE The table below outlines the administrative services fees charged to the funds by Ameriprise Financial for providing administrative services. The asset charge for each calendar day of each year will be equal to the total of 1/365th (1/366th in each leap year) of the amount computed in accordance with the fee schedule in the table below:
------------------------------------------------------------------------------------------------------------------------------- ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES 500,000,001 1,000,000,001 3,000,000,001 FUNDS 0 - 500,000,000 -1,000,000,000 -3,000,000,000 -12,000,000,000 12,000,000,001 + ------------------------------------------------------------------------------------------------------------------------------- Global Technology 0.080% 0.075% 0.070% 0.060% 0.050% International Growth Smaller-Cap Value ------------------------------------------------------------------------------------------------------------------------------- Investment Grade Fixed Income 0.070% 0.065% 0.060% 0.050% 0.040% -------------------------------------------------------------------------------------------------------------------------------
Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 30
------------------------------------------------------------------------------------------------------------------------------- ASSET LEVELS AND BREAKPOINTS IN APPLICABLE FEES 500,000,001 1,000,000,001 3,000,000,001 FUNDS 0 - 500,000,000 -1,000,000,000 -3,000,000,000 -12,000,000,000 12,000,000,001 + ------------------------------------------------------------------------------------------------------------------------------- Capital 0.060% 0.055% 0.050% 0.040% 0.030% Common Stock Communications and Information Large-Cap Value -------------------------------------------------------------------------------------------------------------------------------
The fee is calculated for each calendar day on the basis of net assets as of the close of the preceding day. Fees paid the last fiscal period are shown in the table below. The table also shows the daily rate applied to each fund's net assets as of the last day of the most recent fiscal period.
ADMINISTRATIVE SERVICES FEES PAID DAILY RATE APPLIED FUND IN 2009 TO FUND ASSETS ---- ------------------ ------------------ Capital $ 2,792 0.060% Common Stock 1,011 0.060 Communications and Information 18,678 0.060 Global Technology 2,902 0.080 International Growth 869 0.080 Investment Grade Fixed Income 821 0.070 Large-Cap Value 799 0.060 Smaller-Cap Value 46,508 0.080
OTHER INVESTMENT ADVICE No person or persons, other than directors, officers, or employees of RiverSource Investments, or Wellington Management, regularly advise the Fund's Portfolios or Subadvised Portfolio, as the case may be, with respect to the Portfolios' investments. PRINCIPAL UNDERWRITER RiverSource Fund Distributors, Inc., formerly Seligman Advisors, Inc., an affiliate of RiverSource Investments, located at 50611 Ameriprise Financial Center, Minneapolis, Minnesota 55402, acts a general distributor of the shares of the Portfolios as well as the other funds in the RiverSource Family of Funds. The distributor is an "affiliated person" (as defined in the 1940 Act) of RiverSource Investments, which is itself an affiliated person of the Fund. Those individuals identified above under "Management Information" as directors or officers of both the Fund and the distributor are affiliated persons of both entities. RULE 12B-1 PLAN Each Portfolio has adopted a Shareholder Servicing and Distribution Plan ("12b-1 Plan") with respect to each Portfolio's Class 2 shares in accordance with Section 12(b) of the 1940 Act and Rule 12b-1 thereunder. Under the 12b-1 Plan, each Portfolio, with respect to Class 2 shares, is authorized to pay monthly to the distributor, an annual shareholder servicing and distribution fee of up to 0.25% of the average daily net assets attributable to Class 2 shares. The distributor uses this fee to make payments to participating insurance companies or their affiliates for services that the participating insurance companies provide to Contract owners of Class 2 shares including, but not limited to, (1) the printing and delivering of prospectuses, statements of additional information, shareholder reports, proxy statements and marketing materials related to the Portfolios to current Contract owners, (2) providing facilities to answer questions from current Contract owners about the Portfolios, (3) receiving and answering correspondence, (4) providing information to RiverSource Investments and to Contract owners with respect to shares of the Portfolios attributable to Contract owner Accounts, (5) complying with federal and state securities laws pertaining to the sale of shares of the Portfolios, (6) assisting Contract owners in completing application forms and selecting dividend and other Account options, and (7) other distribution related services. Additionally, the distributor may also use this fee to make payments to administrators or their affiliates for similar services provided to Qualified Plans and their beneficiaries. Because these 12b-1 fees are paid out of the Portfolio's assets on an ongoing basis, over time they will increase the cost of an investment in the Portfolio and may cost shareholders more than other types of charges related to an investment. The participating insurance companies will also provide such office space and equipment, telephone facilities, and personnel as may be reasonably necessary or beneficial in order to provide such Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 31 services to owners. No fees payable pursuant to the Rule 12b-1 Plan are retained by the distributor. The total amounts paid by the Seligman Capital Portfolio, Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio, Seligman Large-Cap Value Portfolio and Seligman Smaller-Cap Value Portfolio to the distributor in respect of Class 2 shares for the year ended December 31, 2009 and such amounts stated as a percentage of the Portfolios' Class 2 shares' average daily net assets, are as follows:
PORTFOLIO* TOTAL FEES PAID ---------- --------------- Capital $10,460 Communications and Information 47,901 Global Technology 4,401 Large-Cap Value 0 Smaller-Cap Value 48,589
* There were no Class 2 shares issued or outstanding during the year ended December 31, 2009 with respect to Large-Cap Value and the other Portfolios of the Fund not otherwise listed above. RiverSource Investments, in its sole discretion, may also make similar payments to the distributor, participating insurance companies or Plan administrators from its own resources, which may include the management fee that RiverSource Investments receives from the Portfolios. Payments made by the Portfolios under the 12b-1 Plan are intended to be used to encourage sales of Class 2 shares to Contract owners, as well as to discourage redemptions and/or exchanges. Fees paid by each Portfolio under the 12b-1 Plan in respect of Class 2 shares may not be used to pay expenses incurred solely in respect of Class 1 shares or any other Seligman mutual fund. The amounts expended by the distributor in any one year with respect to Class 2 shares of a Portfolio may exceed the 12b-1 fees paid by the Portfolio in that year. Each Portfolio's 12b-1 Plan permits expenses incurred by the distributor in respect of Class 2 shares in one fiscal year to be paid from Class 2 12b-1 fees in any other fiscal year; however, in any fiscal year the Portfolios are not obligated to pay any 12b-1 fees in excess of those described above. The 12b- 1 Plan with respect to the Class 2 shares of each Portfolio was initially approved on March 16, 2000 by the Board of Directors, including a majority of the Directors who are not "interested persons" (as defined in the 1940 Act) of the Fund and who have no direct or indirect financial interest in the operation of the 12b-1 Plan or in any agreement related to the Plan ("Qualified Directors"). The 12b-1 Plan will continue in effect until December 31 of each year, so long as such continuance is approved annually by a majority vote of both the Directors and the Qualified Directors of the Fund, cast in person at a meeting called for the purpose of voting on such approval. The 12b-1 Plans may not be amended to increase materially the amounts payable to the distributor without the approval of a majority of the outstanding voting securities of the relevant class. No material amendment to the 12b-1 Plans may be made except by a majority of both the Directors and Qualified Directors. The 12b-1 Plans require that the Treasurer of the Fund shall provide to the Directors, and the Directors shall review, at least quarterly, a written report of the amounts expended (and purposes therefor) under the Plans. Rule 12b-1 also requires that the selection and nomination of Directors who are not "interested persons" of the Fund be made by such disinterested Directors. The 12b-1 Plans will be reviewed by the Directors annually. PORTFOLIO MANAGERS OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGERS, AND COMPENSATION. For purposes of this discussion, each member of a Portfolio's portfolio team is referred to as a "portfolio manager". Set forth below, by Portfolio, for each portfolio manager is: (i) the number of accounts managed (other than the Portfolio managed by the particular portfolio manager) and the total assets in such accounts, within each of the following categories: registered investment companies, other pooled investment vehicles and other accounts; (ii) those accounts that have an advisory fee based on the performance of the account; and (iii) an explanation of the structure of, and method(s) used to determine, portfolio manager compensation. Unless noted Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 32 otherwise, all information is provided as of December 31, 2009. For purposes of this table, each series or portfolio of a registered investment company is treated as a separate registered investment company.
Other Accounts Managed (excluding the fund) ----------------------------------------------------------- Approximate Performance Ownership Structure NUMBER AND TYPE Total Net Based of Fund of FUND PORTFOLIO MANAGER OF ACCOUNT(a) Assets Accounts(b) Shares(c) Compensation ---------------------------------------------------------------------------------------------------------------------------------- Capital Erik J. Voss 3 RICs $2.12 billion 1 RIC ($240.72 M) None 9 other accounts $201.47 million (1) ---------------------------------------------------------------------------------------------------------------------------------- Common Stock Dimitris Bertsimas 29 RICs $11.59 billion 7 RICs ($7.04 B) 1 PIV $591.86 million 18 other accounts(d) $2.57 billion None (2) ----------------------------------------------------------------------------------- Gina Mourtzinou 9 RICs $9.05 billion 6 RICs ($6.52 B) 14 other accounts $116.72 million ---------------------------------------------------------------------------------------------------------------------------------- Communications and Paul Wick 4 RICs $4.48 billion Information 5 PIVs $1.82 billion 6 other accounts $266.43 million ------------------------------------------------------------- Ajay Diwan 4 RICs $4.48 billion 5 PIVs $1.82 billion 7 other accounts $262.94 million ------------------------------------------------------------- Richard Parower 3 RICs $4.19 billion 5 PIVs $1.82 billion None None (3) 8 other accounts $265.53 million ------------------------------------------------------------- Reema Shah 3 RICs $4.19 billion 5 RICs $1.82 billion 8 other accounts $270.3 million ------------------------------------------------------------- Sangeeth Peruri 1 RIC $3.68 billion 12 PIVs $891.27 million ---------------------------------------------------------------------------------------------------------------------------------- Global Technology Paul Wick 4 RICs $4.53 billion 5 PIVs $1.82 billion 6 other accounts $266.43 million ------------------------------------------------------------- Ajay Diwan 4 RICs $4.53 billion 5 PIVs $1.82 billion 7 other accounts $262.94 million ------------------------------------------------------------- Richard Parower 3 RICs $4.24 billion 5 PIVs $1.82 billion None None (3) 8 other accounts $265.53 million ------------------------------------------------------------- Reema Shah 3 RICs $4.24 billion 5 RICs $1.82 billion 8 other accounts $270.3 million ------------------------------------------------------------- Benjamin Lu 1 RIC $504.09 million 2 PIVs $44.25 million 1 other account $0.001 million ---------------------------------------------------------------------------------------------------------------------------------- International Growth WELLINGTON MANAGEMENT: ------------------------------------------------------------------------------------------------------------ Matthew Hudson 6 RICs $1.60 billion ---------------------- Jean-Marc Berteaux 10 PIVs $2.05 billion None (4) 9 other accounts $954.01 million 1 other account ($157.15 M) ---------------------------------------------------------------------------------------------------------------------------------- Investment Grade Todd White 10 RICs $15.13 billion 3 RICs ($821.26 M); Fixed Income 7 PIVs $2.87 billion 1 other account 40 other accounts(d) $20.35 billion ($50.7 M) ----------------------------------------------------------------------------------- Scott Schroepfer 7 RICs $13.25 billion 3 RICs ($821.26 M) 2 other accounts $8.37 million None (5) ----------------------------------------------------------------------------------- Tom Murphy 6 RICs $11.13 billion 2 RICs ($486.48 M) 2 PIVs $729.68 million 17 other accounts $12.58 billion ---------------------------------------------------------------------------------------------------------------------------------- Large-Cap Value Neil T. Eigen 6 RICs $923.06 million 2 PIVs $149.37 million 65 other accounts(d) $2.92 billion 1 RIC ($137.29 M) None (1) ------------------------------------------------------------- Richard S. Rosen 6 RICs $923.06 million 2 PIVs $149.37 million 70 other accounts(d) $2.88 billion ---------------------------------------------------------------------------------------------------------------------------------- Smaller-Cap Value Neil T. Eigen 6 RICs $829.33 million 2 PIVs $149.37 million 65 other accounts(d) $2.92 billion ------------------------------------------------------------- Richard S. Rosen 6 RICs $829.33 million 1 RIC ($137.29 M) None (1) 2 PIVs $149.37 million 70 other accounts(d) $2.88 billion ----------------------------------------------------------------------------------------------------------------------------------
Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 33 (a) RIC refers to a Registered Investment Company (each series or portfolio of a RIC is treated as a separate RIC); PIV refers to a Pooled Investment Vehicle. (b) Number of accounts for which the advisory fee paid is based in part or wholly on performance and the aggregate net assets in those accounts. (c) All shares of the Variable Portfolio funds are owned by life insurance companies and are not available for purchase by individuals. Consequently no portfolio manager owns any shares of Variable Portfolio funds. (d) Reflects each wrap program strategy as a single client, rather than counting each participant in the program as a separate client. STRUCTURE OF COMPENSATION (1) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three- year and five-year) performance of those accounts in relation to the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (2) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus and equity incentive awards are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. Funding for the bonus pool is determined by a percentage of the aggregate assets under management in the accounts managed by the portfolio managers, including the fund, and by the short term (typically one-year) and long-term (typically three- year, five-year and ten-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool would also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. In addition, where portfolio managers invest in a hedge fund managed by the investment manager, they receive a cash reimbursement for the investment management fees charged on their hedge fund investments. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (3) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus, and in some instances the base salary, are paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by a percentage of the management fees on the accounts managed by the portfolio managers, including the fund. The percentage of management fees that fund the bonus pool is based on the short term (typically one-year) and long-term (typically three-year and five-year) performance of those accounts in relation to the relevant peer group universe. Funding for the bonus pool may also include a percentage of any performance fees earned on long/short mutual funds managed by the Team. With Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 34 respect to hedge funds and separately managed accounts that follow a hedge fund mandate, funding for the bonus pool is a percentage of performance fees earned on the hedge funds or accounts managed by the portfolio managers. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Depending upon their job level, RiverSource Investments portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. (4) Wellington Management receives a fee based on the assets under management of the Subadvised Portfolio as set forth in the Subadvisory Agreement between Wellington Management and RiverSource Investments on behalf of the Subadvised Portfolio.. Wellington Management pays its investment professionals out of its total revenues and other resources, including the advisory fees earned with respect to the Subadvised Portfolio. The following information relates to the fiscal year ended December 31, 2009. Wellington Management's compensation structure is designed to attract and retain high-caliber investment professionals necessary to deliver high quality investment management services to its clients. Wellington Management's compensation of the Subadvised Portfolio managers who are primarily responsible for the day-to-day management of the Subadvised Portfolio ("Investment Professionals") includes a base salary and incentive components. The base salary for each Investment Professional who is a partner of Wellington Management is determined by the Managing Partners of Wellington Management. A partner's base salary is generally a fixed amount that may change as a result of an annual review. The base salary for the other Investment Professional is determined by his experience and performance in his role as an Investment Professional. Base salaries for Wellington Management employees are reviewed annually and may be adjusted based on the recommendation of an Investment Professional's manager, using guidelines established by Wellington Management's Compensation Committee, which has final oversight responsibility for base salaries for employees of Wellington Management. Each Investment Professional is eligible to receive an incentive payment based on the revenues earned by Wellington Management from the Subadvised Portfolio managed by the Investment Professional and generally each other account managed by such Investment Professional. Each Investment Professional's incentive payment relating to the Subadvised Portfolio is linked to the gross pre-tax performance of the Subadvised Portfolio managed by the Investment Professional compared to the MSCI EAFE Growth Index (prior to March 1, 2006, the MSCI EAFE Index) over one and three year periods, with an emphasis on three year results. Wellington Management applies similar incentive compensation structures (although the benchmarks or peer groups, time periods and rates may differ) to other accounts managed by the Investment Professionals, including accounts with performance fees. Portfolio-based incentives across all accounts managed by an investment professional can, and typically do, represent a significant portion of an investment professional's overall compensation; incentive compensation varies significantly by individual and can vary significantly from year to year. The investment professionals may also be eligible for bonus payments based on their overall contribution to Wellington Management's business operations. Senior management at Wellington Management may reward individuals as it deems appropriate based on factors other than account performance. Each partner of Wellington Management is eligible to participate in a partner-funded tax qualified retirement plan the contributions to which are made pursuant to an actuarial formula. Mr. Berteaux is a partner of Wellington Management. (5) Portfolio manager compensation is typically comprised of (i) a base salary, (ii) an annual cash bonus, a portion of which may be subject to a mandatory deferral program, and may include (iii) an equity incentive award in the form of stock options and/or restricted stock. The annual cash bonus is paid from a team bonus pool that is based on the performance of the accounts managed by the portfolio management team, which might include mutual funds, wrap accounts, institutional portfolios and hedge funds. The bonus pool is determined by the aggregate market competitive bonus targets for the teams of which the portfolio manager is a member and by the short-term (typically one- year) and long-term (typically three-year) performance of those accounts in relation to applicable benchmarks or the relevant peer group universe. Senior management of RiverSource Investments has the discretion to increase or decrease the size of the part of the bonus pool and to determine the exact amount of each portfolio manager's bonus paid from this portion of the bonus pool based on his/her performance as an employee. RiverSource Investments portfolio managers are provided with a benefits package, including life insurance, health insurance, and participation in a company 401(k) plan, comparable to that received by other RiverSource Investments employees. Certain investment personnel are also eligible to defer a portion of their compensation. An individual making this type of election can allocate the deferral to the returns associated with one or more products they manage or support or to certain other products managed by their investment team. Depending upon their job level, RiverSource Investments Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 35 portfolio managers may also be eligible for other benefits or perquisites that are available to all RiverSource Investments employees at the same job level. CONFLICTS OF INTEREST -- RIVERSOURCE INVESTMENTS: RiverSource Investments portfolio managers may manage one or more mutual funds as well as other types of accounts, including hedge funds, proprietary accounts, separate accounts for institutions and individuals, and other pooled investment vehicles. Portfolio managers make investment decisions for an account or portfolio based on its investment objectives and policies, and other relevant investment considerations. A portfolio manager may manage another account whose fees may be materially greater than the management fees paid by the Fund and may include a performance based fee. Management of multiple funds and accounts may create potential conflicts of interest relating to the allocation of investment opportunities, competing investment decisions made for different accounts and the aggregation and allocation of trades. In addition, RiverSource Investments monitors a variety of areas (e.g., allocation of investment opportunities) and compliance with the firm's Code of Ethics, and places additional investment restrictions on portfolio managers who manage hedge funds and certain other accounts. RiverSource Investments has a fiduciary responsibility to all of the clients for which it manages accounts. RiverSource Investments seeks to provide best execution of all securities transactions and to aggregate securities transactions and then allocate securities to client accounts in a fair and equitable basis over time. RiverSource Investments has developed policies and procedures, including brokerage and trade allocation policies and procedures, designed to mitigate and manage the potential conflicts of interest that may arise from the management of multiple types of accounts for multiple clients. In addition to the accounts noted above, portfolio managers may manage accounts in a personal capacity that may include holdings that are similar to, or the same as, those of the fund. The investment manager's Code of Ethics is designed to address conflicts and, among other things, imposes restrictions on the ability of the portfolio managers and other "investment access persons" to invest in securities that may be recommended or traded in the fund and other client accounts. CONFLICTS OF INTEREST -- WELLINGTON MANAGEMENT: Individual investment professionals at Wellington Management manage multiple accounts for multiple clients. These accounts may include mutual funds, separate accounts (assets managed on behalf of institutions such as pension funds, insurance companies, foundations, or separately managed account programs sponsored by financial intermediaries), bank common trust accounts, and hedge funds. The Investment Professionals generally manage accounts in several different investment styles. These accounts may have investment objectives, strategies, time horizons, tax considerations and risk profiles that differ from those of Seligman International Growth Portfolio (the Subadvised Portfolio). The Investment Professionals make investment decisions for each account, including the Subadvised Portfolio, based on the investment objectives, policies, practices, benchmarks, cash flows, tax and other relevant investment considerations applicable to that account. Consequently, the Investment Professionals may purchase or sell securities, including IPOs, for one portfolio and not another portfolio, and the performance of securities purchased for one account may vary from the performance of securities purchased for other accounts. Alternatively, these accounts may be managed in a similar fashion to the Subadvised Portfolio and thus the accounts may have similar, and in some cases nearly identical, objectives, strategies and/or holdings to that of the Fund. An Investment Professional or other investment professionals at Wellington Management may place transactions on behalf of other accounts that are directly or indirectly contrary to investment decisions made on behalf of the Subadvised Portfolio, or make investment decisions that are similar to those made for the Subadvised Portfolio, both of which have the potential to adversely impact the Portfolio depending on market conditions. For example, an Investment Professional may purchase a security in one account while appropriately selling that same security in another account. Similarly, an Investment Professional may purchase the same security for the Subadvised Portfolio and one or more other accounts at or about the same time, and in those instances the other accounts will have access to their respective holdings prior to the public disclosure of the Subadvised Portfolios' holdings. In addition, some of these accounts have fee structures, including performance fees, which are or have the potential to be higher, in some cases significantly higher, than the fees paid by the Subadvised Portfolio to Wellington Management. Because incentive payments paid by Wellington Management to the Investment Professionals are tied to revenues earned by Wellington Management and, where noted, to the performance achieved by the manager in each account, the incentives associated with any given account may be significantly higher or lower than those associated with other accounts managed by a given Investment Professional. Finally, the Investment Professionals may hold shares or investments in the other pooled investment vehicles and/or other accounts identified above. Wellington Management's goal is to meet its fiduciary obligation to treat all clients fairly and provide high quality investment services to all of its clients. Wellington Management has adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures which it believes address the conflicts associated with managing multiple accounts for multiple clients. In addition, Wellington Management monitors a variety of areas, including compliance with primary account guidelines, the allocation of IPOs, and compliance with the firm's Code of Ethics, and Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 36 places additional investment restrictions on investment professionals who manage hedge funds and certain other accounts. Furthermore, senior investment and business personnel at Wellington Management periodically review the performance of the investment professionals. Although Wellington Management does not track the time an investment professional spends on a single account, Wellington Management does periodically assess whether an investment professional has adequate time and resources to effectively manage the investment professional's various client mandates. SECURITIES OWNERSHIP. The Portfolios are available only to participating insurance companies to fund benefits of variable annuity and variable life insurance contracts and, in respect of Seligman Communications and Information Portfolio Class 2 shares, also to certain qualified pension and retirement plans. As such, a direct ownership of shares in the Portfolios is not available to individual investors, including the portfolio managers. SECURITIES TRANSACTIONS Except as otherwise noted, the description of policies and procedures in this section also applies to any Portfolio subadviser. Subject to policies set by the Board, as well as the terms of the investment management agreements, the investment manager or subadviser is authorized to determine, consistent with a Portfolio's investment objective and policies, which securities will be purchased, held, or sold. In determining where the buy and sell orders are to be placed, the investment manager has been directed to use its best efforts to obtain the best available price and the most favorable execution except where otherwise authorized by the Board. Each Portfolio, the investment manager, any subadviser and RiverSource Fund Distributors, Inc. (principal underwriter and distributor of the RiverSource Family of Funds) has a strict Code of Ethics that prohibits affiliated personnel from engaging in personal investment activities that compete with or attempt to take advantage of planned portfolio transactions for the Portfolios. A Portfolio's securities may be traded on an agency basis with brokers or dealers or on a principal basis with dealers. In an agency trade, the broker- dealer generally is paid a commission. In a principal trade, the investment manager will trade directly with the issuer or with a dealer who buys or sells for its own account, rather than acting on behalf of another client. The investment manager may pay the dealer a commission or instead, the dealer's profit, if any, is the difference, or spread, between the dealer's purchase and sale price for the security. BROKER-DEALER SELECTION In selecting broker-dealers to execute transactions, the investment manager and each subadviser will consider from among such factors as the ability to minimize trading costs, trading expertise, infrastructure, ability to provide information or services, financial condition, confidentiality, competitiveness of commission rates, evaluations of execution quality, promptness of execution, past history, ability to prospect for and find liquidity, difficulty of trade, security's trading characteristics, size of order, liquidity of market, block trading capabilities, quality of settlement, specialized expertise, overall responsiveness, willingness to commit capital and research services provided. The Board has adopted a policy prohibiting the investment manager, or any subadviser, from considering sales of shares of the Portfolios as a factor in the selection of broker-dealers through which to execute securities transactions. On a periodic basis, the investment manager makes a comprehensive review of the broker-dealers and the overall reasonableness of their commissions, including review by an independent third-party evaluator. The review evaluates execution, operational efficiency, and research services. COMMISSION DOLLARS Broker-dealers typically provide a bundle of services including research and execution of transactions. The research provided can be either proprietary (created and provided by the broker-dealer) or third party (created by a third party but provided by the broker-dealer). Consistent with the interests of the Portfolio, the investment manager and each subadviser may use broker-dealers who provide both types of research products and services in exchange for commissions, known as "soft dollars," generated by transactions in fund accounts. The receipt of research and brokerage products and services is used by the investment manager, and by each subadviser, to the extent it engages in such transactions, to supplement its own research and analysis activities, by receiving the views and information of individuals and research staffs of other securities firms, and by gaining access to specialized expertise on individual companies, industries, areas of the economy and market factors. Research and brokerage products and services may include reports on the economy, industries, sectors and individual companies or issuers; statistical information; accounting and tax law interpretations; political analyses; reports on legal developments affecting portfolio securities; information on technical market actions; credit analyses; on-line quotation systems; risk measurement; analyses of corporate Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 37 responsibility issues; on-line news services; and financial and market database services. Research services may be used by the investment manager in providing advice to multiple RiverSource accounts, including the Portfolios (or by any subadviser to any other client of the subadviser) even though it is not possible to relate the benefits to any particular account or Portfolio. On occasion, it may be desirable to compensate a broker for research services or for brokerage services by paying a commission that might not otherwise be charged or a commission in excess of the amount another broker might charge. The Board has adopted a policy authorizing the investment manager to do so, to the extent authorized by law, if the investment manager or subadviser determines, in good faith, that such commission is reasonable in relation to the value of the brokerage or research services provided by a broker or dealer, viewed either in the light of that transaction or the investment manager's or subadviser's overall responsibilities with respect to a Portfolio and the other funds or accounts for which it acts as investment manager (or by any subadviser to any other client of that subadviser). As a result of these arrangements, some portfolio transactions may not be effected at the lowest commission, but overall execution may be better. The investment manager and each subadviser have represented that under its procedures the amount of commission paid will be reasonable and competitive in relation to the value of the brokerage services and research products and services provided. The investment manager or a subadviser may use step-out transactions. A "step- out" is an arrangement in which the investment manager or subadviser executes a trade through one broker-dealer but instructs that broker-dealer to step-out all or a part of the trade to another broker-dealer. The second broker-dealer will clear and settle, and receive commissions for, the stepped-out portion. The investment manager or subadviser may receive research products and services in connection with step-out transactions. Use of Portfolio commissions may create potential conflicts of interest between the investment manager or subadviser and a Portfolio. However, the investment manager and each subadviser has policies and procedures in place intended to mitigate these conflicts and ensure that the use of Portfolio commissions falls within the "safe harbor" of Section 28(e) of the Securities Exchange Act of 1934. Some products and services may be used for both investment decision-making and non-investment decision-making purposes ("mixed use" items). The investment manager and each subadviser, to the extent it has mixed use items, has procedures in place to assure that Portfolio commissions pay only for the investment decision-making portion of a mixed-use item. TRADE AGGREGATION AND ALLOCATION Generally, orders are processed and executed in the order received. When a Portfolio buys or sells the same security as another portfolio, fund, or account, the investment manager or subadviser carries out the purchase or sale pursuant to policies and procedures designed in such a way believed to be fair to the Portfolio. Purchase and sale orders may be combined or aggregated for more than one account if it is believed it would be consistent with best execution. Aggregation may reduce commission costs or market impact on a per- share and per-dollar basis, although aggregation may have the opposite effect. There may be times when not enough securities are received to fill an aggregated order, including in an initial public offering, involving multiple accounts. In that event, the investment manager and each subadviser has policies and procedures designed in such a way believed to result in a fair allocation among accounts, including a Portfolio. From time to time, different portfolio managers with the investment manager may make differing investment decisions related to the same security. However, with certain exceptions for funds managed using strictly quantitative methods, a portfolio manager or portfolio management team may not sell a security short if the security is owned in another portfolio managed by that portfolio manager or portfolio management team. On occasion, a fund may purchase and sell a security simultaneously in order to profit from short-term price disparities. The investment manager has portfolio management teams in its Minneapolis and Los Angeles offices that may share research information regarding leveraged loans. The investment manager operates separate and independent trading desks in these locations for the purpose of purchasing and selling leveraged loans. As a result, the investment manager does not aggregate orders in leveraged loans across portfolio management teams. For example, funds and other client accounts being managed by these portfolio management teams may purchase and sell the same leveraged loan in the secondary market on the same day at different times and at different prices. There is also the potential for a particular account or group of accounts, including a fund, to forego an opportunity or to receive a different allocation (either larger or smaller) than might otherwise be obtained if the investment manager were to aggregate trades in leveraged loans across the portfolio management teams. Although the investment manager does not aggregate orders in leveraged loans across its portfolio management teams in Minneapolis and Los Angeles, it operates in this structure subject to its duty to seek best execution. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 38 BROKERAGE COMMISSIONS PAID TO BROKERS AFFILIATED WITH THE INVESTMENT MANAGER Affiliates of the investment manager may engage in brokerage and other securities transactions on behalf of a Portfolio according to procedures adopted by the Board and to the extent consistent with applicable provisions of the federal securities laws. Subject to approval by the Board, the same conditions apply to transactions with broker-dealer affiliates of any subadviser. The investment manager will use an affiliate only if (i) the investment manager determines that the Portfolio will receive prices and executions at least as favorable as those offered by qualified independent brokers performing similar brokerage and other services for the Portfolio and (ii) the affiliate charges the Portfolio commission rates consistent with those the affiliate charges comparable unaffiliated customers in similar transactions and if such use is consistent with terms of the Management Agreement. For the years ended December 31, 2009, 2008 and 2007, the funds, except for International Growth, did not execute any portfolio transactions with, and therefore did not pay any commissions to, any broker affiliated with either the funds, the investment manager, Wellington Management, or the distributor. For the year ended December 31, 2009, International Growth had $615,638 in transactions and $504 in commissions specifically directed to forms in exchange for research services. TOTAL BROKERAGE COMMISSIONS Brokerage commissions of each Portfolio (except Seligman Investment Grade Fixed Income Portfolio) for the years ended December 31, 2009, 2008 and 2007, are set forth in the following table:
TOTAL BROKERAGE COMMISSIONS PAID FOR EXECUTION AND STATISTICAL SERVICES(1)(2) ------------------------------ PORTFOLIO 2009 2008 2007 --------- -------- -------- -------- Capital $ 28,350 $ 45,616 $ 49,328 Common Stock 2,527 12,871 21,313 Communications and Information 182,446 155,400 249,116 Global Technology 24,679 30,584 45,754 International Growth 10,509 24,441 24,729 Large-Cap Value 1,213 1,966 1,977 Smaller-Cap Value 54,981 150,656 172,691
(1) Not including any spreads on principal transactions on a net basis. (2) Changes in commissions paid from year to year result from, among other things, changes in portfolio turnover. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 39 REGULAR BROKER-DEALERS During the year ended December 31, 2009, certain of the Portfolios of the Fund acquired securities of its regular brokers or dealers (as defined in Rule 10b-1 under the 1940 Act) or of their parents, as follows:
VALUE OF SECURITIES OWNED FUND NAME OF ISSUER AT END OF FISCAL YEAR -------------------------------------------- ---------------------------- ------------------------- Capital None N/A ------------------------------------------------------------------------------------------------------ Common Stock Citigroup Funding $ 35,612 Franklin Resources 5,584 Goldman Sachs Group 87,458 Lehman Brothers Holdings* 9,636 Morgan Stanley 39,664 PNC Financial Services Group 24,547 Charles Schwab 9,749 ------------------------------------------------------------------------------------------------------ Communications and Information None N/A ------------------------------------------------------------------------------------------------------ Global Technology None N/A ------------------------------------------------------------------------------------------------------ International Growth Credit Suisse Group 25,152 ------------------------------------------------------------------------------------------------------ Investment Grade Fixed Income Citigroup 10,054 Lehman Brothers Holdings* 3,113 ------------------------------------------------------------------------------------------------------ Large-Cap Value JPMorgan Chase & Co. 104,175 Morgan Stanley 71,040 ------------------------------------------------------------------------------------------------------ Smaller-Cap Value None N/A ------------------------------------------------------------------------------------------------------
* Subsequent to Aug. 31, 2008, Lehman Brothers Holdings filed a Chapter 11 bankruptcy petition. CAPITAL STOCK AND OTHER SECURITIES CAPITAL STOCK The Fund is authorized to issue, create and classify shares of capital stock in separate series without further action by shareholders. The Fund presently offers nine separate series of common stock, each of which maintains a separate investment portfolio, designated as follows: Seligman Capital Portfolio, Seligman Common Stock Portfolio, Seligman Communications and Information Portfolio, Seligman Global Technology Portfolio, Seligman International Growth Portfolio, Seligman Investment Grade Fixed Income Portfolio, Seligman Large-Cap Value Portfolio and Seligman Smaller-Cap Value Portfolio. Shares of capital stock of each Portfolio have a par value of $.001 and are divided into two classes, designated as Class 1 common stock and Class 2 common stock. Each share of a Fund's Class 1 and Class 2 common stock is equal as to earnings, assets and voting privileges, except that each class bears its own separate shareholder servicing and, potentially, certain other class expenses and has exclusive voting rights with respect to any matter to which a separate vote of any class is required by the 1940 Act or applicable state law. The Fund has adopted a Plan ("Multiclass Plan") pursuant to Rule 18f-3 under the 1940 Act permitting the issuance and sale of multiple classes of common stock. In accordance with the Fund's Articles of Incorporation, the Board of Directors may authorize the creation of additional classes of common stock with such characteristics as are permitted by the Multiclass Plan and Rule 18f-3. The 1940 Act requires that where more than one class exists, each class must be preferred over all other classes in respect of assets specifically allocated to such class. Shares have non-cumulative voting rights for the election of directors. Each outstanding share will be fully paid and non-assessable, and freely transferable. There are no liquidation, conversion or prescriptive rights. In accordance with current policy of the SEC, holders of the Accounts have the right to instruct the applicable participating insurance companies as to voting of Portfolio shares held by such Accounts on all matters to be voted on by Fund shareholders. Such rights may change in accordance with changes in policies of the SEC. Voting rights of the participants in the Accounts of participating insurance companies are more fully set forth in the prospectuses or disclosure documents relating to those Accounts, which should be read together with each Portfolio's Prospectus. A Plan's trustees generally holds the Portfolio shares sold to a Qualified Plan. The responsibility to vote these shares varies from plan to plan. Generally, more Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 40 detailed information regarding the voting responsibilities relating to a specific Plan's assets can be found in the plan's disclosure documents. These documents should be read in conjunction with each Portfolio's Prospectus. The Directors of the Fund have authority to create additional portfolios and to classify and reclassify shares of capital stock without further action by shareholders, and additional series may be created in the future. Under Maryland corporate law, the Fund is not required to hold annual meetings and it is the intention of the Fund's Directors not to do so. However, special meetings of shareholders will be held for action by shareholders as may be required by the 1940 Act, the Fund's Articles of Incorporation and By-laws, or Maryland corporate law. OTHER SECURITIES The Fund has no authorized securities other than the above-mentioned common stock. PURCHASE, REDEMPTION, AND PRICING OF SHARES PURCHASE OF SHARES Shares of the Fund's Portfolios are only being offered to: (1) Accounts established by participating insurance companies to fund benefits of the Contracts and (2) with respect to Class 2 shares of Seligman Communications and Information Portfolio, Qualified Plans. The Accounts may invest in shares of the Portfolios in accordance with allocation instructions received from the owners of the Contracts. A more detailed description of such allocations rights and information on how to purchase or surrender a Contract, as well as sales charges and other expenses imposed by the Contracts on their owners, are further described in the separate prospectuses and disclosure documents issued by the participating insurance companies and accompanying each Portfolio's Prospectus. Qualified Plans may invest in shares of Seligman Communications and Information Portfolio in accordance with applicable law and their own governing documents. Beneficiaries of such Plans are encouraged to consult their plan administrators for additional information. The Fund reserves the right to reject any order for the purchase of shares of the Fund's Portfolios. OFFERING PRICE The net asset value per share of each Portfolio is determined as of the close of regular trading on the New York Stock Exchange ("NYSE") (normally, 4:00 p.m. Eastern time) each day that the NYSE is open. Currently, the NYSE is closed on New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day. VALUING FUND SHARES FOR FUNDS OTHER THAN MONEY MARKET FUNDS. A Portfolio's securities are valued as follows as of the close of business of the New York Stock Exchange (the "Exchange"): - Securities traded on a securities exchange for which a last-quoted sales price is readily available are valued at the last-quoted sales price on the exchange where such security is primarily traded. - Securities traded on a securities exchange for which a last-quoted sales price is not readily available are valued at the mean of the closing bid and asked prices, looking first to the bid and asked prices on the exchange where the security is primarily traded and, if none exist, to the over-the-counter market. - Securities included in the NASDAQ National Market System are valued at the last-quoted sales price in this market. - Securities included in the NASDAQ National Market System for which a last- quoted sales price is not readily available, and other securities traded over-the-counter but not included in the NASDAQ National Market System are valued at the mean of the closing bid and asked prices. - Futures and options traded on major exchanges are valued at the last- quoted sales price on their primary exchange. - Foreign securities traded outside the United States are generally valued as of the time their trading is complete, which is usually different from the close of the Exchange. Foreign securities quoted in foreign currencies are translated into U.S. dollars utilizing spot exchange rates at the close of regular trading on the Exchange. - Occasionally, events affecting the value of securities occur between the time the primary market on which the securities are traded closes and the close of the Exchange. If events materially affect the value of securities, the securities will be valued at their fair value according to procedures decided upon in good faith by the Board. This occurs most commonly with foreign securities, but may occur in other cases. The fair value of a security is likely to be different from the quoted or published price. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 41 - Short-term securities maturing more than 60 days from the valuation date are valued at the readily available market price or approximate market value based on current interest rates. Short-term securities 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 determined by systematically increasing the carrying value of a security if acquired at a discount, or reducing the carrying value if acquired at a premium, so that the carrying value is equal to maturity value on the maturity date. - Securities without a readily available market price and securities for which the price quotations or valuations received from other sources are deemed unreliable or not reflective of market value are valued at fair value as determined in good faith by the Board. The Board is responsible for selecting methods it believes provide fair value. - When possible, bonds are valued at an evaluated bid by a pricing service independent from the funds. If a valuation of a bond is not available from a pricing service, the bond will be valued by a dealer knowledgeable about the bond if such a dealer is available. The assets of funds-of-funds consist primarily of shares of the underlying funds, which are valued at their NAVs. Other securities held by funds-of-funds are valued as described above. REDEMPTION IN KIND The procedures for redemption of Fund shares under ordinary circumstances are set forth in each Portfolio's Prospectus. In unusual circumstances, payment may be postponed, if: (i) the orderly liquidation of portfolio securities is prevented by the closing of, or restricted trading on, the NYSE; (ii) during periods of emergency which make the disposal by the Fund of its shares impracticable or it is not reasonably practicable for the Fund's Portfolios to fairly determine the value of the Portfolios' net assets; or (iii) such other periods as ordered by the SEC for the protection of the Portfolio's shareholders. It is not anticipated that shares will be redeemed for other than cash or its equivalent. However, the Fund reserves the right to pay the redemption price to the accounts in whole or in part, by a distribution in kind from the Portfolio's investment portfolio, in lieu of cash, taking the securities at their value employed for determining such redemption price, and selecting the securities in such manner as the Board of Directors may deem fair and equitable. The Fund reserves the right to make such an in-kind distribution for redemptions in excess of 15% of a Portfolio. If shares are redeemed in this way, brokerage costs will ordinarily be incurred by the accounts in converting such securities into cash. Participating Plans will also be subject to the policies and procedures set forth above. ARRANGEMENTS PERMITTING FREQUENT TRADING OF FUND SHARES The Fund has no arrangements with any person to permit frequent trading of a Portfolio's shares. TAXATION OF THE FUND Each Portfolio of the Fund is qualified and intends to continue to qualify for tax treatment as a "regulated investment company" under certain provisions of the Internal Revenue Code of 1986, as amended. Under such provisions, the Fund's Portfolios will be subject to federal income tax only with respect to undistributed net investment income and net realized capital gain. Each of the Fund's Portfolios will be treated as a separate entity. Dividends and capital gain distributions from each of the other Portfolios will be declared and paid annually and will be reinvested at the net asset value of such shares of the Portfolio that declared such dividend or capital gain distribution. Information regarding the tax consequences of an investment in the Fund's Portfolios is contained in the separate prospectuses or disclosure documents of the Accounts, which should be read together with this SAI. For federal income tax purposes, certain funds had total capital loss carryovers at the end of the most recent fiscal period that, if not offset by subsequent capital gains, will expire as provided in the table below. Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses 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 funds are permitted to treat net capital losses realized between November 1 and its fiscal year end ("post-October loss") as occurring on the first day of the following tax year. The total capital loss carryovers below include post-October losses, if applicable. It Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 42 is unlikely that the Board will authorize a distribution of any net realized capital gains until the available capital loss carryover has been offset or has expired except as required by Internal Revenue Service rules.
AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT AMOUNT TOTAL CAPITAL EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING EXPIRING PORTFOLIO LOSS CARRYOVERS IN 2010 IN 2011 IN 2012 IN 2013 IN 2014 IN 2015 IN 2016 --------- --------------- ---------- ---------- -------- -------- -------- -------- ---------- Capital $ 9,288,464 $6,090,929 $ 0 $0 $ 0 $ 0 $0 $1,961,725 Common Stock $ 3,461,085 $ 519,960 $ 366,561 $0 $ 0 $ 0 $0 $ 632,912 Communications and Information $15,686,110 $7,829,524 $5,578,202 $0 $ 0 $ 0 $0 $2,165,560 Global Technology $ 5,915,187 $4,941,506 $ 108,762 $0 $ 0 $ 0 $0 $ 544,777 International Growth $ 2,134,598 $ 481,073 $ 0 $0 $ 0 $ 0 $0 $1,325,858 Investment Grade Fixed Income $ 145,093 $ 0 $ 0 $0 $56,149 $75,089 $0 $ 0 Large-Cap Value $ 127,528 $ 0 $ 0 $0 $ 0 $ 0 $0 $ 0 Smaller-Cap Value $14,399,624 $ 0 $ 0 $0 $ 0 $ 0 $0 $ 0 AMOUNT AMOUNT EXPIRING EXPIRING PORTFOLIO IN 2017 IN 2018 --------- ----------- -------- Capital $ 1,192,247 $ 43,563 Common Stock $ 1,924,322 $ 17,330 Communications and Information $ 112,824 $ 0 Global Technology $ 320,142 $ 0 International Growth $ 249,980 $ 77,687 Investment Grade Fixed Income $ 10,566 $ 3,289 Large-Cap Value $ 121,250 $ 6,278 Smaller-Cap Value $14,150,615 $249,009
UNDERWRITERS DISTRIBUTION OF SECURITIES The Fund and the distributor are parties to a Distribution and Shareholder Servicing Agreement under which the distributor acts as the exclusive agent for distribution of shares of the Portfolios. The distributor accepts orders for the purchase of Portfolio shares, which are offered continuously. COMPENSATION The distributor, which is an affiliated person of RiverSource Investments, which is an affiliated person of the Fund, did not receive any commissions or other compensation from the Fund during the fiscal year ended December 31, 2009. PAYMENTS TO UNAFFILIATED AND AFFILIATED INSURANCE COMPANIES The Portfolios are sold as underlying investment options of variable insurance policies and annuity contracts (products) offered by unaffiliated insurance companies and affiliated insurance companies, such as RiverSource Life Insurance Company (RiverSource Life) and its wholly-owned subsidiary, RiverSource Life Insurance Co. of New York (collectively, the Companies). RiverSource Investments and its affiliates make or support payments out of their own resources to the Companies, as a result of the Companies including the Portfolios as investment options in the products. These products may also include unaffiliated mutual funds as investment options, and the Companies receive payments from the sponsors of these unaffiliated mutual funds as a result of including these funds in the products. Employees of Ameriprise Financial and its affiliates, including employees of affiliated broker-dealers, may be separately incented to recommend or sell shares of the fund, as employee compensation and business unit operating goals at all levels are tied to the company's success. Certain employees, directly or indirectly, may receive higher compensation and other benefits as investment in the fund increases. In addition, management, sales leaders and other employees may spend more of their time and resources promoting Ameriprise Financial and its subsidiary companies, including RiverSource Investments, and the distributor, and the products they offer, including the Portfolios. The amount of payment from sponsors of unaffiliated funds or allocation from RiverSource Investments and its affiliates varies, and may be significant. The amount of the payment or allocation the Companies receive from a fund may create an incentive for the Companies and may influence their decision regarding which funds to include in a product. These arrangements are sometimes are referred to as "revenue sharing payments," and are in addition to any 12b-1 distribution and/or service fees or other amounts paid by the funds for account maintenance, subaccounting or recordkeeping services provided directly by the Companies. See the product prospectus for more information regarding these payments and allocations. FINANCIAL STATEMENTS The Annual Report to Shareholders for the year ended December 31, 2009 for the Fund's Portfolios contains a portfolio of the investments of each Portfolio as of December 31, 2009, as well as certain other financial information as of this date. The financial statements and notes included in the Annual Report were audited by the independent registered accounting firm, Ernst & Young LLP, 220 South 6th Street, Suite 1400 Minneapolis, MN55402-4509, and are incorporated herein by reference. The financial statements for periods ended on or before Dec. 31 , 2008 were audited by other auditors. The Annual Report and Mid-Year Report will be furnished without charge to investors who request copies of this SAI. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 43 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 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 defendant's 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 of 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 ("Supreme Court"), asking the Supreme Court to stay the District Court proceedings while the 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. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in this case and remanded to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. 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' Board of Directors/Trustees. In September 2006, the Office of the Attorney General of the State of New York ("NYAG") commenced a civil action in New York State Supreme Court against J. & W. Seligman & Co. Incorporated ("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 is and has 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 as follows: $150,000 to Seligman Global Growth Fund, $550,000 to Seligman Global Smaller Companies Fund, $7.7 million to Seligman Communications and Information Fund and $2.9 million to Seligman Global Technology Fund. These settlement payments are reflected in the net asset values of these 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 Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 44 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. GENERAL INFORMATION CUSTODIANS. The funds' securities and cash are held pursuant to a custodian agreement with JPMorgan Chase Bank, N.A. (JPMorgan), 1 Chase Manhattan Plaza, 19th Floor, New York, NY 10005. The custodian is permitted to deposit some or all of their securities in central depository systems as allowed by federal law. For its services, each fund pays its custodian a maintenance charge and a charge per transaction in addition to reimbursing the custodian's out-of-pocket expenses. As part of this arrangement, securities purchased outside the United States are maintained in the custody of various foreign branches of JPMorgan or in other financial institutions as permitted by law and by the fund's custodian agreement. INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM. Ernst & Young LLP, Independent Registered Public Accounting Firm, has been selected as auditors of the Fund. Their address is 220 S. 6th Street #1400, Minneapolis, MN 55402. On March 11, 2009, the Audit Committee of the Board of Directors recommended, and the Board of Directors, including a majority of those members who are not "interested persons" of the Fund (as defined in the 1940 Act), approved Ernst & Young LLP as the independent registered public accounting firm to serve as auditors for the Fund. Ernst & Young LLP began service as the Fund's independent registered public accounting firm effective March 18, 2009. For the fiscal years ended December 31, 2008 and December 31, 2007, the Fund's independent registered public accounting firm was Deloitte & Touche LLP. During the Fund's fiscal years ended December 31, 2008 and 2007 and the subsequent interim period preceding Ernst & Young LLP's appointment, neither the Fund nor anyone on behalf of the Fund consulted with Ernst & Young LLP on any matter regarding: (1) the application of accounting principles to a specified transaction, either completed or proposed, or the type of audit opinion that might be rendered on the Fund's financial statements, and neither a written report was provided to the Fund nor oral advice was provided that Ernst & Young LLP concluded was an important factor considered by the Fund in reaching a decision as to the accounting, auditing or financial reporting issue; or (2) either a disagreement or a reportable event, as defined in Item 304(a)(1)(iv) and (v) of Regulation S-K, respectively. Seligman Portfolio Funds Statement of Additional Information - April 30, 2010 Page 45 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 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 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 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 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 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 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 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 PART C. OTHER INFORMATION Item 28. Exhibits (a)(1) Articles Supplementary in respect of Seligman Smaller-Cap Value Portfolio filed December 17, 2004, effective January 1, 2005. (Incorporated by reference to Registrant's Post-Effective Amendment No. 34 filed on April 29, 2005.) (a)(2) Articles of Amendment to the Articles of Amendment and Restatement in respect of Seligman Income and Growth Portfolio (formerly, Seligman Income Portfolio) filed April 24, 2003. (Incorporated by reference to Registrant's Post-Effective Amendment No. 32 filed on April 16, 2004.) (a)(3) Form of Articles of Amendment and Restatement of Articles of Incorporation. (Incorporated by reference to Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.) (a)(4) Articles Supplementary in respect of Seligman Large-Cap Growth Portfolio. (Incorporated by reference to Registrant's Post-Effective Amendment No. 25 filed on April 28, 1999.) (a)(5) Articles Supplementary in respect of Class 2 shares of the Portfolios. (Incorporated by reference to Registrant's Post-Effective Amendment No. 27 filed on April 28, 2000.) (a)(6) Articles of Amendment dated April 24, 2002, in respect of Seligman Investment Grade Fixed Income Portfolio (formerly, Seligman Bond Portfolio). (Incorporated by reference to Registrant's Post-Effective Amendment No. 29 filed on April 30, 2002.) (b) Amended and Restated By-laws of Registrant. (Incorporated by reference to Registrant's Post-Effective Amendment No. 36 filed on April 24, 2006). (c) Stock Certificate: Not applicable. (d)(1) Investment Management Services Agreement, between Registrant and RiverSource Investments, LLC, dated Nov. 7, 2008, amended and restated April 6, 2010, is filed electronically herewith as Exhibit (d)(1) to Registrant's Post-Effective Amendment No. 45 to Registration Statement No. 33-15253. (d)(2) Form of Subadvisory Agreement dated November 7, 2008 between the Registrant, RiverSource Investments, LLC and Wellington Management Company LLP, in respect of Seligman International Growth Portfolio filed electronically on or about April 30, 2009 as Exhibit (d)(1) to Registrant's Post-Effective Amendment No. 43 to Registration Statement No. 33-15253 is incorporated by reference. (e) Distribution Agreement between Registrant and RiverSource Fund Distributors, Inc., dated May 1, 2009, amended and restated April 6, 2010 is filed electronically on or about April 29, 2010 as Exhibit (e) to RiverSource Variable Series Trust Post-Effective Amendment No. 9 to Registration Statement No. 333-146374 is incorporated by reference. (f) Deferred Compensation Plan, amended and restated Jan. 1, 2009, filed electronically on or about Jan. 27, 2009 as Exhibit (f) to RiverSource Equity Series, Inc. Post-Effective Amendment No. 105 to Registration Statement No. 2-13188 is incorporated by reference. (g) Form of Master Global Custody Agreement with JP Morgan Chase Bank, N.A. filed electronically on or about Dec. 23, 2008 as Exhibit (g) to RiverSource International Mangers, Inc. Post-Effective Amendment No. 18 to Registration Statement No. 333-64010 is incorporated by reference. (h)(1) Administrative Services Agreement, dated Oct. 1, 2005, amended and restated April 6, 2010, between Registrant and Ameriprise Financial, Inc. filed electronically on or about April 29, 2010 as Exhibit (h)(1) to RiverSource Series Trust Post-Effective Amendment No. 10 to Registration Statement No. 333-131683 is incorporated by reference. (h)(2) Transfer Agency and Servicing Agreement, dated November 8, 2007, amended and restated April 6, 2010, between Registrant and RiverSource Service Corporation filed electronically on or as Exhibit (h)(2) to Registrant's Post-Effective Amendment No. 9 to Registration Statement No. 333-146374. (h)(3) Master Fee Cap/Fee Waiver Agreement, dated Oct. 1, 2005, amended and restated April 6, 2010, between RiverSource Investments, LLC, Ameriprise Financial, Inc., RiverSource Service Corporation, RiverSource Fund Distributors, Inc. and the Registrant filed electronically on or about April 29, 2010 as Exhibit (h)(4) to RiverSource Series Trust Post-Effective Amendment No. 10 to Registration Statement No. 333-131683 is incorporated by reference. (h)(4) License Agreement, effective May 1, 2006, amended and restated as of Nov. 12, 2008, between Ameriprise Financial, Inc. and RiverSource Family of Funds filed electronically on or about Feb. 27, 2009 as Exhibit (h)(4) to RiverSource Variable Series Trust Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (i) Opinion and consent of counsel as to the legality of the securities being registered is filed electronically herewith. (j)(1) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP) is filed electronically herewith. (j)(2) Consent of Independent Registered Public Accounting Firm (Deloitte& Touche LLP) is filed electronically herewith. (k) Omitted Financial Statements: Not Applicable. (l)(1) Form of Investment Letter of the Registrant on behalf of the Class 2 shares of the Portfolios. (Incorporated by reference to Registrant's Post-Effective Amendment No. 27 filed on April 28, 2000.) (l)(2) Form of Investment Letter on behalf of Registrant's Seligman Large-Cap Value Portfolio. (Incorporated by reference to Registrant's Post-Effective Amendment No. 25 filed on April 28, 1999.) (l)(3) Form of Investment Letter on behalf of Registrant's Seligman Smaller-Cap Value Portfolio. (Incorporated by reference to Registrant's Post-Effective Amendment No. 25 filed on April 28, 1999.) (l)(4) Form of Purchase Agreement on behalf of Registrant's Seligman Capital Portfolio, Seligman Cash Management Portfolio, Seligman Common Stock Portfolio and Seligman Investment Grade Fixed Income Portfolio (formerly, Seligman Bond Portfolio). (Incorporated by reference to Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.) (l)(5) Investment Letter on behalf of Registrant's Seligman International Growth Portfolio. (Incorporated by reference to Registrant's Post-Effective Amendment No. 22 filed on April 28, 1998.) (m) Plan and Agreement of Distribution between Registrant and RiverSource Fund Distributors, Inc., dated May 1, 2009, amended and restated April 6, 2010 filed electronically on or about April 29, 2010 as Exhibit (m) to RiverSource Variable Series Trust Post-Effective Amendment No. 9 to Registration Statement No. 333-146374 is incorporated by reference. (n) Rule 18f - 3(d) Plan, amended and restated April 6, 2010, filed electronically on or about April 29, 2010 as Exhibit (n) to RiverSource Variable Series Trust Post-Effective Amendment No. 9 to Registration Statement No. 333-146374 is incorporated by reference. (o) Reserved. (p)(1) Code of Ethics adopted under Rule 17j-1 for Registrant filed electronically on or about Feb. 27, 2009 as Exhibit (p)(1) to Registrant's Post-Effective Amendment No. 4 to Registration Statement No. 333-146374 is incorporated by reference. (p)(2) Code of Ethics adopted under Rule 17j-1 for Registrant's principal underwriter, dated April 2008, filed electronically on or about April 25, 2008 as Exhibit (p)(2) to Registrant's Post-Effective Amendment No. 3 to Registration Statement No. 333-146374 is incorporated by reference. (p)(3) Code of Ethics adopted under Rule 17j-1 for Registrant's investment adviser, dated Nov. 15, 2009, filed electronically on or about Nov. 30, 2009 as Exhibit (p)(3) to RiverSource Tax-Exempt Income Series, Inc. Post-Effective Amendment No. 51 to Registration Statement No. 2-63552 is incorporated by reference. (p)(4) Code of Ethics adopted under Rule 17j-1 for Seligman International Growth Portfolio's Subadviser Wellington Management Company LLP. filed electronically on or about March 2, 2009 as Exhibit (p)(4) to Seligman Global Fund Series, Inc. Post-Effective Amendment No. 48 to Registration Statement No. 33-44186 is incorporated by reference. (q) Directors/Trustees Power of Attorney to sign Amendments to this Registration Statement, dated April 6, 2010, is filed electronically herewith as Exhibit (q) to Registrant's Post-Effective Amendment No. 45 Registration Statement No. 33-15253. Item 29. Persons Controlled by or Under Common Control with Registrant. RiverSource Investments, LLC, ("RiverSource Investments"), as sponsor of the RiverSource Family of Funds, which includes Seligman branded funds, may make initial capital investments in funds (seed accounts). RiverSource Investments also serves as investment manager of certain funds-of-funds that invest primarily in shares of affiliated funds (the "underlying funds"). RiverSource Investments does not make initial capital investments or invest in underlying funds for the purpose of exercising control. However, since these ownership interests may be significant, in excess of 25%, such that RiverSource Investments may be deemed to control certain funds, procedures have been put in place to assure that public shareholders determine the outcome of all actions taken at shareholder meetings. Specifically, RiverSource Investments (which votes proxies for the seed accounts) and the Boards of Directors or Trustees of the underlying funds (which votes proxies for the underlying funds) vote on each proposal in the same proportion that other shareholders vote on the proposal. Item 30. Indemnification. Reference is made to the provisions of Article Eleventh of Registrant's Amended and Restated Articles of Incorporation filed as Exhibit 24(b)(1) of Registrant's Post-Effective Amendment No. 22 to the Registration Statement filed on April 28, 1998 and Article X of Registrant's Amended and Restated By-laws filed as Exhibit Item 23(b) of Post-Effective Amendment No. 36 filed on April 24, 2006. Insofar as indemnification for liabilities arising under the Securities Act of 1933, as amended, may be permitted to directors, officers and controlling persons of the registrant pursuant to the foregoing provisions, or otherwise, the Registrant has been advised by the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the registrant of expenses incurred or paid by a director, officer or controlling person of the Registrant in the successful defense of any action, suit or proceeding) is asserted by such director, officer or controlling person in connection with the securities being registered, the Registrant will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Act and will be governed by the final adjudication of such issue. Item 31. Business and Other Connections of the Investment Adviser (RiverSource Investments, LLC) The following are directors and principal officers of RiverSource Investments, LLC who are directors and/or officers of one or more other companies:
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Neysa M. Alecu, American Enterprise Investment 70400 AXP Financial Center, Anti-Money Laundering Officer and Anti-Money Laundering Services Inc. Minneapolis, MN 55474 Identity Theft Prevention Officer Officer Ameriprise Auto & Home 3500 Packerland Drive Anti-Money Laundering Officer and Insurance Agency, Inc. De Pere, WI 54115 Identity Theft Prevention Officer Ameriprise Bank, FSB 7 World Trade Center Bank Secrecy Act/Anti-Money 250 Greenwich Street, Laundering Officer Suite 3900 New York, NY 10007 Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Anti-Money Laundering Officer and Minneapolis, MN 55474 Identity Theft Prevention Officer Ameriprise Financial Services, 5221 Ameriprise Financial Anti-Money Laundering Officer and Inc. Center, Minneapolis, MN 55474 Identity Theft Prevention Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Anti-Money Laundering Officer Minneapolis, MN 55474 IDS Capital Holdings Inc. Anti-Money Laundering Officer IDS Management Corporation Anti-Money Laundering Officer Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Anti-Money Laundering Officer Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Anti-Money Laundering Officer and Center, Minneapolis, MN 55474 Identity Theft Prevention Officer RiverSource Life Insurance 829 Ameriprise Financial Center, Anti-Money Laundering Officer and Company Minneapolis, MN 55474 Identity Theft Prevention Officer RiverSource Life Insurance 20 Madison Ave. Ext. Identity Theft Prevention Officer Company of New York Albany, NY 12005 RiverSource Service 734 Ameriprise Financial Center, Anti-Money Laundering Officer and Corporation Minneapolis, MN 55474 Identity Theft Prevention Officer
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Patrick Thomas Ameriprise Trust Company 200 Ameriprise Financial Center, Director, Senior Vice President Bannigan, Minneapolis, MN 55474 Director and Senior Vice President - Asset Management, Products and Marketing J. & W. Seligman & Co. 100 Park Avenue Director, Senior Vice President - Incorporated New York, NY 10017 Asset Management, Products & Marketing Group RiverSource Distributors, Inc. 50611 Ameriprise Financial Director and Vice President Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Director and Vice President Inc. RiverSource Service Corporation 734 Ameriprise Financial Center, Director Minneapolis, MN 55474 RiverSource Services, Inc. Director and Vice President
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Walter S. Berman, Advisory Capital Strategies Treasurer Treasurer Group Inc. American Enterprise Investment 70400 AXP Financial Center, Treasurer Services Inc. Minneapolis, MN 55474 Ameriprise Auto & Home 3500 Packerland Drive Treasurer Insurance Agency Inc. De Pere, WI 54115 Ameriprise Bank, FSB 9393 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 Ameriprise Captive Insurance Director and Treasurer Company Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Director, Executive Vice President, Minneapolis, MN 55474 Chief Financial Officer and Treasurer Ameriprise Financial Services, 5221 Ameriprise Financial Director and Treasurer Inc. Center, Minneapolis, MN 55474 Ameriprise Holdings, Inc. Chief Financial Officer Ameriprise Insurance Company 3500 Packerland Drive Treasurer De Pere, WI 54115 IDS Capital Holdings Inc. Treasurer IDS Management Corporation Treasurer IDS Property Casualty 3500 Packerland Drive Treasurer Insurance Company De Pere, WI 54115 Investors Syndicate Vice President and Treasurer Development Corporation J. & W. Seligman & Co. 100 Park Avenue Treasurer Incorporated New York, NY 10017 RiverSource CDO Seed Treasurer Investments, LLC RiverSource Distributors, Inc. 50611 Ameriprise Financial Treasurer Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Treasurer Inc. RiverSource Fund Distributors 60 St. Mary Axe, London EC3A 8JQ Treasurer Ltd RiverSource Life Insurance 20 Madison Ave. Extension, Vice President and Treasurer Company of New York Albany, NY 12005 RiverSource Life Insurance 829 Ameriprise Financial Center, Vice President and Treasurer Company Minneapolis, MN 55474 RiverSource Service 734 Ameriprise Financial Center, Treasurer Corporation Minneapolis, MN 55474 RiverSource Services, Inc. Treasurer RiverSource Tax Advantaged Treasurer Investments, Inc. Securities America Advisors 12325 Port Grace Blvd., Lavista, Director Inc. NE68128-8204 Securities America Financial 7100 W. Center Rd., Ste. 500, Director Corporation Omaha, NE 68106-2716 Securities America, Inc. 12325 Port Grace Blvd., Lavista, Director NE68128 Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Ltd. Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Sarl
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------ -------------------------------- ------------------------------------- Amy K. Johnson J. & W. Seligman & Co. 100 Park Avenue, Chief Administrative Officer Chief Administrative Incorporated New York, NY 10017 Officer Ameriprise Trust Company 200 Ameriprise Financial Center, President Minneapolis, MN 55474 Ameriprise Financial Inc. 200 Ameriprise Financial Center, Vice President - Asset Management Minneapolis, MN 55474 and Trust Services
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Christopher Paul Advisory Capital Strategies Vice President Keating, Director and Group, Inc. Head of Institutional Sales, Client Service and Consultant Relationships Ameriprise Trust Company 200 Ameriprise Financial Center, Director and Vice President Minneapolis, MN 55474 Boston Equity General Partner Vice President LLC J. & W. Seligman & Co. 100 Park Avenue Head of Institutional Sales, Client Incorporated New York, NY 10017 Service and Consultant Relationships RiverSource Fund Distributors, Vice President Inc. RiverSource Services, Inc. Vice President Seligman Focus Partners LLC 100 Park Avenue Vice President New York, NY 10017 Seligman Health Partners LLC 100 Park Avenue Vice President New York, NY 10017 Seligman Health Plus Partners 100 Park Avenue Vice President LLC New York, NY 10017 Seligman Partners LLC 100 Park Avenue Vice President New York, NY 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- ---------------------------------- -------------------------------------- Eleanor T.M. Hoagland, Ameriprise Certificate Company 70100 Ameriprise Financial Center, Chief Compliance Officer Chief Compliance Minneapolis, MN 55474 Officer, Money Laundering Prevention Officer and Identity Theft Prevention Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Chief Resolution Officer Minneapolis, MN 55474 J. & W. Seligman & Co. 100 Park Avenue, Money Laundering Prevention Officer Incorporated New York, NY 10017 Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Chief Compliance Officer Minneapolis, MN 55474 RiverSource Fund Distributors, Money Laundering Prevention Officer Inc. RiverSource Service Corporation 734 Ameriprise Financial Center, Chief Compliance Officer Minneapolis, MN 55474 RiverSource Services, Inc. Money Laundering Prevention Officer Seligman Data Corp. 100 Park Avenue, Chief Compliance Officer New York, NY 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- ---------------------------------- -------------------------------------- Brian Joseph McGrane, Advisory Capital Strategies Vice President and Chief Financial Director, Vice Group Inc. Officer President and Chief Financial Officer Advisory Select LLC Dissolved Vice President and Chief Financial Officer (resigned 5/1/07) Ameriprise Certificate Company 70100 Ameriprise Financial Vice President and Chief Financial Center, Minneapolis, MN 55474 Officer (resigned 8/24/07) Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Senior Vice President and Lead Minneapolis, MN 55474 Financial Officer Ameriprise Financial Services, 5221 Ameriprise Financial Vice President and Lead Financial Inc. Center, Minneapolis, MN 55474 Officer - Finance
Ameriprise Holdings, Inc. Director Ameriprise Trust Company 200 Ameriprise Financial Center, Director, Vice President and Chief Minneapolis, MN 55474 Financial Officer Boston Equity General Partner Vice President and Chief Financial LLC Officer J. & W. Seligman & Co. 100 Park Avenue, New York, NY Director, Vice President and Chief Incorporated 10017 Financial Officer RiverSource CDO Seed Board Member Investments, LLC RiverSource Life Insurance 829 Ameriprise Financial Center, Director, Executive Vice President Company Minneapolis, MN 55474 and Chief Financial Officer Seligman Focus Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer Seligman Health Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer Seligman Health Plus Partners 100 Park Avenue, New York, NY Vice President and Chief Financial LLC 10017 Officer Seligman Partners LLC 100 Park Avenue, New York, NY Vice President and Chief Financial 10017 Officer
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Thomas R. Moore, Advisory Capital Strategies Secretary Secretary Group Inc. American Enterprise Investment 70400 AXP Financial Center, Secretary Services Inc. Minneapolis, MN 55474 Ameriprise Bank, FSB 9393 Ameriprise Financial Secretary Center, Minneapolis, MN 55474 Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Vice President, Chief Governance Minneapolis, MN 55474 Officer and Corporate Secretary Ameriprise Financial Services, 5221 Ameriprise Financial Secretary Inc. Center, Minneapolis, MN 55474 Ameriprise Holdings, Inc. Secretary Ameriprise Insurance Company 3500 Packerland Drive Secretary De Pere, WI 54115 Ameriprise Trust Company 200 Ameriprise Financial Center, Secretary Minneapolis, MN 55474 Boston Equity General Partner Secretary LLC IDS Capital Holdings Inc. Secretary IDS Futures Corporation 570 Ameriprise Financial Center, Secretary Minneapolis, MN 55474 IDS Management Corporation Secretary IDS Property Casualty 3500 Packerland Drive Secretary Insurance Company De Pere, WI 54115 Investors Syndicate Secretary Development Corporation J. & W. Seligman & Co. 100 Park Avenue, New York, NY Secretary Incorporated 10017 RiverSource CDO Seed Secretary Investments, LLC RiverSource Fund Distributors, Secretary Inc. RiverSource Distributors, Inc. 50611 Ameriprise Financial Secretary Center, Minneapolis, MN 55474
RiverSource Life Insurance 20 Madison Ave. Extension, Secretary Company of New York Albany, NY 12005 RiverSource Life Insurance 829 Ameriprise Financial Center, Secretary Company Minneapolis, MN 55474 RiverSource Service 734 Ameriprise Financial Center, Secretary Corporation Minneapolis, MN 55474 RiverSource Services, Inc. Secretary RiverSource Tax Advantaged Secretary Investments, Inc. Seligman Focus Partners LLC 100 Park Avenue, New York, NY Secretary 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY Secretary 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY Secretary LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY Secretary 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- Scott Roane Plummer, Advisory Capital Strategies Chief Legal Officer Chief Legal Officer Group Inc. and Assistant Secretary Ameriprise Certificate Company 70100 Ameriprise Financial Vice President, General Counsel and Center, Minneapolis, MN 55474 Secretary Ameriprise Financial, Inc. 200 Ameriprise Financial Center, Vice President - Asset Management Minneapolis, MN 55474 Compliance Ameriprise Financial Services, 5221 Ameriprise Financial Vice President and Chief Counsel - Inc. Center, Minneapolis, MN 55474 Asset Management Ameriprise Trust Company Chief Legal Officer Boston Equity General Partner Chief Legal Officer LLC J. & W. Seligman & Co. 100 Park Avenue, New York, NY Chief Legal Officer Incorporated 10017 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chief Counsel Center, Minneapolis, MN 55474 RiverSource Service Corporation 734 Ameriprise Financial Center, Vice President and Chief Legal Minneapolis, MN 55474 Officer RiverSource Fund Distributors, Chief Counsel Inc. RiverSource Services, Inc. Chief Counsel Seligman Focus Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY Chief Counsel LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY Chief Counsel 10017
Name and Title Other Companies Address* Title within other companies ---------------------- ------------------------------- --------------------------------- -------------------------------------- William Frederick Advisory Capital Strategies Director and President 'Ted' Truscott Group Inc. Chairman, Chief Investment Officer and President Ameriprise Certificate Company 70100 Ameriprise Financial Director, President and Chief Center, Minneapolis, MN 55474 Executive Officer Ameriprise Financial, Inc. 200 Ameriprise Financial Center, President - U.S. Asset Management, Minneapolis, MN 55474 Annuities and Chief Investment Officer Ameriprise Financial Services, 5221 Ameriprise Financial Senior Vice President and Chief Inc. Center, Minneapolis, MN 55474 Investment Officer Ameriprise Trust Company 200 Ameriprise Financial Center, Director Minneapolis, MN 55474 Boston Equity General Partner President LLC IDS Capital Holdings Inc. Director and President J. & W. Seligman & Co. 100 Park Avenue, New York, NY Chairman and President Incorporated 10017 Kenwood Capital Management LLC 333 S. 7th Street, Suite 2330, Board Member Minneapolis, MN 55402 RiverSource Distributors, Inc. 50611 Ameriprise Financial Chairman and Chief Executive Officer Center, Minneapolis, MN 55474 RiverSource Fund Distributors, Chairman and Chief Executive Officer Inc. RiverSource Life Insurance 829 Ameriprise Financial Center, Director Company Minneapolis, MN 55474 RiverSource Services, Inc. Chairman and Chief Executive Officer Seligman Focus Partners LLC 100 Park Avenue, New York, NY President 10017 Seligman Health Partners LLC 100 Park Avenue, New York, NY President 10017 Seligman Health Plus Partners 100 Park Avenue, New York, NY President LLC 10017 Seligman Partners LLC 100 Park Avenue, New York, NY President 10017 Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Ltd. Threadneedle Asset Management 60 St. Mary Axe, London EC3A 8JQ Director Holdings Sarl
* Unless otherwise noted, address is 50606 Ameriprise Financial Center, Minneapolis, MN 55474 Item 32. Principal Underwriter (a) RiverSource Fund Distributors, Inc. acts as principal underwriter for the following investment companies: THE RIVERSOURCE FUNDS: RiverSource Bond Series, Inc.; RiverSource California Tax-Exempt Trust; RiverSource Dimensions Series, Inc.; RiverSource Diversified Income Series, Inc.; RiverSource Equity Series, Inc.; RiverSource Global Series, Inc.; RiverSource Government Income Series, Inc.; RiverSource High Yield Income Series, Inc.; RiverSource Income Series, Inc.; RiverSource International Managers Series, Inc.; RiverSource International Series, Inc.; RiverSource Investment Series, Inc.; RiverSource Large Cap Series, Inc.; RiverSource Managers Series, Inc.; RiverSource Market Advantage Series, Inc.; RiverSource Money Market Series, Inc.; RiverSource Sector Series, Inc.; RiverSource Selected Series, Inc.; RiverSource Series Trust; RiverSource Short Term Investments Series, Inc.; RiverSource Special Tax-Exempt Series Trust; RiverSource Strategic Allocation Series, Inc., RiverSource Strategy Series, Inc.; RiverSource Tax-Exempt Income Series, Inc.; RiverSource Tax-Exempt Money Market Series, Inc., RiverSource Tax-Exempt Series, Inc.; and RiverSource Variable Series Trust. THE SELIGMAN FUNDS: RiverSource Government Money Market Fund, Inc., Seligman Capital Fund, Inc., Seligman Communications and Information Fund, Inc., Seligman Frontier Fund, Inc., Seligman Growth Fund, Inc., Seligman Global Fund Series, Inc., Seligman LaSalle Real Estate Fund Series, Inc., Seligman Municipal Fund Series, Inc., Seligman Municipal Series Trust, Seligman Portfolios, Inc., Seligman TargetHorizon ETF Portfolios, Inc. and Seligman Value Fund Series, Inc. (b) As to each director, principal officer or partner of RiverSource Fund Distributors, Inc.
Name and Principal Business Address Positions and Offices with Underwriter Positions and Offices with Fund --------------------------------- -------------------------------------- ----------------------------------- William Frederick "Ted" Truscott* Chairman and Chief Executive Officer Director and Vice President Jeffrey Lee McGregor, Sr.* Director and President None Patrick Thomas Bannigan* Director and Vice President President Paul J. Dolan* Chief Operating Officer and Chief None Administrative Officer Jeffrey P. Fox* Chief Financial Officer Treasurer Christopher P. Keating* Vice President None Emily Calcagno** Vice President None Scott Roane Plummer* Chief Counsel Vice President, General Counsel and Secretary James F. Angelos* Chief Compliance Officer None Thomas R. Moore* Secretary None Walter Berman* Treasurer None Eleanor T. M. Hoagland** Anti-Money Laundering Officer None
* Business address is: 50611 Ameriprise Financial Center, Minneapolis, MN 55474 ** Business address is: 100 Park Avenue, New York, NY 10017. (c) Not Applicable Item 33. Location of Accounts and Records Ameriprise Financial, Inc. 707 Second Avenue, South Minneapolis, MN 55402 Iron Mountain Records Management 920 & 950 Apollo Road Eagan, MN 55121 Iron Mountain Records Management is an off-site storage facility housing historical records that are no longer required to be maintained on-site. Records stored at this facility include various trading and accounting records, as well as other miscellaneous records. Item 34. Management Services Not Applicable Item 35. Undertakings Not Applicable SIGNATURES Pursuant to the requirements of the Securities Act and the Investment Company Act, the Registrant, SELIGMAN PORTFOLIOS, INC., certifies that it meets all of the requirements for effectiveness of this Amendment to its Registration Statement pursuant to Rule 485(b) under the Securities Act and has duly caused this Amendment to its Registration Statement to be signed on its behalf by the undersigned, duly authorized, in the City of Minneapolis, and the State of Minnesota on the 29th day of April, 2010. SELIGMAN PORTFOLIOS, INC. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer Pursuant to the requirements of the Securities Act, this Amendment to the Registration Statement has been signed below by the following persons in the capacities indicated on the 29th day of April, 2010.
Signature Capacity --------- -------- /s/ Stephen R. Lewis, Jr.* Chair of the Board ------------------------------------- Stephen R. Lewis, Jr. /s/ Kathleen A. Blatz* Director ------------------------------------- Kathleen A. Blatz /s/ Arne H. Carlson* Director ------------------------------------- Arne H. Carlson /s/ Pamela G. Carlton* Director ------------------------------------- Pamela G. Carlton /s/ Patricia M. Flynn* Director ------------------------------------- Patricia M. Flynn /s/ Anne P. Jones* Director ------------------------------------- Anne P. Jones
Signature Capacity --------- -------- /s/ Jeffrey Laikind* Director ------------------------------------- Jeffrey Laikind /s/ John F. Maher* Director ------------------------------------- John F. Maher /s/ Catherine James Paglia* Director ------------------------------------- Catherine James Paglia /s/ Leroy C. Richie* Director ------------------------------------- Leroy C. Richie /s/ Alison Taunton-Rigby* Director ------------------------------------- Alison Taunton-Rigby /s/ William F. Truscott* Director ------------------------------------- William F. Truscott
* Signed pursuant to Directors/Trustees Power of Attorney, dated April 6, 2010, filed electronically herewith as Exhibit (q) to Registrant's Post-Effective Amendment No. 45 to Registration Statement No. 33-15253, by: /s/ Scott R. Plummer ------------------------------------- Scott R. Plummer CONTENTS OF THIS POST-EFFECTIVE AMENDMENT NO. 45 TO REGISTRATION STATEMENT NO. 33-15253 This Post-Effective Amendment comprises the following papers and documents: The facing sheet. Part A. Prospectuses for Seligman Capital Portfolio Seligman Common Stock Portfolio Seligman Communications and Information Portfolio Seligman Global Technology Portfolio Seligman International Growth Portfolio Seligman Investment Grade Fixed Income Portfolio Seligman Large-Cap Value Portfolio Seligman Smaller-Cap Value Portfolio Part B. Statement of Additional Information Financial Statements Part C. Other information The signatures EXHIBIT INDEX (d)(1) Investment Management Services Agreement, between Registrant and RiverSource Investments, LLC, dated Nov. 7, 2008, amended and restated April 6, 2010. (i) Opinion and consent of counsel as to the legality of the securities being registered. (j)(1) Consent of Independent Registered Public Accounting Firm (Ernst & Young LLP). (j)(2) Consent of Independent Registered Public Accounting Firm (Deloitte& Touche LLP). (q) Directors/Trustees Power of Attorney to sign Amendments to this Registration Statement, dated April 6, 2010.