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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act File Number 811-22328
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND, INC.
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(Exact name of registrant as specified in charter)
50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474
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(Address of principal executive offices) (Zip code)
Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474
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(Name and address of agent for service)
Registrant's telephone number, including area code: (612) 671-1947
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Date of fiscal year end: 12/31
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Date of reporting period: 12/31
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Annual Report
(SELIGMAN LOGO)
SELIGMAN
PREMIUM TECHNOLOGY GROWTH FUND
ANNUAL REPORT FOR
THE PERIOD ENDED
DECEMBER 31, 2009
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND SEEKS GROWTH
OF CAPITAL AND CURRENT INCOME.
TABLE OF CONTENTS --------------------------------------------------------------
Your Fund at a Glance.............. 2
Manager Commentary................. 4
Portfolio of Investments........... 8
Statement of Assets and
Liabilities...................... 14
Statement of Operations............ 15
Statement of Changes in Net
Assets........................... 16
Financial Highlights............... 17
Notes to Financial Statements...... 19
Report of Independent Registered
Public Accounting Firm........... 39
Federal Income Tax Information..... 41
Board Members and Officers......... 42
Matters Relating to the Directors'
Consideration of the Approval of
the Investment Management
Services Agreement............... 46
Proxy Voting....................... 48
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SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 1
YOUR FUND AT A GLANCE ----------------------------------------------------------
FUND SUMMARY
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> Seligman Premium Technology Growth Fund (the Fund) Common Stock increased
4.24% (excluding sales charge) based on net asset value since its commencement
of investment operations on Nov. 30, 2009, and 0.00% based on market price,
since its initial public offering on Nov. 24, 2009.
> The Fund underperformed its benchmark, the S&P North American Technology
Sector Index, which gained 4.77% for the same period.
TOTAL RETURNS (for period ended Dec. 31, 2009)
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SINCE
INCEPTION
11/30/2009(a)
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Seligman Premium Technology Growth Fund
Market Price +0.00%(b)
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Net Asset Value:
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Without sales charge +4.24%(c)
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With sales charge -0.45%(c)
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S&P North American Technology Sector Index
(unmanaged)(d) +4.77%
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(a) Not annualized.
(b) Market price total return since inception is based on the initial public
offering price on Nov. 24, 2009, which was $20.00 per share.
(c) Net asset value total return since inception is from the opening of business
on Nov. 30, 2009. The net asset value price per share of the Fund's Common
Stock at inception was $19.10. The net asset value returns are calculated
with and without the effect of the 4.50% maximum sales charge.
(d) The Standard & Poor's (S&P) North American Technology Sector Index is an
unmanaged modified capitalization-weighted index based on a universe of
technology-related stocks. The index reflects reinvestment of all
distributions and changes in market prices. The index does not reflect the
effects of sales charges, expenses and taxes. It is not possible to invest
directly in an index.
The performance information shown represents past performance and is not a
guarantee of future results. The investment return and principal value of your
investment will fluctuate so that your shares, when sold, may be worth more or
less than their original cost. Current performance may be lower or higher than
the performance information shown. You may obtain performance information
current to the most recent month-end by visiting seligman.com.
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2 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
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Returns reflect changes in market price or net asset value, as applicable, and
assume reinvestment of distributions, if any. Returns do not reflect the
deduction of taxes that investors may pay on distributions or the sale of
shares.
PRICE PER SHARE
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DEC. 31, 2009 INCEPTION
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Market price $20.00 $20.00(a)
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Net asset value 19.91 19.10(b)
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(a) Market price at inception is based on the initial public offering on Nov.
24, 2009.
(b) Net asset value price at inception is from the opening of business on Nov.
30, 2009.
The net asset value of the Fund's shares may not always correspond to the market
price of such shares. Common stock of many closed-end funds frequently trade at
a discount from their net asset value. The Fund is subject to stock market risk,
which is the risk that stock prices overall will decline over short or long
periods, adversely affecting the value of an investment in the Fund.
STYLE MATRIX
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STYLE
VALUE BLEND GROWTH
X LARGE
X MEDIUM SIZE
X SMALL
Shading within the style matrix approximates areas in which the Fund is designed
to generally invest.
The style matrix can be a valuable tool for constructing and monitoring your
portfolio. It provides a frame of reference for distinguishing the types of
stocks or bonds owned by a fund, and may serve as a guideline for helping you
build a portfolio.
Investment products, including shares of funds, are not federally or FDIC-
insured, are not deposits or obligations of, or guaranteed by any financial
institution, and involve investment risks including possible loss of principal
and fluctuation in value.
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SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 3
MANAGER COMMENTARY -------------------------------------------------------------
Dear Stockholders,
Seligman Premium Technology Growth Fund (the Fund) Common Stock gained 4.24%
based on net asset value (excluding sales charge) since commencement of
investment operations on Nov. 30, 2009. The Fund underperformed its benchmark,
the S&P North American Technology Sector Index (the S&P Index), which rose 4.77%
for the same period.
Due to the brief period of time (approximately one month) between the Fund's
inception and the close of the reporting period, there is little to report with
respect to significant performance factors that may have impacted the Fund over
this time. Because of this limited history, we will instead focus on current
technology and technology-related sectors market outlook.
OUR FUTURE STRATEGY
IT budgets are showing signs of improving in 2010. It appears that global
enterprise spending, or at least budgetary intentions, for 2010 seem to indicate
a 4-5% growth in budgets. There seems to be pent-up demand for storage and
servers, so data center equipment certainly may be on the upswing. We are
anticipating strong results from data center-centric companies as earnings
results are announced in the first quarter of 2010.
We also anticipate meaningful improvement in software projects that have been
held on pause for some time. Now that the recovery is showing some resolve and
we have experienced some stabilization, we believe
SECTOR BREAKDOWN(1) (at Dec. 31, 2009)
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Consumer Discretionary 1.2%
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Health Care 5.3%
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Information Technology 89.3%
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Telecommunication Services 1.9%
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Other(2) 2.3%
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(1) Sectors can be comprised of several industries. Please refer to the section
entitled "Portfolio of Investments" for a complete listing.
Percentages indicated are based upon total investments. The Fund's
composition is subject to change.
(2) Cash & Cash Equivalents.
The sectors identified above are based on the Global Industry Classification
Standard (GICS), which was developed by and is the exclusive property of Morgan
Stanley Capital International Inc. and Standard & Poor's, a division of The
McGraw-Hill Companies, Inc.
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4 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
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companies will resume deploying software projects that had been held on the
backburner in the downturn. We anticipate a nice recovery in enterprise software
demand for new licenses and for new products as 2010 unfolds.
Within semiconductors, we anticipate a significant increase in capital spending.
Semiconductors are coming off very depressed levels. Factoring in the rising
prices of commodity chips and the high utilization rates in existing chip
factory facilities, we believe current forecasts of 50-60% growth in capital
spending within semiconductors may be proven correct.
We are seeing vast improvements in the financing environment. We anticipate a
marked increase in initial public offering activity within the technology sector
in 2010. Valuations among technology companies are running a wide spectrum
currently. While some technology
TOP TEN HOLDINGS(1) (at Dec. 31, 2009)
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Synopsys 7.3%
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Microsoft 5.6%
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Check Point Software Technologies 5.3%
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Oracle 5.2%
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Symantec 5.2%
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Cisco Systems 5.0%
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Apple 5.0%
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Amdocs 4.8%
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Open Text 4.4%
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QUALCOMM 4.0%
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(1) Percentages indicated are based upon total investments (excluding Cash &
Cash Equivalents).
For further detail about these holdings, please refer to the section entitled
"Portfolio of Investments."
Fund holdings are as of the date given, are subject to change at any time, and
are not recommendations to buy or sell any security.
There are still a lot of technology companies that are flush with cash, which
lends support to our anticipation of a step-up in acquisition activity, as
well as increased share repurchases.
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SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 5
MANAGER COMMENTARY (continued) -------------------------------------------------
companies are at lofty levels, there are still many companies out there with
reasonable valuations. We are currently finding more value in larger companies,
as companies with smaller floats (small capitalization structure) are pricing in
at the expensive end of the spectrum. We plan to navigate carefully, likely
underweighting smaller, more expensive companies. We anticipate secondary
offerings with many of these companies, many of which are in the software and
Internet-related areas. We are fairly positive about the prospects for software
and plan to continue to overweight the industry.
There are still a lot of technology companies that are flush with cash, which
lends support to our anticipation of a step-up in acquisition activity, as well
as increased share repurchases.
We also anticipate that, as the semiconductor industry continues to improve,
chip companies may start hiring once again, increasing spending on design tools
and engineers.
(PHOTO - PAUL H. WICK) (PHOTO - AJAY DIWAN) (PHOTO - NA)
Paul H. Wick Ajay Diwan John K. Schonberg, CFA(R)
Portfolio Manager Portfolio Manager Portfolio Manager
Any specific securities mentioned are for illustrative purposes only and are not
a complete list of securities in the Fund's portfolio, and such securities may
have increased or decreased in value since the date hereof. The views expressed
in this statement reflect those of the portfolio manager(s) through the end of
the period of the report as stated on the cover and do not necessarily represent
the views of RiverSource Investments, LLC (RiverSource) or any other person in
the RiverSource organization. Any such views are subject to change at any time
based upon market or other conditions and RiverSource disclaims any
responsibility to update such views. These views may not be relied on as
investment advice and, because investment decisions for a fund in the
RiverSource Family of Funds are based on numerous factors, may not be relied on
as an indication of trading intent on behalf of any fund in the RiverSource
Family of Funds.
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6 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
THIS PAGE LEFT BLANK INTENTIONALLY
PORTFOLIO OF INVESTMENTS ------------------------------------------------------
DEC. 31, 2009
(Percentages represent value of investments compared to net assets)
INVESTMENTS IN SECURITIES
COMMON STOCKS (100.3%)
ISSUER SHARES VALUE(a)
COMMUNICATIONS EQUIPMENT (9.5%)
Cisco Systems 596,400(b) $14,277,816
Polycom 54,000(b) 1,348,380
QUALCOMM 246,900 11,421,594
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Total 27,047,790
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COMPUTERS & PERIPHERALS (14.7%)
Apple 67,600(b,e) 14,254,135
Dell 102,300(b) 1,469,028
EMC 287,500(b) 5,022,625
Hewlett-Packard 144,300 7,432,893
NetApp 140,894(b) 4,845,345
Netezza 334,700(b) 3,246,590
Teradata 110,400(b) 3,469,872
Western Digital 47,600(b) 2,101,540
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Total 41,842,028
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DIVERSIFIED TELECOMMUNICATION SERVICES (1.9%)
Deutsche Telekom ADR 192,632(c) 2,831,690
Qwest Communications Intl 328,500 1,382,985
Telecom Italia 823,400(c) 1,282,580
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Total 5,497,255
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HEALTH CARE EQUIPMENT & SUPPLIES (3.3%)
AGA Medical Holdings 67,000(b) 989,590
Inverness Medical Innovations 17,000(b) 705,670
Medtronic 32,700 1,438,146
St. Jude Medical 171,800(b) 6,318,804
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Total 9,452,210
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HEALTH CARE PROVIDERS & SERVICES (0.1%)
Emdeon Cl A 18,811(b) 286,868
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INTERNET SOFTWARE & SERVICES (6.8%)
eBay 111,800(b) 2,631,772
Open Text 307,600(b,c) 12,503,940
VeriSign 176,300(b) 4,273,512
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Total 19,409,224
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IT SERVICES (5.8%)
Amdocs 485,300(b,c) 13,845,609
Fidelity Natl Information Services 109,100 2,557,304
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Total 16,402,913
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LIFE SCIENCES TOOLS & SERVICES (0.4%)
Life Technologies 23,400(b) 1,222,182
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MEDIA (1.2%)
DreamWorks Animation SKG Cl A 87,148(b) 3,481,563
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OFFICE ELECTRONICS (0.9%)
Xerox 308,500 2,609,910
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PHARMACEUTICALS (1.6%)
Abbott Laboratories 85,000 4,589,150
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (7.4%)
Amkor Technology 335,600(b) 2,402,896
Avago Technologies 98,700(b,c) 1,805,223
Lam Research 22,300(b) 874,383
Marvell Technology Group 104,100(b,c) 2,160,075
Microchip Technology 32,500 944,450
Natl Semiconductor 94,600 1,453,056
Novellus Systems 243,000(b) 5,671,620
Teradyne 164,800(b) 1,768,304
Verigy 199,703(b,c) 2,570,178
Xilinx 56,500 1,415,890
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Total 21,066,075
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SOFTWARE (46.7%)
Adobe Systems 60,800(b) 2,236,224
Aspen Technology 182,700(b) 1,791,374
BMC Software 283,000(b) 11,348,300
Check Point Software Technologies 447,700(b,c) 15,168,076
JDA Software Group 153,900(b) 3,919,833
McAfee 55,100(b) 2,235,407
Mentor Graphics 553,100(b) 4,883,873
Micro Focus Intl 137,400(c) 1,005,301
See accompanying Notes to Portfolio of Investments.
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8 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
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COMMON STOCKS (CONTINUED)
ISSUER SHARES VALUE(a)
SOFTWARE (CONT.)
Microsoft 521,500 $15,900,535
NICE Systems ADR 28,700(b,c) 890,848
Nuance Communications 594,000(b) 9,230,760
Oracle 610,900 14,991,486
Parametric Technology 638,800(b) 10,437,992
SolarWinds 27,002(b) 621,316
SonicWALL 305,000(b) 2,321,050
Symantec 829,300(b) 14,836,177
Synopsys 942,100(b) 20,989,987
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Total 132,808,539
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TOTAL COMMON STOCKS
(Cost: $272,600,813) $285,715,707
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MONEY MARKET FUND (2.4%)(D)
SHARES VALUE(a)
RiverSource Short-Term Cash Fund, 0.18% 6,852,236(f) $6,852,236
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TOTAL MONEY MARKET FUND
(Cost: $6,852,236) $6,852,236
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TOTAL INVESTMENTS IN SECURITIES
(Cost: $279,453,049)(g) $292,567,943
=====================================================================================
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.
INVESTMENTS IN DERIVATIVES
OPEN OPTIONS CONTRACTS WRITTEN AT DEC. 31, 2009
NUMBER OF EXERCISE PREMIUM EXPIRATION
ISSUER PUTS/CALLS CONTRACTS PRICE RECEIVED DATE VALUE(a)
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Apple Call 161 $250 $213,802 Jan. 2011 $289,800
Apple Put 236 170 444,556 Jan. 2011 342,790
NASDAQ 100 Index Call 22 1,875 46,176 Jan. 2010 43,450
NASDAQ 100 Index Call 750 1,800 2,326,520 Jan. 2010 5,317,500
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Total $5,993,540
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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
18.98% of net assets.
(d) At Dec. 31, 2009, cash or short-term securities were designated to cover
open put and/or call options written. See Note 3 to the financial
statements.
(e) At Dec. 31, 2009, securities valued at $3,394,846 were held to cover open
call options written. See Note 3 to the financial statements.
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SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 9
PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
(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 $279,540,592 and the aggregate gross unrealized appreciation and
depreciation based on that cost was:
Unrealized appreciation $13,574,039
Unrealized depreciation (546,688)
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Net unrealized appreciation $13,027,351
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10 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
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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
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SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 11
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
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Equity Securities
Common Stocks(a)
Diversified
Telecommunication
Services $4,214,675 $1,282,580 $-- $5,497,255
Software 131,803,238 1,005,301 -- 132,808,539
All Other
Industries(b) 147,409,913 -- -- 147,409,913
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Total Equity Securities 283,427,826 2,287,881 -- 285,715,707
---------------------------------------------------------------------------------------------
Other
Affiliated Money Market
Fund(c) 6,852,236 -- -- 6,852,236
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Total Other 6,852,236 -- -- 6,852,236
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Investments in Securities 290,280,062 2,287,881 -- 292,567,943
Other Financial
Instruments(d) (5,993,540) -- -- (5,993,540)
---------------------------------------------------------------------------------------------
Total $284,286,522 $2,287,881 $-- $286,574,403
---------------------------------------------------------------------------------------------
(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.
(d) Other Financial Instruments are derivative instruments. Derivative
descriptions are located in the Investments in Derivatives section of the
Portfolio of Investments.
--------------------------------------------------------------------------------
12 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
FAIR VALUE MEASUREMENTS (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 1(800) 937-5449.
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 13
STATEMENT OF ASSETS AND LIABILITIES --------------------------------------------
DEC. 31, 2009
ASSETS
Investments in securities, at value
Unaffiliated issuers (identified cost $272,600,813) $285,715,707
Affiliated money market fund (identified cost $6,852,236) 6,852,236
-------------------------------------------------------------------------------
Total investments in securities (identified cost $279,453,049) 292,567,943
Dividends receivable 54,363
Receivable for investment securities sold 737,418
-------------------------------------------------------------------------------
Total assets 293,359,724
-------------------------------------------------------------------------------
LIABILITIES
Options contracts written, at value (premiums received
$3,031,054) 5,993,540
Payable for investment securities purchased 2,181,976
Accrued investment management services fees 231,617
Accrued administrative services fees 13,897
Accrued Stockholders' meeting fees 3,200
Accrued offering costs 20,000
Other accrued expenses 40,522
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Total liabilities 8,484,752
-------------------------------------------------------------------------------
Net assets applicable to outstanding Common Stock $284,874,972
-------------------------------------------------------------------------------
REPRESENTED BY
Common Stock -- $.01 par value $ 143,053
Additional paid-in capital 272,282,711
Accumulated net realized gain (loss) 2,296,761
Unrealized appreciation (depreciation) on investments
and on translation of assets and liabilities in foreign
currencies 10,152,447
-------------------------------------------------------------------------------
Total -- representing net assets applicable to outstanding Common
Stock $284,874,972
-------------------------------------------------------------------------------
Shares outstanding applicable to Common Stock 14,305,250
-------------------------------------------------------------------------------
Net asset value per share of outstanding Common Stock $ 19.91
-------------------------------------------------------------------------------
Market price per share of Common Stock $ 20.00
-------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
14 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
STATEMENT OF OPERATIONS --------------------------------------------------------
FOR THE PERIOD FROM NOV. 30, 2009* TO DEC. 31, 2009
INVESTMENT INCOME
Income:
Dividends $ 56,859
Income distributions from affiliated money market fund 5,516
Less foreign taxes withheld (832)
------------------------------------------------------------------------------
Total income 61,543
------------------------------------------------------------------------------
Expenses:
Investment management services fees 231,617
Administrative services fees 13,897
Compensation of board members 789
Custodian fees 6,560
Printing and postage 21,920
Professional fees 3,200
Stockholders' meeting fees 3,200
Other 11,327
------------------------------------------------------------------------------
Total expenses 292,510
------------------------------------------------------------------------------
Investment income (loss) -- net (230,967)
------------------------------------------------------------------------------
REALIZED AND UNREALIZED GAIN (LOSS) -- NET
Net realized gain (loss) on:
Security transactions 1,083,689
Foreign currency transactions (1,544)
Options contracts written 1,213,072
------------------------------------------------------------------------------
Net realized gain (loss) on investments 2,295,217
Net change in unrealized appreciation (depreciation) on
investments and on translation of assets and liabilities in
foreign currencies 10,152,447
------------------------------------------------------------------------------
Net gain (loss) on investments and foreign currencies 12,447,664
------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations $12,216,697
------------------------------------------------------------------------------
* Commencement of investment operations.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 15
STATEMENT OF CHANGES IN NET ASSETS --------------------------------------------
FOR THE PERIOD FROM NOV. 30, 2009(A) TO DEC. 31, 2009
OPERATIONS
Investment income (loss) -- net $ (230,967)
Net realized gain (loss) on investments 2,295,217
Net change in unrealized appreciation (depreciation) on
investments and
on translation of assets and liabilities in foreign currencies 10,152,447
-------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from operations 12,216,697
-------------------------------------------------------------------------------
CAPITAL SHARE TRANSACTIONS
Net proceeds from issuance of shares(b) -- 14,300,000 shares 272,558,000
-------------------------------------------------------------------------------
Total increase (decrease) in net assets 284,774,697
Net assets at beginning of period 100,275(c)
-------------------------------------------------------------------------------
Net assets at end of period $284,874,972
-------------------------------------------------------------------------------
(a) Commencement of investment operations.
(b) Offering costs of $572,000, incurred in connection with the initial
offering, have been charged against the proceeds from issuance of shares.
(c) RiverSource Investments, LLC made an investment of initial capital of
$100,275 on Oct. 14, 2009.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
16 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
FINANCIAL HIGHLIGHTS -----------------------------------------------------------
The Fund's financial highlights are presented below. Per share operating
performance data is designed to allow investors to trace the operating
performance, on a per Common share basis from the beginning net asset value to
the ending net asset value, so that investors can understand what effect the
individual items have on their investment, assuming it was held throughout the
period. Generally, the per share amounts are derived by converting the actual
dollar amounts incurred for each item, as disclosed in the financial statements,
to their equivalent per Common share amounts, using average Common shares
outstanding during the period.
Total return measures the Fund's performance assuming that investors purchased
Fund shares at market price or net asset value as of the beginning of the
period, reinvested all their distributions, and then sold their shares at the
closing market price or net asset value on the last day of the period. The
computations do not reflect taxes or any sales commissions investors may incur
in purchasing or selling Fund shares and taxes investors may incur on
distributions or on the sale of Fund shares. Total returns are not annualized
for periods of less than one year.
PERIOD ENDED
DEC. 31,
PER SHARE OPERATING PERFORMANCE 2009(a)
Net asset value, beginning of period $19.10(b)
---------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss) (.02)
Net gains (losses) (both realized and
unrealized) .87
---------------------------------------------------------------
Total from investment operations .85
---------------------------------------------------------------
Offering costs (.04)
---------------------------------------------------------------
Net asset value, end of period $19.91
---------------------------------------------------------------
Market value, end of period $20.00
---------------------------------------------------------------
TOTAL RETURN
Based upon market price .00%(c)
---------------------------------------------------------------
Based upon net asset value 4.24%
---------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS(D)
Total expenses 1.22%(e)
---------------------------------------------------------------
Net investment income (loss) (.96%)(e)
---------------------------------------------------------------
SUPPLEMENTAL DATA
Net assets, end of period (in millions) $285
---------------------------------------------------------------
Portfolio turnover rate 8%
---------------------------------------------------------------
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 17
FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS
(a) For the period from Nov. 30, 2009 (commencement of investment operations) to
Dec. 31, 2009.
(b) Net asset value, beginning of period, of $19.10 reflects a deduction of
$0.90 per share sales charge from the initial offering price of $20.00 per
share.
(c) Based upon initial offering price of $20.00 per share.
(d) 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 ratio.
(e) Annualized.
The accompanying Notes to Financial Statements are an integral part of this
statement.
--------------------------------------------------------------------------------
18 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
NOTES TO FINANCIAL STATEMENTS --------------------------------------------------
1. ORGANIZATION
Seligman Premium Technology Growth Fund, Inc. (the Fund) is registered with the
Securities and Exchange Commission under the Investment Company Act of 1940, as
amended (1940 Act) as a non-diversified, closed-end management investment
company. The Fund was incorporated under the laws of the State of Maryland on
Sept. 3, 2009, and commenced investment operations on Nov. 30, 2009. The Fund
had no investment operations prior to Nov. 30, 2009 other than those relating to
organizational matters and the sale to RiverSource Investments, LLC (RiverSource
Investments or the Investment Manager) of 5,250 common shares (Common Stock) at
a cost of $100,275 on Oct. 14, 2009. As of Dec. 31, 2009, the Fund issued
14,300,000 shares of Common Stock, including 13,100,000 shares of Common Stock
in its initial public offering and 1,200,000 shares of Common Stock purchased by
the Fund's underwriters pursuant to an over-allotment option granted to the
underwriters in connection with the initial public offering. On Jan. 13, 2010,
the Fund's underwriters purchased an additional 545,000 shares of Common Stock
pursuant to the over-allotment option, resulting in a total of 14,845,000 shares
of Common Stock issued by the Fund in its initial public offering, including
shares purchased by the underwriters pursuant to the over-allotment option. With
this closing of this additional purchase of Common Stock, the Fund's total
raise-up in its initial public offering is an aggregate of $296.9 million. The
Fund has one billion authorized shares of Common Stock which trades on the New
York Stock Exchange (NYSE) under the symbol "STK".
The Fund's investment objectives are to seek growth of capital and current
income. Under normal market conditions, the Fund's investment program will
consist primarily of (i) investing in a portfolio of equity securities of
technology and technology-related companies that seeks to exceed the total
return, before fees and expenses, of the S&P North American Technology Sector
Index(R) and (ii) writing call options on the NASDAQ 100 Index(R), an unmanaged
index that includes the largest and most active non-financial domestic and
international companies listed on the Nasdaq Stock Market, or its exchange-
traded fund equivalent (the NASDAQ 100) on a month-to-month basis, with an
aggregate notional amount typically ranging from 25% to 90% of the underlying
value of the Fund's holdings of Common Stock. The Fund expects to generate
current income from premiums received from writing call options on the NASDAQ
100. The Fund may also buy or write other call and put options on securities,
indices, ETFs and market baskets of securities to generate additional income or
return or to provide the portfolio with downside protection as further described
below in Note 3 to the financial statements -- Investment in Derivatives.
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 19
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
The Fund currently has outstanding Common Stock. Each outstanding share of
Common Stock entitles the holder thereof to one vote on all matters submitted to
a vote of the Common Stockholders, including the election of directors. Because
the Fund has no other classes or series of stock outstanding, Common Stock
possesses exclusive voting power. All of the Fund's shares of Common Stock have
equal dividend, liquidation, voting and other rights. The Fund's Common
Stockholders have no preference, conversion, redemption, exchange, sinking fund,
or appraisal rights and have no preemptive rights to subscribe for any of the
Fund's securities.
Although the Fund has no current intention to do so, the Fund is authorized and
reserves the flexibility to use leverage to increase its investments or for
other management activities through the issuance of preferred shares (Preferred
Stock) and/or borrowings. The costs of issuing Preferred Stock and/or a
borrowing program would be borne by holders of Common Stock (Common
Stockholders) and consequently would result in a reduction of net asset value of
Common Stock.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
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 each business day of the 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
--------------------------------------------------------------------------------
20 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
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 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.
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
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 21
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 income taxable (which includes net short-term capital gains) to
Common Stockholders. 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 TO STOCKHOLDERS
Under the level rate distribution policy, the Fund intends to make quarterly
distributions to Common Stockholders at a rate that reflects the past and
projected performance of the Fund. The Fund expects to receive all or some of
its current income and gains from the following sources: (i) dividends received
by the Fund that are paid on the equity and equity-related securities in its
portfolio; and (ii) capital gains (short-term and long-term) from option
premiums and the sale of portfolio securities. Distributions would be made only
after paying dividends on Preferred Stock, if any have been issued. It is
possible that the Fund's distributions will at times exceed the earnings and
profits of the Fund and therefore all or a portion of such distributions may
constitute a return of
--------------------------------------------------------------------------------
22 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
capital as described below. A return of capital is a return of a portion of an
investor's original investment. A return of capital is not taxable, but it
reduces a Stockholder's tax basis in his or her shares, thus reducing any loss
or increasing any gain on a subsequent taxable disposition by the Stockholder of
his or her shares. Distributions may be variable, and the Fund's distribution
rate will depend on a number of factors, including the net earnings on the
Fund's portfolio investments and the rate at which such net earnings change as a
result of changes in the timing of, and rates at which, the Fund receives income
from the sources described above. The net investment income of the Fund consists
of all income (other than net short-term and long-term capital gains) less all
expenses of the Fund.
As portfolio and market conditions change, the rate of dividends on the Common
Stock and the Fund's distribution policy could change. Over time, the Fund will
distribute all of its net investment income and net short-term capital gains. In
addition, at least annually, the Fund intends to distribute any net capital gain
(which is the excess of net long-term capital gain over net short-term capital
loss) or, alternatively, to retain all or a portion of the year's net capital
gain and pay federal income tax on the retained gain. The 1940 Act currently
limits the number of times the Fund may distribute long-term capital gains in
any tax year (unless and until it receives an exemptive order), which may
increase the variability of the Fund's distributions. The Board reserves the
right to change the dividend policy from time to time.
Dividends and other distributions to Stockholders are recorded on ex-dividend
dates.
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. Interest
income, including amortization of premium, market discount and original issue
discount using the effective interest method, is accrued daily.
3. INVESTMENT 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. The Fund uses a rules-based call option writing strategy on the NASDAQ
100 on a month-to-month basis, with an aggregate notional amount typically
ranging from 25% to 90% of the underlying value of the Fund's holdings of common
stock (the Rules-based Option Strategy). In addition to the Rules-based Option
Strategy, the Fund may write additional calls with aggregate notional amounts of
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 23
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
up to 25% of the value of the Fund's holdings in common stocks (to a maximum of
90% when aggregated with the call options written pursuant to the Rules-based
Option Strategy) when call premiums are attractive relative to the risk of the
price of the NASDAQ 100. The Fund may also close (or buy back) a written call
option if the Investment Manager believes that a substantial amount of the
premium (typically, 70% or more) to be received by the Fund has been captured
before exercise, potentially reducing the call position to 0% of total equity
until additional calls are written.
The Fund may also seek to provide downside protection by purchasing puts on the
NASDAQ 100 when premiums on these options are considered by the Investment
Manager to be low and, therefore, attractive relative to the downside protection
provided.
The Fund may also buy or write other call and put options on securities,
indices, ETFs and market baskets of securities to generate additional income or
return or to provide the portfolio with downside protection. In this regard,
options may include writing "in-" or "out-of-the-money" put options or buying or
selling options in connection with closing out positions prior to expiration of
any options. However, the Fund does not intend to write "naked" call options on
individual stocks (i.e., selling a call option on an individual security not
owned by the Fund) other than in connection with implementing the options
strategies with respect to the NASDAQ 100. The put and call options purchased,
sold or written by the Fund may be exchange-listed or over-the-counter (OTC).
Investments in derivative instruments may expose the Fund to certain additional
risks, including those detailed below.
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
--------------------------------------------------------------------------------
24 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
Statement of Assets and Liabilities. At Dec. 31, 2009, the Fund had no
outstanding forward foreign currency contracts.
OPTION TRANSACTIONS
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.
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
ASSET DERIVATIVES LIABILITY DERIVATIVES
------------------------------- -------------------------------
STATEMENT OF ASSETS STATEMENT OF ASSETS
RISK EXPOSURE AND LIABILITIES AND LIABILITIES
CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE
-------------------------------------------------------------------------------------
Equity Options contracts
contracts N/A N/A written, at value $5,993,540
-------------------------------------------------------------------------------------
Total $N/A $5,993,540
-------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE PERIOD
ENDED DEC. 31, 2009
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME
--------------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY CONTRACTS OPTIONS TOTAL
--------------------------------------------------------------------------------
Equity contracts $ -- $1,213,072 $1,213,072
--------------------------------------------------------------------------------
Foreign exchange contracts (31,413) -- $ (31,413)
--------------------------------------------------------------------------------
Total $(31,413) $1,213,072 $1,181,659
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 25
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN
INCOME
---------------------------------------------------------------------------------
FORWARD FOREIGN
RISK EXPOSURE CATEGORY CURRENCY CONTRACTS OPTIONS TOTAL
---------------------------------------------------------------------------------
Equity contracts $-- $(2,962,486) $(2,962,486)
---------------------------------------------------------------------------------
Foreign exchange contracts -- -- $ --
---------------------------------------------------------------------------------
Total $-- $(2,962,486) $(2,962,486)
---------------------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY
FORWARD FOREIGN CURRENCY CONTRACTS
At Dec. 31, 2009, the Fund had no outstanding forward foreign currency
contracts. During the period ended Dec. 31, 2009, the Fund entered into and
closed four forward foreign currency contracts, of which, the average gross
notional amount was $575,000.
OPTIONS
The gross notional amount of contracts outstanding was $107.7 million at Dec.
31, 2009. The monthly average gross notional amount for these contracts was
$53.9 million for the period ended Dec. 31, 2009. The fair value of such
contracts on Dec. 31, 2009 is set forth in the table above.
4. EXPENSES
INVESTMENT MANAGEMENT SERVICES FEES
Under an Investment Management Services Agreement between the Investment Manager
and the Fund (the Management Agreement), the Investment Manager will determine
on behalf of the Fund which securities will be purchased, held or sold. Under
the Management Agreement, the Fund will pay the Investment Manager a management
fee, payable on a monthly basis, at an annual rate equal to 1.00% of the Fund's
average daily Managed Assets. "Managed Assets" means the net asset value of the
Fund's outstanding Common Stock plus the liquidation preference of any issued
and outstanding Preferred Stock of the Fund and the principal amount of any
borrowings used for leverage.
ADMINISTRATIVE SERVICES FEES
Under an Administrative Services Agreement, the Fund will pay Ameriprise
Financial an annual fee for administration and accounting services equal to
0.06% of the Fund's average daily Managed Assets. The fee for the period ended
Dec. 31, 2009 was 0.06% of the Fund's average daily Managed Assets.
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
--------------------------------------------------------------------------------
26 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
these Fund and Board expenses is facilitated by a company providing limited
administrative services to the Fund and the Board. For the period ended Dec. 31,
2009, other expenses paid to this company were $43.
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 Fund until distributed in accordance with the Plan.
ORGANIZATION EXPENSES AND OFFERING COSTS
The Investment Manager has agreed to pay all organization expenses of the Fund.
With respect to the Fund's initial public offering, the Investment Manager has
agreed to pay all offering costs (other than sales load) that exceed $0.04 per
share of Common Stock. The Fund paid offering costs of $572,000 from the
proceeds of the initial public offering costs. Offering costs paid by the Fund
were charged as a reduction of paid-in capital at the completion of the Fund
offering.
5. SECURITIES TRANSACTIONS
Cost of purchases and proceeds from sales of securities (other than short-term
obligations) aggregated $294,980,499 and $23,463,375, respectively, for the
period ended Dec. 31, 2009. Realized gains and losses are determined on an
identified cost basis.
6. DIVIDEND INVESTMENT PLAN AND STOCK REPURCHASE PROGRAM
The Fund, in connection with its Dividend Investment Plan (the Plan), issues
shares of its own Common Stock, as needed, to satisfy Plan requirements. No
shares were issued to Plan participants during the period ended Dec. 31, 2009.
Pursuant to the Plan, unless a Common Stockholder elects otherwise, all cash
dividends, capital gains distributions, and other distributions are
automatically reinvested in additional Common Stock. If you hold your shares in
street name or other nominee (i.e., through a broker), you should contact them
to determine their policy, as the broker firm's policy with respect to Fund
distributions may be to default to a cash payment. Common Stockholders who elect
not to participate in the Plan (including those whose intermediaries do not
permit participation in the Plan by their customers) will receive all dividends
and distributions payable in cash directly to the Common Stockholder of record
(or, if the shares of Common Stock are held in street or other nominee name,
then to such nominee).
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 27
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
Common Stockholders may elect not to participate in the Plan and to receive all
distributions of dividends and capital gains or other distributions in cash by
sending written instructions to American Stock Transfer & Trust Company, LLC
(AST), 59 Maiden Lane Plaza Level, New York, New York 10038. Participation in
the Plan may be terminated or resumed at any time without penalty by written
notice if received by AST, prior to the record date for the next distribution.
Otherwise, such termination or resumption will be effective with respect to any
subsequently declared distribution.
Under the Plan, Common Stockholders receive shares of Common Stock in lieu of
cash distributions unless they have elected otherwise as described above. Common
Stock will be issued in lieu of cash by the Fund from previously authorized but
unissued Common Stock. If the market price of a share on the ex-dividend date of
such a distribution is at or above the Fund's net asset value per share on such
date, the number of shares to be issued by the Fund to each Common Stockholder
receiving shares in lieu of cash distributions will be determined by dividing
the amount of the cash distribution to which such Common Stockholder would be
entitled by the greater of the net asset value per share on such date or 95% of
the market price of a share on such date. If the market price of a share on such
an ex-dividend date is below the net asset value per share, the number of shares
to be issued to such Common Stockholders will be determined by dividing such
amount by the per share market price. The issuance of Common Stock at less than
net asset value per share will dilute the net asset value of all Common Stock
outstanding at that time. Market price on any day means the closing price for
the Common Stock at the close of regular trading on the NYSE on such day or, if
such day is not a day on which the Common Stock trades, the closing price for
the Common Stock at the close of regular trading on the immediately preceding
day on which trading occurs.
The Fund, under its stock repurchase program, currently intends to make open
market purchases of its Common Stock from time to time when the Fund is trading
at a discount to its net asset value, in an amount approximately sufficient to
offset the growth in the number of shares of Common Stock issued as a result of
the reinvestment of the portion of its distributions to Common Stockholders that
are attributable to distributions received by the Fund from its underlying
portfolio investments less fund expenses. No shares were purchased in the open
market during the period ended Dec. 31, 2009.
The Fund reserves the right to amend or terminate the Plan as applied to any
distribution paid subsequent to written notice of the change sent to
participants in the Plan at least 90 days before the record date for such
distribution. There are no service or brokerage charges to participants in the
Plan; however, the Fund reserves the right to amend the Plan to include a
service charge payable to the
--------------------------------------------------------------------------------
28 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
Fund by the participants. The Fund reserves the right to amend the Plan to
provide for payment of brokerage fees by Plan participants in the event the Plan
is changed to provide for open market purchases of Common Stock on behalf of
Plan participants. All correspondence concerning the Plan should be directed to
AST.
7. OPTIONS CONTRACTS WRITTEN
Contracts and premiums associated with options contracts written during the
period ended Dec. 31, 2009, are as follows:
CALLS PUTS
CONTRACTS PREMIUMS CONTRACTS PREMIUMS
---------------------------------------------------------------------------
Balance Nov. 30, 2009 -- $ -- -- $ --
Opened 1,673 4,590,753 236 444,556
Closed (740) (2,004,255) -- --
---------------------------------------------------------------------------
Balance Dec. 31, 2009 933 $ 2,586,498 236 $444,556
---------------------------------------------------------------------------
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 $268,285,533 and $261,433,297,
respectively, for the period 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. FEDERAL TAX INFORMATION
Net investment income (loss) and net realized gains (losses) may differ for
financial statement and tax purposes primarily because options contracts,
foreign currency transactions 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.
Some of the Fund's investments and positions may be subject to special tax rules
that may change the normal treatment of income, gains and losses recognized by
the Fund (for example, the calls written by the Fund on the NASDAQ 100,
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 29
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
investments in futures transactions or non-U.S. corporations classified as
"passive foreign investment companies"). Those special tax rules can, among
other things, affect the treatment of capital gain or loss as long-term or
short-term and may result in ordinary income or loss rather than capital gain or
loss. The application of these special rules would therefore also affect the
character of distributions made by the Fund, and may increase the amount of
taxes payable by Common Stockholders.
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 $230,967 and accumulated net realized gain has been increased by
$1,544 resulting in a net reclassification adjustment to decrease paid-in
capital by $232,511.
For the period ended Dec. 31, 2009, there were no distributions.
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 $ (603,951)
Unrealized appreciation (depreciation) $13,053,159
For federal income tax purposes, the Fund had a capital loss carry-over of
$603,951 at Dec. 31, 2009, that if not offset by capital gains will expire in
2017. 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. RISKS RELATING TO CERTAIN INVESTMENTS
DIVERSIFICATION RISK
The Fund is non-diversified. A non-diversified fund may invest more of its
assets in fewer companies than if it were a diversified fund. The Fund may be
more exposed to the risks of loss and volatility than a fund that invests more
broadly.
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
--------------------------------------------------------------------------------
30 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
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.
SMALL AND MID-CAP COMPANIES RISK
The Fund may invest all or a substantial portion of its assets in companies
whose market capitalization is considered small- or mid-cap. These companies
often are newer or less established companies than larger companies. Investments
in these companies carry additional risks because earnings of these companies
tend to be less predictable; they often have limited product lines, markets,
distribution channels or financial resources; and the management of such
companies may be dependent upon one or a few key people. The market movements of
equity securities of small-cap and mid-cap companies may be more abrupt or
erratic than the market movements of equity securities of larger, more
established companies or the stock market in general. Historically, small-cap
and mid-cap companies have sometimes gone through extended periods when they did
not perform as well as larger companies. In addition, equity securities of these
companies generally are less liquid than those of larger companies. This means
that the Fund could have greater difficulty selling such securities at the time
and price that the Fund would like. Smaller-company stocks, as a whole, may
experience larger price fluctuations than large-company stocks or other types of
investments. During periods of investor uncertainty, investor sentiment may
favor large, well-known companies over small, lesser-known companies. There may
be less trading in a smaller company's stock, which means that buy and sell
transactions in that stock could have a larger impact on the stock's price than
is the case with larger company stocks.
WRITING CALL OPTIONS RISK
A principal aspect of the Fund's investment strategy involves writing call
options on the NASDAQ 100. This part of the Fund's strategy subjects the Fund to
certain additional risks. A decision as to whether, when and how to use options
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 31
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
involves the exercise of skill and judgment, and even a well-conceived
transaction may be unsuccessful to some degree because of market behavior or
unexpected events. The principal factors affecting the market value of an option
include supply and demand, interest rates, the current market price of the
underlying index or security in relation to the exercise price of the option,
the actual or perceived volatility of the underlying index or security and the
time remaining until the expiration date.
The Fund intends to write call options on the NASDAQ 100; however, it does not
intend to have a portfolio of securities that mirrors the securities in the
NASDAQ 100. As a result, during a period when the Fund has outstanding call
options written on the NASDAQ 100, the NASDAQ 100 may appreciate to a greater
extent than the securities in the Fund's portfolio. If the call options are
exercised in these circumstances, the Fund's loss on the options will be greater
because it will be paying the option holder not only an amount effectively
representing appreciation on securities in its own portfolio but also an amount
representing the greater appreciation experienced by the securities in the
NASDAQ 100 that the Fund does not own. If, at a time these call options may be
exercised, the securities underlying these options have market values above the
exercise price, then these call options will be exercised and the Fund will be
obligated to deliver to the option holder either the securities underlying these
options or to deliver the cash value of those securities, in exchange for which
the option holder will pay the Fund the exercise price. In either case, the Fund
will incur losses to the extent the market value of the underlying securities
exceed the sum of the premium the Fund received from writing the call options
and the exercise price of the call options, which loss may be very substantial.
To the extent all or part of the Fund's call options are covered, the Fund
forgoes, during the option's life, the opportunity to profit from increases in
the market value of the security underlying the call option above the sum of the
option premium received and the exercise price of the call, but has retained the
risk of loss should the price of the underlying security decline below the
exercise price minus the option premium received. The writer of an exchange-
listed option on a security has no control over when during the exercise period
of the option (which may be a single day or multiple days) it may be required to
fulfill its obligation as a writer of the option. Once an option writer has
received an exercise notice, it would be obligated to deliver the underlying
security at the exercise price. Thus, the writing of call options may require
the Fund to sell portfolio securities at inopportune times or for prices other
than current market values and will limit the amount of appreciation the Fund
can realize above the exercise price of an option.
--------------------------------------------------------------------------------
32 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
The Fund may be required to sell investments from its portfolio to effect cash
settlement (or transfer ownership of a stock or other instrument to physically
settle) on any written call options that are exercised. Such sales (or
transfers) may occur at inopportune times, and the Fund may incur transaction
costs that increase the expenses borne by Common Stockholders. The Fund may sell
written call options over an exchange or in the OTC market. The options in the
OTC markets may not be as liquid as exchange-listed options. The Fund may be
limited in the number of counterparties willing to take positions opposite the
Fund or may find the terms of such counterparties to be less favorable than the
terms available for listed options. The Fund cannot guarantee that its options
strategies will be effective. Moreover, OTC options may provide less favorable
tax treatment than listed options.
The value of options may be adversely affected if the market for such options
becomes less liquid or smaller. There can be no assurance that a liquid market
will exist when the Fund seeks to close out an option position, in the case of a
call option written, by buying the option back. Reasons for the absence of a
liquid secondary market on an exchange include the following: (i) there may be
insufficient trading interest in certain options; (ii) restrictions may be
imposed by an exchange on opening transactions or closing transactions or both;
(iii) trading halts, suspensions or other restrictions may be imposed with
respect to particular classes or series of options; (iv) unusual or unforeseen
circumstances may interrupt normal operations on an exchange; (v) the facilities
of an exchange or the Options Clearing Corporation (OCC) may not at all times be
adequate to handle current trading volume; or (vi) one or more exchanges could,
for economic or other reasons, decide or be compelled to discontinue the trading
of options (or a particular class or series of options) at some future date. If
trading were discontinued, the secondary market on that exchange (or in that
class or series of options) would cease to exist. However, outstanding options
on that exchange that had been issued by the OCC as a result of trades on that
exchange would continue to be exercisable in accordance with their terms. The
Fund's ability to terminate OTC options will be more limited than with exchange-
traded options and may involve the risk that broker-dealers participating in
such transactions will not fulfill their obligations.
The hours of trading for options may not conform to the hours during which the
underlying securities are traded. To the extent that the options markets close
before the markets for the underlying securities, significant price and rate
movements can take place in the underlying markets that would not be reflected
concurrently in the options markets. Call options are marked to market daily and
their value will be affected by changes in the value of and dividend rates of
the underlying common stocks, changes in interest rates, changes in the actual
or perceived volatility of the stock market and the underlying common stocks and
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 33
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
the remaining time to the options' expiration. Additionally, the exercise price
of an option may be adjusted downward before the option's expiration as a result
of the occurrence of certain corporate events affecting the underlying equity
security, such as extraordinary dividends, stock splits, merger or other
extraordinary distributions or events. A reduction in the exercise price of an
option would reduce the Fund's capital appreciation potential on the underlying
security.
The Fund's options transactions will be subject to limitations established by
each of the exchanges, boards of trade or other trading facilities on which such
options are traded. These limitations govern the maximum number of options in
each class which may be written or purchased by a single investor or group of
investors acting in concert, regardless of whether the options are written or
purchased on the same or different exchanges, boards of trade or other trading
facilities or are held or written in one or more accounts or through one or more
brokers. Thus, the number of options which the Fund may write or purchase may be
affected by options written or purchased by other investment advisory clients of
the Investment Manager. An exchange, board of trade or other trading facility
may order the liquidation of positions found to be in excess of these limits,
and may impose certain other sanctions.
OPTIONS RISK
The Fund intends to engage in transactions in options on securities, indices,
exchange-traded funds and market baskets of securities on exchanges and in the
OTC markets. In general, exchange-traded options have standardized exercise
prices and expiration dates and require the parties to post margin against their
obligations, and the performance of the parties' obligations in connection with
such options is guaranteed by the exchange or a related clearing corporation.
OTC options have more flexible terms negotiated between the buyer and the
seller, but generally do not require the parties to post margin and are subject
to greater credit risk. OTC options also involve greater liquidity risk.
In addition to writing call options as described above, the Fund may purchase
put options. By buying a put option, the Fund will pay a premium to acquire a
right to sell the securities or instruments underlying the put at the exercise
price of the option. The Fund will lose money if the securities or instruments
underlying the option do not decline in value below the exercise price of the
option by an amount sufficient to offset the premium paid to acquire the option.
To the extent the Fund purchases put options in the OTC market, the Fund will be
subject to the credit risk of the seller of the option. The Fund also may write
put options on the types of securities or instruments that may be held by the
Fund, provided that such put options are secured by segregated, liquid
instruments. The Fund will receive a premium for writing a put option, which
increases the Fund's return. In
--------------------------------------------------------------------------------
34 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
exchange for the premium received, the Fund has the obligation to buy the
securities or instruments underlying the option at an agreed-upon exercise price
if the securities or instruments decrease below the exercise price of the
option. The Fund will lose money if the securities or instruments decrease in
value so that the amount the Fund is obligated to pay the counterparty to the
option to purchase the securities underlying the option upon exercise of the
option exceeds the value of those securities by an amount that is greater than
the premium received by the Fund for writing the option.
The Fund may purchase call options on any of the types of securities or
instruments in which it may invest. In exchange for paying the option premium, a
purchased call option gives the Fund the right to buy, and obligates the seller
to sell, the underlying security or instrument at the exercise price. The Fund
will lose money if the securities or instruments underlying the option do not
appreciate in value in an amount sufficient to offset the premium paid by the
Fund to acquire the option.
FOREIGN SECURITIES RISK
The Fund may invest up to 25% of its Managed Assets in securities of companies
organized outside the United States. Investments in foreign securities involve
certain risks not associated with investments in U.S. companies. Securities
markets in certain foreign countries are not as developed, efficient or liquid
as securities markets in the United States. Therefore, the prices of foreign
securities are often volatile and trading costs are higher. Certain foreign
countries may impose restrictions on the ability of issuers of foreign
securities to make payments of principal and interest to investors located
outside the country, due to blockage of foreign currency exchanges or otherwise.
Generally, there is less publicly available information about foreign companies
due to less rigorous disclosure or accounting standards and regulatory
practices. In addition, the Fund will be subject to risks associated with
adverse political and economic developments in foreign countries, which could
cause the Fund to lose money on its investments in foreign securities.
The Fund may invest in securities of issuers located or doing substantial
business in "emerging markets" (lesser developed countries). Because of the less
developed markets and economics and, in some countries, 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. These risks include a high
concentration of market capitalization and trading volume in a small number of
issuers representing a limited number of industries, as well as a high
concentration of investors and financial intermediaries; political and social
uncertainties; over-dependence on exports, especially with respect to primary
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 35
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
commodities, making these economies vulnerable to changes in commodity prices;
overburdened infrastructure and obsolete or unseasoned financial systems;
environmental problems; less developed legal systems; and less reliable
custodial services and settlement practices.
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. 22, 2010, the date of issuance of the Fund's financial statement.
There were no events or transactions that occurred during the period that
materially impacted the amounts or disclosures in the Fund's financial
statement.
12. 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
--------------------------------------------------------------------------------
36 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
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 Funds. This settlement
resolved all outstanding matters between the Seligman Parties and the NYAG. In
addition to the foregoing matter, the New
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 37
NOTES TO FINANCIAL STATEMENTS (continued) --------------------------------------
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 PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------
TO THE BOARD OF DIRECTORS AND STOCKHOLDERS OF
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND:
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of Seligman Premium Technology Growth Fund (the
Fund) as of December 31, 2009, and the related statements of operations, changes
in net assets, and the financial highlights for the period from November 30,
2009 (commencement of investment operations) to December 31, 2009. 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.
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 PREMIUM TECHNOLOGY GROWTH FUND -- 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 Premium Technology Growth Fund at December 31,
2009, the results of its operations, changes in its net assets and the financial
highlights for the period from November 30, 2009 (commencement of investment
operations) to December 31, 2009, in conformity with U.S. generally accepted
accounting principles.
/s/ Ernst & Young LLP
Minneapolis, Minnesota
February 22, 2010
--------------------------------------------------------------------------------
40 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
FEDERAL INCOME TAX INFORMATION -------------------------------------------------
(UNAUDITED)
Fiscal year ended Dec. 31, 2009
The Fund designates as distributions of long-term gains, to the extent necessary
to fully distribute such capital gains, earnings and profits distributed to
Stockholders on the sale of shares.
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 41
BOARD MEMBERS AND OFFICERS -----------------------------------------------------
Stockholders elect a Board that oversees the Fund's operations. The Board
appoints officers who are responsible for day-to-day business decisions based on
policies set by the Board. The following is a list of the Fund's Board members.
The RiverSource Family of Funds that each Board member oversees consists of 132
funds, which includes 100 RiverSource funds and 32 Seligman funds. The Board is
divided into three classes, each of which consists of four Directors. Members of
each class typically hold office for a term of 3 years and until their
successors are elected and qualify or until he or she reaches the mandatory
retirement age established by the Board. The term of one class expires in each
year.
INDEPENDENT BOARD MEMBERS
POSITION HELD
NAME, WITH FUND,
ADDRESS, LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
AGE AND TERM OF OFFICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
Kathleen Blatz Board member since Chief Justice, Minnesota Supreme Court, 1998-2006; None
901 S. Marquette Ave. 2009 Attorney
Minneapolis, MN 55402 Term expiring 2012
Age 55
------------------------------------------------------------------------------------------------------------------------------
Arne H. Carlson Board member since Chair, RiverSource Family of Funds, 1999-2006; former None
901 S. Marquette Ave. 2009 Governor of Minnesota
Minneapolis, MN 55402 Term expiring 2013
Age 75
------------------------------------------------------------------------------------------------------------------------------
Pamela G. Carlton Board member since President, Springboard -- Partners in Cross Cultural None
901 S. Marquette Ave. 2009 Leadership (consulting company)
Minneapolis, MN 55402 Term expiring 2012
Age 55
------------------------------------------------------------------------------------------------------------------------------
Patricia M. Flynn Board member since Trustee Professor of Economics and Management, Bentley None
901 S. Marquette Ave. 2009 College; former Dean, McCallum Graduate School of
Minneapolis, MN 55402 Term expiring 2011 Business, Bentley University
Age 59
------------------------------------------------------------------------------------------------------------------------------
Anne P. Jones Board member since Attorney and Consultant None
901 S. Marquette Ave. 2009
Minneapolis, MN 55402 Term expiring 2012
Age 75
------------------------------------------------------------------------------------------------------------------------------
Jeffrey Laikind, CFA Board member since Former Managing Director, Shikiar Asset Management American Progressive
901 S. Marquette Ave. 2009 Insurance
Minneapolis, MN 55402 Term expiring 2011
Age 74
------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
42 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
INDEPENDENT BOARD MEMBERS (CONTINUED)
POSITION HELD
NAME, WITH FUND,
ADDRESS, LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
AGE AND TERM OF OFFICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
Stephen R. Lewis, Jr. Chair of the Board President Emeritus and Professor of Economics, Carleton Valmont Industries,
901 S. Marquette Ave. since 2009, College Inc. (manufactures
Minneapolis, MN 55402 Board member since irrigation systems)
Age 71 2009
Term expiring 2011
------------------------------------------------------------------------------------------------------------------------------
John F. Maher Board member since Retired President and Chief Executive Officer and None
901 S. Marquette Ave. 2009 former Director, Great Western Financial Corporation
Minneapolis, MN 55402 Term expiring 2013 (financial services), 1986-1997
Age 66
------------------------------------------------------------------------------------------------------------------------------
Catherine James Paglia Board member since Director, Enterprise Asset Management, Inc. (private None
901 S. Marquette Ave. 2009 real estate and asset management company)
Minneapolis, MN 55402 Term expiring 2011
Age 57
------------------------------------------------------------------------------------------------------------------------------
Leroy C. Richie Board member since Counsel, Lewis & Munday, P.C. since 1987; Vice Digital Ally, Inc.
901 S. Marquette Ave. 2009 President and General Counsel, Automotive Legal (digital imaging);
Minneapolis, MN 55402 Term expiring 2013 Affairs, Chrysler Corporation, 1990-1997 Infinity, Inc. (oil
Age 68 and gas exploration
and production); OGE
Energy Corp. (energy
and energy services)
------------------------------------------------------------------------------------------------------------------------------
Alison Taunton-Rigby Board member since Chief Executive Officer and Director, RiboNovix, Inc. Idera
901 S. Marquette Ave. 2009 since 2003 (biotechnology); former President, Aquila Pharmaceuticals,
Minneapolis, MN 55402 Term expiring 2012 Biopharmaceuticals Inc.
Age 65 (biotechnology);
Healthways, Inc.
(health management
programs)
------------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 43
BOARD MEMBERS AND OFFICERS (continued) -----------------------------------------
BOARD MEMBER AFFILIATED WITH RIVERSOURCE INVESTMENTS*
POSITION HELD
NAME, WITH FUND,
ADDRESS, LENGTH OF SERVICE PRINCIPAL OCCUPATION OTHER
AGE AND TERM OF OFFICE DURING PAST FIVE YEARS DIRECTORSHIPS
------------------------------------------------------------------------------------------------------------------------------
William F. Truscott Board member since President -- U.S. Asset Management and Chief Investment None
53600 Ameriprise 2009, Officer, Ameriprise Financial, Inc. since 2005;
Financial Center Vice President since President, Chairman of the Board and Chief Investment
Minneapolis, MN 55474 2009 Officer, RiverSource Investments, LLC since 2001;
Age 49 Term expiring 2013 Director, President and Chief Executive Officer,
Ameriprise Certificate Company since 2006; Chairman of
the Board and Chief Executive Officer, RiverSource
Distributors, Inc. since 2006 and of RiverSource Fund
Distributors, Inc. since 2008; Senior Vice
President -- Chief Investment Officer, Ameriprise
Financial, Inc., 2001-2005
------------------------------------------------------------------------------------------------------------------------------
* Interested person by reason of being an officer, director, security holder
and/or employee of RiverSource Investments or Ameriprise Financial.
The SAI has additional information about the Fund's Board members and is
available, without charge, upon request by calling 1(800) 937-5449.
The Board has appointed officers who are responsible for day-to-day business
decisions based on policies it has established. The officers are elected
annually and serve at the pleasure of the Board. In addition to Mr. Truscott,
who is Vice President, the Fund's other officers are:
FUND OFFICERS
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------
Patrick T. Bannigan President since 2009 Director and Senior Vice President -- Asset Management,
172 Ameriprise Financial Products and Marketing, RiverSource Investments, LLC
Center and Director and Vice President -- Asset Management,
Minneapolis, MN 55474 Products and Marketing, RiverSource Distributors, Inc.
Age 44 since 2006 and of RiverSource Fund Distributors, Inc.
since 2008; Managing Director and Global Head of
Product, Morgan Stanley Investment Management, 2004-
2006; President, Touchstone Investments, 2002-2004
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
44 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
FUND OFFICERS (CONTINUED)
NAME, POSITION HELD
ADDRESS, WITH FUND AND PRINCIPAL OCCUPATION
AGE LENGTH OF SERVICE DURING PAST FIVE YEARS
--------------------------------------------------------------------------------------------------------
Michelle M. Keeley Vice President since Executive Vice President -- Equity and Fixed Income,
172 Ameriprise Financial 2009 Ameriprise Financial, Inc. and RiverSource Investments,
Center LLC since 2006; Vice President -- Investments,
Minneapolis, MN 55474 Ameriprise Certificate Company since 2003; Senior Vice
Age 45 President -- Fixed Income, Ameriprise Financial, Inc.,
2002-2006 and RiverSource Investments, LLC, 2004-2006
--------------------------------------------------------------------------------------------------------
Amy K. Johnson Vice President since Chief Administrative Officer, RiverSource Investments,
5228 Ameriprise Financial 2009 LLC since 2009; Vice President -- Asset Management and
Center Minneapolis, MN Trust Company Services, RiverSource Investments, LLC,
55474 2006-2009; Vice President -- Operations and Compliance,
Age 44 RiverSource Investments, LLC, 2004-2006; Director of
Product Development -- Mutual Funds, Ameriprise
Financial, Inc., 2001-2004
--------------------------------------------------------------------------------------------------------
Jeffrey P. Fox Treasurer since 2009 Vice President -- Investment Accounting, Ameriprise
105 Ameriprise Financial Financial, Inc. since 2002; Chief Financial Officer,
Center RiverSource Distributors, Inc. since 2006 and of
Minneapolis, MN 55474 RiverSource Fund Distributors, Inc. since 2008
Age 54
--------------------------------------------------------------------------------------------------------
Scott R. Plummer Vice President, Vice President and Chief Counsel -- Asset Management,
5228 Ameriprise Financial General Counsel and Ameriprise Financial, Inc. since 2005; Chief Counsel,
Center Secretary since 2009 RiverSource Distributors, Inc. and Chief Legal Officer
Minneapolis, MN 55474 and Assistant Secretary, RiverSource Investments, LLC
Age 50 since 2006; Chief Counsel, RiverSource Fund
Distributors, Inc. since 2008; Vice President, General
Counsel and Secretary, Ameriprise Certificate Company
since 2005; Vice President -- Asset Management
Compliance, Ameriprise Financial, Inc., 2004-2005;
Senior Vice President and Chief Compliance Officer,
USBancorp Asset Management, 2002-2004
--------------------------------------------------------------------------------------------------------
Eleanor T.M. Hoagland Chief Compliance Chief Compliance Officer, RiverSource Investments, LLC,
100 Park Avenue Officer since 2009 Ameriprise Certificate Company and RiverSource Service
New York, NY 10010 Corporation since 2009; Chief Compliance Officer for
Age 58 each of the Seligman funds since 2004; Money Laundering
Prevention Officer and Identity Theft Prevention
Officer for each of the Seligman funds, 2008-2009;
Managing Director, J. & W. Seligman & Co. Incorporated
and Vice-President for each of the Seligman funds,
2004-2008
--------------------------------------------------------------------------------------------------------
Neysa M. Alecu Money Laundering Vice President -- Compliance, Ameriprise Financial,
2934 Ameriprise Financial Prevention Officer Inc. since 2008; Anti-Money Laundering Officer,
Center since 2009 and Ameriprise Financial, Inc. since 2005; Compliance
Minneapolis, MN 55474 Identity Theft Director, Ameriprise Financial, Inc., 2004-2008
Age 46 Prevention Officer
since 2009
--------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 45
MATTERS RELATING TO THE DIRECTORS' CONSIDERATION OF THE APPROVAL OF THE
INVESTMENT MANAGEMENT SERVICES AGREEMENT --------------------------------------
RiverSource Investments, LLC ("RiverSource Investments" or the "investment
manager"), a wholly-owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise
Financial"), serves as the investment manager to the Fund. Under an investment
management services agreement (the "IMS Agreement"), RiverSource Investments
provides investment advice and other services to the Fund and all funds in the
RiverSource Family of Funds (collectively, the "Funds"). The Fund's Board of
Directors (the "Board"), including the independent Board members (the
"Independent Directors"), and its Contracts, Investment Review and Compliance
Committees monitor these services throughout the year. The Board accords
particular weight to the work, deliberations and conclusions of these committees
in determining whether to approve the IMS Agreement. The Board also accorded
particular weight to its 2009 annual review of RiverSource Investments (which
culminated in April 2009) and its deliberations and conclusions in connection
therewith.
At the November 11-12, 2009 in-person Board meeting, the Board, including the
Independent Directors, considered approval of the IMS Agreement. At this
meeting, independent legal counsel to the Independent Directors reviewed with
the Independent Directors various factors relevant to the Board's consideration
of advisory agreements and the Board's legal responsibilities related to such
consideration. Following an analysis and discussion of the factors identified
below, the Board, including all of the Independent Directors, approved the IMS
Agreement.
Nature, Extent and Quality of Services Provided by RiverSource Investments: The
Board analyzed various reports and presentations it had received detailing the
services to be performed by RiverSource Investments, as well as its history,
reputation, expertise, resources and capabilities. In this regard, the Board
considered, in particular, RiverSource Investments' continued investment in, and
resources dedicated to, the Funds' operations, most notably, the large
investment made in the acquisition of J. & W. Seligman & Co. Incorporated,
including its portfolio management operations, personnel and infrastructure
(including the addition of two new offices in New York City and Menlo Park).
Further, in connection with the Board's evaluation of the overall package of
services to be provided by RiverSource Investments, the Board considered the
quality of the administrative services proposed to be provided by a RiverSource
Investments' affiliate to the Fund. The Board also reviewed the financial
condition of RiverSource Investments (and its affiliate) and RiverSource
Investments' ability to carry out its responsibilities under the IMS Agreement.
The Board also
--------------------------------------------------------------------------------
46 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
--------------------------------------------------------------------------------
discussed the acceptability of the terms of the IMS Agreement (including the
relatively broad scope of services required to be performed by RiverSource
Investments). The Board concluded that the services to be performed under the
IMS Agreement for the Fund should be of a reasonably high quality. Based on the
foregoing, and based on other information received (both oral and written) and
other considerations, the Board concluded that RiverSource Investments and its
affiliate were in a position to provide a high quality and level of services to
the Fund.
Investment Performance: Although the consideration of a fund's investment
performance is usually reviewed in connection with evaluating the nature, extent
and quality of services provided under advisory agreements, the Board did not
consider this factor because the Fund had no performance history. However, the
Board did consider the investment process of the Fund's portfolio managers,
including those members of the investment manager's Seligman Technology Team and
their investment performance track record with respect to managing a similar
mutual fund, albeit a fund without a rules-based call option strategy.
Comparative Fees, Costs of Services Provided and the Profits Realized By
RiverSource Investments and its Affiliate from their Relationships with the
Fund: The Board reviewed comparative fees and the costs of services to be
provided under the IMS Agreement. In considering the proposed level of fees
under the IMS Agreement, the Board observed that the Fund did not have a Lipper
peer group for comparative purposes, but it accorded particular weight to a
comparison of investment management fees for other closed-end funds, including
those that make significant use of options strategies, where the investment
manager also advises an open-end fund with a similar mandate to the closed-end
fund (without the use of a call option strategy). The Board also considered the
investment management fees for an open-end fund in the RiverSource Family of
Funds that had a substantially similar mandate as the Fund, but without the use
of a call option strategy (the Comparable RiverSource Open-End Fund). The Board
observed that the incremental fee payable by the closed-end funds (that use a
call option strategy) when compared to the comparable open-end fund managed by
the same manager, was greater than the proposed incremental fee to be paid by
the Fund compared to the fee paid by the Comparable RiverSource Open-End Fund.
Furthermore, the Board evaluated the fairness and reasonableness of the
investment management fees currently paid by the Comparable RiverSource Open-End
Fund (which was proposed by management to be representative of the portion of
the Fund's fees that would be attributable to
--------------------------------------------------------------------------------
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT 47
MATTERS RELATING TO THE DIRECTORS' CONSIDERATION OF THE APPROVAL OF THE
INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) --------------------------
the Fund's technology investment strategy (i.e., without taking into account the
call option strategy)). The Board observed that the Comparable RiverSource Open-
End Fund's fees approximate the median fees paid by funds in its comparable peer
group. Based on the foregoing, among other factors, the Board found the total
level of proposed fees to be reasonable. The Board also considered the expected
profitability of RiverSource Investments and its affiliate in connection with
RiverSource Investments providing investment management services to the Fund.
The Board noted that the fees to be paid by the Fund should permit the
investment manager to offer competitive compensation to its personnel, make
necessary investments in its business and earn a reasonable profit.
Economies of Scale to be Realized: The Board noted that, although the
management fee schedule for the Fund does not contain breakpoints that reduce
the fee rate on assets above specified levels, the Fund is a closed-end fund
with no planned continuous offering of its shares. In light of the foregoing,
the Board determined that it was reasonable for the IMS Agreement to include no
breakpoints at this time.
Based on the foregoing, the Board, including all of the Independent Directors,
concluded that the proposed investment management service fees were fair and
reasonable in light of the extent and quality of services expected to be
provided. In reaching this conclusion, no single factor was determinative. On
November 12, 2009, the Board, including all of the Independent Directors,
approved the IMS Agreement.
PROXY VOTING -------------------------------------------------------------------
The policy of the Board is to vote the proxies of the companies in which the
Fund holds investments consistent with the procedures as stated in the Statement
of Additional Information (SAI). You may obtain a copy of the SAI without charge
by calling American Stock Transfer & Trust Company 1(800) 937-5449; or searching
the website of the Securities and Exchange Commission (SEC) at
http://www.sec.gov. Information regarding how the Fund voted proxies relating to
portfolio securities will be filed with the SEC by August 31 for the most recent
12-month period ending June 30, 2010, and will be available without charge by
visiting seligman.com; or searching the website of the SEC at www.sec.gov.
--------------------------------------------------------------------------------
48 SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND -- 2009 ANNUAL REPORT
SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND
200 Ameriprise Financial Center
Minneapolis, MN 55474
SELIGMAN.COM
You should consider the investment objectives, risks,
charges, and expenses of the Fund carefully before
investing. You can obtain the Fund's most recent periodic
reports and other regulatory filings by contacting your
financial advisor or American Stock Transfer & Trust Company
at 1(800)937-5449. These reports and other filings can also
be found on the Securities and Exchange Commission's EDGAR
Database. You should read these reports and other filings
carefully before investing.
(SELIGMAN LOGO) (C)2010 RiverSource Investments, LLC. SL-9922 D (3/10)
Item 2. (a) The Registrant has adopted a code of ethics that applies to the
Registrant's principal executive officer and principal financial
officer. A copy of the code of ethics is filed as an exhibit to this
form N-CSR.
(b) During the period covered by this report, there were not any
amendments to the provisions of the code of ethics adopted in 2(a)
above.
(c) During the period covered by this report, there were not any
implicit or explicit waivers to the provisions of the code of ethics
adopted in 2(a).
Item 3. The Registrant's board of directors has determined that independent
directors Pamela G. Carlton, Jeffrey Laikind, John F. Maher and Anne P.
Jones, each qualify as audit committee financial experts.
Item 4. Principal Accountant Fees and Services
(a) Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for
professional services rendered for the audit of the annual financial
statements for Seligman Premium Technology Growth Fund, Inc. were as
follows:
2009 - $58,225
(b) Audit-Related Fees. The fees for the year ended Dec. 31, to Ernst & Young
LLP for additional audit-related services rendered related to the
semiannual financial statement review and other consultations and services
required to complete the audit for Seligman Premium Technology Growth
Fund, Inc. were as follows:
2009 - $10,375
(c) Tax Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP for
tax compliance related services rendered for Seligman Premium Technology
Growth Fund, Inc. were as follows:
2009 - $3,498
(d) All Other Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP
for additional professional services rendered for Seligman Premium
Technology Growth Fund, Inc. were as follows:
2009 - $0
(e) (1) Audit Committee Pre-Approval Policy. Pursuant to Sarbanes-Oxley
pre-approval requirements, all services to be performed by Ernst & Young
LLP for the registrant and to the registrant's investment adviser and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the registrant must
be pre-approved by the audit committee.
(e) (2) 100% of the services performed for items (b) through (d) above during
2009 were pre-approved by the audit committee.
(f) Not applicable.
(g) Non-Audit Fees. The fees for the year ended Dec. 31, to Ernst & Young LLP
by the registrant for non-audit fees and by the registrant's investment
adviser, and any entity controlling, controlled by, or under common
control with the adviser that provides ongoing services to the registrant
were as follows:
2009 - $812,559
(h) 100% of the services performed in item (g) above during 2009 were
pre-approved by the Ameriprise Financial Audit Committee and/or the
RiverSource Mutual Funds Audit Committee.
Item 5. Audit Committee of Listed Registrants. Not applicable.
Item 6. Investments.
(a) The complete schedule of investments is included in Item 1 of this Form
N-CSR.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End
Management Investment Companies.
GENERAL GUIDELINES, POLICIES AND PROCEDURES
The 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.
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 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.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Information pertaining to the portfolio managers of the registrant, as of Dec.
31, 2009, is set forth below.
PORTFOLIO OTHER ACCOUNTS ASSETS UNDER PERFORMANCE BASED SECURITIES
MANAGER MANAGED(a) MANAGEMENT ACCOUNTS OWNERSHIP
------------------ ------------------ ------------------ ----------------- ---------------
John Schonberg 7 RICs $ 1.23 billion 2 RICs ($1.1 B) $1-$10,000
2 PIVs $ 19.34 million
Paul Wick 4 RICs $ 4.25 billion None None
5 PIVs $ 1.82 billion
3 other accounts $262.42 million
(a) RIC refers to a Registered Investment Company; PIV refers to a Pooled
Investment Vehicle.
Compensation:
JOHN SCHONBERG
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. 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, plus, where
applicable, a percentage of the assets of the funds they support as research
analysts, and by the short term (typically one-year) and long-term (typically
three-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. 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.
PAUL WICK
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 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.
Conflicts of Interest:
JOHN SCHONBERG AND PAUL WICK
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 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.
Item 9. Purchase of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers. None.
Item 10. Submission of matters to a vote of security holders. Not applicable.
Item 11. Controls and Procedures.
(a) Based upon their evaluation of the registrant's disclosure controls
and procedures as conducted within 90 days of the filing date of this
Form N-CSR, the registrant's Principal Financial Officer and Principal
Executive Officer have concluded that those disclosure controls and
procedures provide reasonable assurance that the material information
required to be disclosed by the registrant on this report is recorded,
processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission's rules and forms.
(b) There were no changes in the registrant's internal controls over
financial reporting that occurred during the registrant's last fiscal
half-year (the registrant's second fiscal half-year in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant's internal control over financial
reporting.
Item 12. Exhibits.
(a)(1) Code of ethics as applies to the Registrant's principal executive
officer and principal financial officer, as required to be disclosed
under Item 2 of Form N-CSR, is attached as Ex. 99.CODE ETH.
(a)(2) Separate certification for the Registrant's principal executive
officer and principal financial officer, as required by Section 302 of
the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment
Company Act of 1940, are attached as EX.99.CERT.
(a)(3) Not applicable.
(b) A certification by the Registrant's principal executive officer and
principal financial officer, pursuant to Section 906 of the
Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment
Company Act of 1940, is attached as EX.99.906 CERT.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the Registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Seligman Premium Technology Growth Fund, Inc.
By /s/ Patrick T. Bannigan
---------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 2010
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By /s/ Patrick T. Bannigan
---------------------------
Patrick T. Bannigan
President and Principal Executive Officer
Date March 5, 2010
By /s/ Jeffrey P. Fox
---------------------------
Jeffrey P. Fox
Treasurer and Principal Financial Officer
Date March 5, 2010