Exhibit 17(i) Seligman Common Stock Fund, Inc. ------------------------------------------------------------------------------- Annual Report December 31, 2008 Seeking Total Return Through a Combination of Capital Appreciation and Current Income (J. & W. SELIGMAN LOGO) Table of Contents <Table> Interview With Your Portfolio Manager....................... 4 Performance Overview........................................ 6 Portfolio Overview.......................................... 9 Understanding and Comparing Your Fund's Expenses............ 13 Portfolio of Investments.................................... 14 Statement of Assets and Liabilities......................... 23 Statement of Operations..................................... 24 Statements of Changes in Net Assets......................... 25 Notes to Financial Statements............................... 26 Financial Highlights........................................ 36 Report of Independent Registered Public Accounting Firm..... 42 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement.. 43 Proxy Results............................................... 48 Directors and Officers...................................... 49 Required Federal Income Tax Information..................... 52 Additional Fund Information................................. 53 </Table> 3 Interview With Your Portfolio Manager Note: In conjunction with the acquisition of the Fund's previous investment manager by RiverSource Investments, LLC, the team responsible for the Fund's management was changed in November 2008 from the Seligman Core/Growth Investment Team to the RiverSource Disciplined Equity and Asset Allocation Team. Q. HOW DID SELIGMAN COMMON STOCK FUND PERFORM FOR THE YEAR ENDED DECEMBER 31, 2008? A. For the one year ended December 31, 2008, Seligman Common Stock Fund posted a total return, based on the net asset value of Class A shares of -44.6%. In comparison, the Fund's benchmark, the S&P 500 Index, returned -37.0%, and the Fund's peers, as measured by the Lipper Multi-Cap Core Funds Average, returned -38.8%. Q. WHAT MARKET CONDITIONS AND ECONOMIC FACTORS MATERIALLY IMPACTED THE FUND'S INVESTMENT RESULTS DURING THE YEAR? A. Weak economic data points released in January in manufacturing, employment, and retail sales fueled fears of global recession and sparked a sharp sell- off in equities. The credit freeze continued as growth slowed and banks and brokers reined in capital as the financial system continued to absorb losses related to subprime debt. The combined crises in housing, the credit market, and the economy spurred an activist Federal Reserve Board (the Fed) and the Administration to take unprecedented steps to shore up the economy. The liquidity crisis reached its peak in March when the Fed intervened to facilitate the sale of investment bank Bear Stearns to JPMorgan Chase. Bear Stearns, an 85-year-old financial institution, was highly leveraged and after losing access to capital, was on the brink of insolvency. Seeking to contain the damage and shore up the financial system, the Fed stepped in and engineered the sale of the troubled investment bank. The Administration and Congress were similarly proactive in addressing the crisis. In addition to enacting a $160 billion fiscal stimulus program, the cap on mortgages that Fannie Mae and Freddie Mac can acquire and guarantee was raised in an effort to support home purchases. The Fed reacted to the weakening economic outlook with a federal funds target rate cut in January, made between the Fed's regular meetings, followed by three additional decreases during the period. As the Fed moved, however, concerns of inflation grew and the dollar weakened. As the dollar weakened, commodities rallied and stock prices continued to decline. At the end of June, oil prices had reached north of $140 per barrel. The resultant impact was a slowing of consumer spending and the economy itself. Commodity prices reversed course in June, essentially giving back gains earned earlier in the fiscal year. Investors were largely driven out of commodities and commodity-related stocks that had performed well earlier in the period, in search of more defensive positions. In September we witnessed the unfolding of several unprecedented events that affected markets on a global scale. Fannie Mae and Freddie Mac were put into conservatorship. On September 15, Lehman Brothers filed for bankruptcy. The ripple effects of the failing of this 158-year old investment bank were widespread. Several cash management funds with exposure to Lehman debt suffered, with the net asset value of the Reserve Primary Fund falling below $1 per share -- "breaking the buck." Credit markets across the globe froze up, which had a significant implication on markets as a whole. Investors started focusing more on higher quality stocks. The stock of any company with a fair amount of debt on its balance sheet suddenly became a question mark to investors. The downgrading of AIG's credit rating led to a liquidity crisis (its stock price suffered a 95% decline on September 16, 2008) that ended in the largest government bailout of a company in US history. Merrill Lynch quickly sold itself to Bank of 4 Interview With Your Portfolio Manager America, and commercial banks WAMU and Wachovia were quickly sold to JPMorgan Chase and Wells Fargo, respectively. Personal consumption in the US contracted for the first time in almost two decades during the third quarter of 2008. With mounting job losses, tighter credit conditions, and a significantly amplified level of household debt, the resulting recession has been much deeper than we have experienced in quite some time. The US consumer accounts for approximately two-thirds of the US economy. When the consumer retrenches, as they did during 2008, the resulting impact on the economy as a whole is tremendous. Q. WHAT INVESTMENT STRATEGIES AND TECHNIQUES MATERIALLY IMPACTED THE FUND'S INVESTMENT RESULTS DURING THE YEAR? A. Information technology was the Fund's largest sector weighting during the year and was the Fund's largest overweight, relative to its benchmark. The sector was among the poorer performing areas of the benchmark during the year and a combination of stock selection and sector allocation led the Fund's investment results within the sector to lag those of the benchmark. A scale-back in the Fund's allocation to the sector was initiated late in the year. The area that had the largest negative impact on the Fund's investment results, as compared to the benchmark, was the materials sector. The sector accounted for a modest portion (less than 5%) of the Fund's and benchmark's allocation. The Fund underperformed the benchmark in the sector by a wide margin, due primarily to stock selection. Stock selection was also notably detrimental in the financials, consumer staples, and consumer discretionary sectors. Stock selection was the strongest in the health care sector. The Fund's overweight in the sector also aided its performance, as health care was among the better performing areas of the benchmark during the year. From an allocation perspective, the Fund's underweightings in the financials and industrials sectors benefited relative performance, as these sectors were among the benchmark's bottom performing areas. Holdings that aided the Fund's investment results during the year included Allstate (insurance), Pfizer (pharmaceuticals), Gilead Sciences (biotechnology), and Wal-Mart Stores (food and staples retailing). Holdings that detracted from the Fund's investment results included CIGNA (health care providers and services), Smurfit-Stone Container (containers and packaging), Bank of America (diversified financial services), and Comverse Technology (communications equipment). By year-end, the Fund's position in Comverse Technology had been eliminated. - ------- The views and opinions expressed are those of the Portfolio Manager(s), are provided for general information only, and do not constitute specific tax, legal, or investment advice to, or recommendations for, any person. There can be no guarantee as to the accuracy of market forecasts. Opinions, estimates, and forecasts may be changed without notice. 5 Performance Overview This section of the report is intended to help you understand the performance of Seligman Common Stock Fund and to provide a summary of the Fund's portfolio characteristics. Performance data quoted in this report represents past performance and does not guarantee or indicate future investment results. The rates of return will vary and the principal value of an investment will fluctuate. Shares, if redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. Total returns of the Fund (except for Class I shares) as of the most recent month end will be available at WWW.SELIGMAN.COM(1) by the seventh business day following that month end. Calculations assume reinvestment of distributions, if any. Performance data quoted does not reflect the deduction of taxes that an investor may pay on distributions or the redemption of Fund shares. The chart on page 7 compares $10,000 hypothetical investments made in Class A shares, with and without the initial 5.75% maximum sales charge and in Class B shares, without contingent deferred sales charge ("CDSC"), to a $10,000 investment made in the Standard and Poor's 500 Composite Stock Price Index ("S&P 500 Index"), for the ten-year period ended December 31, 2008. The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. The performance of Class C, Class I and Class R shares, which commenced on later dates, and of Class A and Class B shares for other periods, with and without applicable sales charges and CDSCs, is not shown in the chart but is included in the total returns table that follows the chart. The performance of Class C, Class I and Class R shares will differ from the performance shown for Class A and Class B shares, based on the differences in sales charges and fees paid by shareholders. Returns for Class A shares are calculated with and without the effect of the initial 5.75% maximum sales charge that became effective on January 7, 2008. Returns for Class B shares are calculated with and without the effect of the maximum 5% CDSC, charged on redemptions made within one year of the date of purchase, declining to 1% in the sixth year and 0% thereafter. Returns for Class C and Class R shares are calculated with and without the effect of the 1% CDSC, charged on redemptions made within one year of purchase. Returns for Class C shares would have been lower for periods prior to June 4, 2007 if the 1% initial sales charge then in effect was incurred. On May 16, 2008, Class D shares of the Fund were converted to Class C shares at their respective net asset values. Effective at the close of business on May 16, 2008, Class D shares are no longer offered by the Fund. Class I shares do not have sales charges, and returns are calculated accordingly. An investment in the Fund is not a deposit in a bank and is not insured or guaranteed by the Federal Deposit Insurance Corporation or any other government agency. - ------- 1 The website reference is an inactive textual reference and information contained in or otherwise accessible through the website does not form a part of this report or the Fund's prospectuses or statement of additional information. 6 Performance Overview (LINE GRAPH) Investment Results TOTAL RETURNS For Periods Ended December 31, 2008 - -------------------------------------------------------------------------------- <Table> <Caption> AVERAGE ANNUAL ------------------------------------------------------------ CLASS C CLASS I CLASS R SINCE SINCE SINCE SIX ONE FIVE TEN INCEPTION INCEPTION INCEPTION MONTHS* YEAR YEARS YEARS 5/27/99 11/30/01 4/30/03 - ---------------------------------------------------------------------------------------------------- CLASS A - ---------------------------------------------------------------------------------------------------- With Sales Charge (39.26)% (47.76)% (7.57)% (6.62)% n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without Sales Charge (35.57) (44.56) (6.46) (6.06) n/a n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS B - ---------------------------------------------------------------------------------------------------- With CDSC+ (38.88) (47.65) (7.48) n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.79) (45.02) (7.17) (6.63)++ n/a n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS C - ---------------------------------------------------------------------------------------------------- With 1% CDSC (36.37) (45.51) n/a n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.75) (44.98) (7.16) n/a (7.26)% n/a n/a - ---------------------------------------------------------------------------------------------------- CLASS I (35.36) (44.30) (6.06) n/a n/a (5.44)% n/a - ---------------------------------------------------------------------------------------------------- CLASS R - ---------------------------------------------------------------------------------------------------- With 1% CDSC (36.27) (45.20) n/a n/a n/a n/a n/a - ---------------------------------------------------------------------------------------------------- Without CDSC (35.65) (44.67) (6.68) n/a n/a n/a (2.77)% - ---------------------------------------------------------------------------------------------------- BENCHMARKS** - ---------------------------------------------------------------------------------------------------- Lipper Multi-Cap Core Funds Average (31.60) (38.81) (2.61) 0.82 0.12 (0.96) 1.78 - ---------------------------------------------------------------------------------------------------- S&P 500 Index (28.47) (36.99) (2.19) (1.38) (1.92) (1.40) 1.67 - ---------------------------------------------------------------------------------------------------- </Table> - ------- See footnotes on page 8. 7 Performance Overview NET ASSET VALUE PER SHARE CLASS A CLASS B CLASS C CLASS I CLASS R - ---------------------------------------------------------------------------------- 12/31/08 $ 6.02 $ 5.87 $ 5.88 $ 6.07 $ 6.04 - ---------------------------------------------------------------------------------- 6/30/08 9.72 9.48 9.49 9.79 9.75 - ---------------------------------------------------------------------------------- 12/31/07 11.44 11.17 11.18 11.53 11.47 - ---------------------------------------------------------------------------------- - ------- * Returns for periods of less than one year are not annualized. ** The Lipper Multi-Cap Core Funds Average ("Lipper Average") and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500 Index") are unmanaged benchmarks that assume reinvestment of all distributions and exclude the effect of fees, taxes and sales charges. The S&P 500 Index also excludes the effect of expenses. The Lipper Average measures the performance of funds, that, by portfolio practice, invest in a variety of market-capitalization ranges without concentrating 75% of their equity assets in any one market-capitalization range over an extended period of time. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value, compared to the S&P SuperComposite 1500 Index. The S&P 500 Index measures the performance of 500 of the largest US companies based on market capitalizations. Investors cannot invest directly in an average or index. + The CDSC is 5% if you sell your shares within one year of purchase and 2% for the five-year period. ++ The ten-year return for Class B shares reflects automatic conversion to Class A shares approximately eight years after their date of purchase. 8 Portfolio Overview Diversification of Net Assets December 31, 2008 - -------------------------------------------------------------------------------- <Table> <Caption> PERCENT OF NET ASSETS DECEMBER 31, ---------------- ISSUES COST VALUE 2008 2007 - ---------------------------------------------------------------------------------- COMMON STOCKS: - ---------------------------------------------------------------------------------- Aerospace and Defense 2 $ 780,180 $ 744,270 0.7 2.8 - ---------------------------------------------------------------------------------- Air Freight and Logistics 1 307,962 334,087 0.3 0.5 - ---------------------------------------------------------------------------------- Airlines 1 198,334 200,286 0.2 1.2 - ---------------------------------------------------------------------------------- Auto Components -- -- -- -- 1.1 - ---------------------------------------------------------------------------------- Automobiles 1 201,508 210,784 0.2 0.4 - ---------------------------------------------------------------------------------- Beverages 3 3,153,815 3,242,929 3.2 -- - ---------------------------------------------------------------------------------- Biotechnology 3 1,971,107 2,212,889 2.2 1.9 - ---------------------------------------------------------------------------------- Building Products 1 208,091 269,045 0.3 -- - ---------------------------------------------------------------------------------- Capital Markets 2 2,706,074 1,008,766 1.0 4.3 - ---------------------------------------------------------------------------------- Chemicals 6 2,908,319 2,653,857 2.6 -- - ---------------------------------------------------------------------------------- Commercial Banks 6 3,837,310 1,851,809 1.8 1.2 - ---------------------------------------------------------------------------------- Commercial Services and Supplies 3 787,962 911,129 0.9 1.0 - ---------------------------------------------------------------------------------- Communications Equipment 4 1,453,721 1,056,191 1.1 5.6 - ---------------------------------------------------------------------------------- Computers and Peripherals 4 2,761,437 2,898,263 2.9 4.3 - ---------------------------------------------------------------------------------- Construction and Engineering -- -- -- -- 1.2 - ---------------------------------------------------------------------------------- Consumer Finance 1 249,267 235,284 0.2 1.1 - ---------------------------------------------------------------------------------- Containers and Packaging 1 397,238 7,860 -- 2.3 - ---------------------------------------------------------------------------------- Distributors 1 196,996 190,928 0.2 -- - ---------------------------------------------------------------------------------- Diversified Consumer Services 1 270,579 323,896 0.3 -- - ---------------------------------------------------------------------------------- Diversified Financial Services 4 13,063,098 8,064,443 8.0 3.9 - ---------------------------------------------------------------------------------- Diversified Telecommunication Services 3 463,546 484,565 0.5 2.4 - ---------------------------------------------------------------------------------- Electric Utilities 3 1,959,871 1,510,042 1.5 0.7 - ---------------------------------------------------------------------------------- Electrical Equipment 1 454,687 486,767 0.5 0.5 - ---------------------------------------------------------------------------------- Electronic Equipment, Instruments and Components 2 407,961 436,343 0.4 -- - ---------------------------------------------------------------------------------- Energy Equipment and Services 8 2,714,830 1,953,040 1.9 3.1 - ---------------------------------------------------------------------------------- Food and Staples Retailing 3 10,129,029 5,878,281 5.8 2.3 - ---------------------------------------------------------------------------------- Food Products 7 2,299,066 2,378,249 2.4 -- - ---------------------------------------------------------------------------------- Gas Utilities 1 200,715 212,027 0.2 -- - ---------------------------------------------------------------------------------- Health Care Equipment and Supplies 2 394,684 408,003 0.4 1.0 - ---------------------------------------------------------------------------------- Health Care Providers and Services 4 1,849,802 1,079,517 1.1 1.7 - ---------------------------------------------------------------------------------- Hotels, Restaurants and Leisure -- -- -- -- 0.9 - ---------------------------------------------------------------------------------- Household Durables 8 1,645,911 1,852,760 1.8 -- - ---------------------------------------------------------------------------------- Household Products 2 533,282 552,295 0.6 -- - ---------------------------------------------------------------------------------- (Continued on page 10.) </Table> 9 Portfolio Overview Diversification of Net Assets (continued) December 31, 2008 - -------------------------------------------------------------------------------- <Table> <Caption> PERCENT OF NET ASSETS DECEMBER 31, ---------------- ISSUES COST VALUE 2008 2007 - ---------------------------------------------------------------------------------- COMMON STOCKS: (continued) - ---------------------------------------------------------------------------------- Independent Power Producers and Energy Traders -- $ -- $ -- -- 0.6 - ---------------------------------------------------------------------------------- Industrial Conglomerates 2 1,231,609 1,142,911 1.1 2.5 - ---------------------------------------------------------------------------------- Insurance 8 4,557,670 4,997,299 4.9 2.5 - ---------------------------------------------------------------------------------- Internet Software and Services 2 1,477,894 433,322 0.4 2.3 - ---------------------------------------------------------------------------------- IT Services 5 1,386,153 1,421,036 1.4 -- - ---------------------------------------------------------------------------------- Leisure Equipment and Products 3 596,712 635,983 0.6 -- - ---------------------------------------------------------------------------------- Life Sciences Tools and Services -- -- -- -- 0.6 - ---------------------------------------------------------------------------------- Machinery 6 1,253,413 1,397,837 1.4 1.2 - ---------------------------------------------------------------------------------- Media 5 2,377,846 2,434,475 2.4 2.7 - ---------------------------------------------------------------------------------- Metals and Mining 5 1,669,178 1,319,989 1.3 2.2 - ---------------------------------------------------------------------------------- Multi-Utilities 1 196,175 192,940 0.2 -- - ---------------------------------------------------------------------------------- Multiline Retail 3 565,482 489,953 0.5 1.8 - ---------------------------------------------------------------------------------- Oil, Gas and Consumable Fuels 24 15,859,315 13,294,691 13.1 9.5 - ---------------------------------------------------------------------------------- Personal Products 1 195,940 226,627 0.2 -- - ---------------------------------------------------------------------------------- Pharmaceuticals 8 14,238,097 13,262,822 13.1 5.4 - ---------------------------------------------------------------------------------- Real Estate Investment Trusts 2 507,068 539,915 0.5 0.3 - ---------------------------------------------------------------------------------- Road and Rail 5 4,763,281 4,579,497 4.5 -- - ---------------------------------------------------------------------------------- Semiconductors and Semiconductor Equipment 7 3,694,706 3,098,987 3.1 3.5 - ---------------------------------------------------------------------------------- Software 3 532,431 567,844 0.6 3.2 - ---------------------------------------------------------------------------------- Specialty Retail 12 4,912,991 5,058,166 5.0 1.1 - ---------------------------------------------------------------------------------- Textiles, Apparel and Luxury Goods 5 1,075,736 1,152,606 1.1 0.6 - ---------------------------------------------------------------------------------- Tobacco -- -- -- -- 2.6 - ---------------------------------------------------------------------------------- Trading Companies and Distributors 2 403,466 413,993 0.4 -- - ---------------------------------------------------------------------------------- Wireless Telecommunication Services 1 216,909 155,116 0.2 1.6 - ---------------------------------------------------------------------------------- TOTAL COMMON STOCKS 199 120,218,454 100,464,614 99.2 89.6 - ---------------------------------------------------------------------------------- OPTIONS PURCHASED 7 1,168,949 22,647 -- 1.0 - ---------------------------------------------------------------------------------- EQUITY-LINKED NOTES 2 2,550,000 180,852 0.2 5.3 - ---------------------------------------------------------------------------------- OTHER SHORT-TERM HOLDING AND OTHER ASSETS LESS LIABILITIES 1 620,800 620,800 0.6 4.1 - ---------------------------------------------------------------------------------- NET ASSETS 209 $124,558,203 $101,288,913 100.0 100.0 - ---------------------------------------------------------------------------------- </Table> 10 Portfolio Overview Largest Industries+ December 31, 2008 - -------------------------------------------------------------------------------- (MONTHLY DIVIDEND REAL ESTATE FUND - LARGEST SECTORS GRAPHIC) Largest Portfolio Holdings++ December 31, 2008 - -------------------------------------------------------------------------------- <Table> <Caption> PERCENT OF SECURITY VALUE NET ASSETS - ------------------------------------------------------------------------------- Pfizer $5,887,530 5.8 - ------------------------------------------------------------------------------- Wal-Mart Stores 5,351,711 5.3 - ------------------------------------------------------------------------------- Johnson & Johnson 4,490,720 4.4 - ------------------------------------------------------------------------------- Chevron 4,237,889 4.2 - ------------------------------------------------------------------------------- JPMorgan Chase 3,579,223 3.5 - ------------------------------------------------------------------------------- Bank of America 2,264,332 2.2 - ------------------------------------------------------------------------------- International Business Machines 2,236,468 2.2 - ------------------------------------------------------------------------------- Home Depot 2,153,981 2.1 - ------------------------------------------------------------------------------- Citigroup 2,144,838 2.1 - ------------------------------------------------------------------------------- Gilead Sciences 1,860,882 1.8 - ------------------------------------------------------------------------------- </Table> There can be no assurance that the securities presented have remained or will remain in the Fund's portfolio. Information regarding the Fund's portfolio holdings should not be construed as a recommendation to buy or sell any security or as an indication that any security is suitable for a particular investor. - ------- See footnotes on page 12. 11 Portfolio Overview Largest Portfolio Changes July 1 to December 31, 2008 - -------------------------------------------------------------------------------- <Table> <Caption> LARGEST PURCHASES LARGEST SALES - ----------------------------------- ----------------------------------- Wal-Mart Stores* Exxon Mobil - ----------------------------------- ----------------------------------- Johnson & Johnson* Microsoft** - ----------------------------------- ----------------------------------- Pfizer AT&T** - ----------------------------------- ----------------------------------- Citigroup* Philip Morris International** - ----------------------------------- ----------------------------------- International Business Machines* Hewlett-Packard** - ----------------------------------- ----------------------------------- Chevron Cephalon - ----------------------------------- ----------------------------------- Bank of America UST** - ----------------------------------- ----------------------------------- PepsiCo* Target** - ----------------------------------- ----------------------------------- Gilead Sciences* Delta Air Lines** - ----------------------------------- ----------------------------------- Comcast (Class A)* Barr Laboratories** - ----------------------------------- ----------------------------------- </Table> Largest portfolio changes from the previous period to the current period are based on cost of purchases and proceeds from sales of securities, listed in descending order. - ------- + Includes options purchased. ++ Excludes options purchased and short-term holdings. * Position added during the period. ** Position eliminated during the period. 12 Understanding and Comparing Your Fund's Expenses As a shareholder of the Fund, you incur ongoing expenses, such as management fees, distribution and/or service (12b-1) fees (as applicable), and other Fund expenses. The information below is intended to help you understand your ongoing expenses (in dollars) of investing in the Fund and to compare them with the ongoing expenses of investing in other mutual funds. Please note that the expenses shown in the table are meant to highlight your ongoing expenses only and do not reflect any transactional costs, such as sales charges (also known as loads) on certain purchases or redemptions. Therefore, the table is useful in comparing ongoing expenses only, and will not help you to determine the relative total expenses of owning different funds. In addition, if transactional costs were included, your total expenses would have been higher. The table is based on an investment of $1,000 invested at the beginning of July 1, 2008 and held for the entire six-month period ended December 31, 2008. ACTUAL EXPENSES The table below provides information about actual expenses and actual account values. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value at the beginning of the period by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number under the heading entitled "Expenses Paid During Period" for the Fund's share class that you own to estimate the expenses that you paid on your account during the period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The table below also provides information about hypothetical expenses and hypothetical account values based on the actual expense ratio of each class and an assumed rate of return of 5% per year before expenses, which is not the actual return of any class of the Fund. The hypothetical expenses and account values may not be used to estimate the ending account value or the actual expenses you paid for the period. You may use this information to compare the ongoing expenses of investing in the Fund and other mutual funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other mutual funds. <Table> <Caption> ACTUAL HYPOTHETICAL ------------------------------ ------------------------------- BEGINNING ENDING ENDING ACCOUNT ANNUALIZED ACCOUNT EXPENSES PAID ACCOUNT EXPENSES PAID VALUE EXPENSE VALUE DURING PERIOD VALUE DURING PERIOD 7/1/08 RATIO* 12/31/08 7/1/08 TO 12/31/08** 12/31/08 7/1/08 TO 12/31/08** - ----------------------------------------------------------------------------------------------------- Class A $1,000.00 1.55% $644.30 $6.41 $1,017.34 $ 7.86 - ----------------------------------------------------------------------------------------------------- Class B 1,000.00 2.30 642.10 9.49 1,013.57 11.64 - ----------------------------------------------------------------------------------------------------- Class C 1,000.00 2.30 642.50 9.50 1,013.57 11.64 - ----------------------------------------------------------------------------------------------------- Class I 1,000.00 0.91 646.40 3.77 1,020.56 4.62 - ----------------------------------------------------------------------------------------------------- Class R 1,000.00 1.80 643.50 7.44 1,016.09 9.12 - ----------------------------------------------------------------------------------------------------- </Table> - ------- * Expenses of Class B, Class C, Class I and Class R shares differ from the expenses of Class A shares due to the differences in 12b-1 fees and other class-specific expenses paid by each share class. See the Fund's prospectuses for a description of each share class and its fees, expenses and sales charges. ** Expenses are equal to the annualized expense ratio based on actual expenses for the period July 1, 2008 to December 31, 2008, multiplied by the average account value over the period, multiplied by 184/366 (number of days in the period). 13 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE COMMON STOCKS 99.2% - ------------------------------------------------------------------------------ AEROSPACE AND DEFENSE 0.7% - ------------------------------------------------------------------------------ General Dynamics 8,767 $ 504,892 - ------------------------------------------------------------------------------ United Technologies 4,466 239,378 - ------------------------------------------------------------------------------ 744,270 - ------------------------------------------------------------------------------ AIR FREIGHT AND LOGISTICS 0.3% - ------------------------------------------------------------------------------ C.H. Robinson Worldwide 6,071 334,087 - ------------------------------------------------------------------------------ AIRLINES 0.2% - ------------------------------------------------------------------------------ Southwest Airlines 23,235 200,286 - ------------------------------------------------------------------------------ AUTOMOBILES 0.2% - ------------------------------------------------------------------------------ Harley-Davidson 12,421 210,784 - ------------------------------------------------------------------------------ BEVERAGES 3.2% - ------------------------------------------------------------------------------ Brown-Forman (Class B) 4,790 246,637 - ------------------------------------------------------------------------------ Coca-Cola 29,646 1,342,074 - ------------------------------------------------------------------------------ PepsiCo 30,203 1,654,218 - ------------------------------------------------------------------------------ 3,242,929 - ------------------------------------------------------------------------------ BIOTECHNOLOGY 2.2% - ------------------------------------------------------------------------------ Celgene* 4,510 249,313 - ------------------------------------------------------------------------------ Cephalon* 1,333 102,694 - ------------------------------------------------------------------------------ Gilead Sciences* 36,388 1,860,882 - ------------------------------------------------------------------------------ 2,212,889 - ------------------------------------------------------------------------------ BUILDING PRODUCTS 0.3% - ------------------------------------------------------------------------------ Masco 24,173 269,045 - ------------------------------------------------------------------------------ CAPITAL MARKETS 1.0% - ------------------------------------------------------------------------------ Goldman Sachs Group 2,751 232,157 - ------------------------------------------------------------------------------ Morgan Stanley 48,417 776,609 - ------------------------------------------------------------------------------ 1,008,766 - ------------------------------------------------------------------------------ CHEMICALS 2.6% - ------------------------------------------------------------------------------ CF Industries Holdings 4,055 199,344 - ------------------------------------------------------------------------------ Dow Chemical 71,320 1,076,219 - ------------------------------------------------------------------------------ E. I. duPont de Nemours 8,185 207,080 - ------------------------------------------------------------------------------ Monsanto 10,954 770,614 - ------------------------------------------------------------------------------ PPG Industries 4,644 197,045 - ------------------------------------------------------------------------------ Sigma-Aldrich 4,819 203,555 - ------------------------------------------------------------------------------ 2,653,857 - ------------------------------------------------------------------------------ COMMERCIAL BANKS 1.8% - ------------------------------------------------------------------------------ BB&T 12,006 329,685 - ------------------------------------------------------------------------------ Fifth Third Bancorp 28,659 236,723 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 14 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE COMMERCIAL BANKS (continued) - ------------------------------------------------------------------------------ KeyCorp 24,547 $ 209,140 - ------------------------------------------------------------------------------ SunTrust Banks 12,105 357,582 - ------------------------------------------------------------------------------ U.S. Bancorp 17,031 425,945 - ------------------------------------------------------------------------------ Wells Fargo 52,840 292,734 - ------------------------------------------------------------------------------ 1,851,809 - ------------------------------------------------------------------------------ COMMERCIAL SERVICES AND SUPPLIES 0.9% - ------------------------------------------------------------------------------ Avery Dennison 6,850 224,200 - ------------------------------------------------------------------------------ Republic Services 8,747 216,838 - ------------------------------------------------------------------------------ Waste Management 14,185 470,091 - ------------------------------------------------------------------------------ 911,129 - ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT 1.1% - ------------------------------------------------------------------------------ Cisco Systems* 18,387 299,708 - ------------------------------------------------------------------------------ Corning 21,751 207,287 - ------------------------------------------------------------------------------ Nortel Networks* 7,555 1,964 - ------------------------------------------------------------------------------ QUALCOMM 15,273 547,232 - ------------------------------------------------------------------------------ 1,056,191 - ------------------------------------------------------------------------------ COMPUTERS AND PERIPHERALS 2.9% - ------------------------------------------------------------------------------ Dell* 18,954 194,089 - ------------------------------------------------------------------------------ International Business Machines 26,574 2,236,468 - ------------------------------------------------------------------------------ Lexmark International (Class A)* 7,760 208,744 - ------------------------------------------------------------------------------ QLogic* 19,268 258,962 - ------------------------------------------------------------------------------ 2,898,263 - ------------------------------------------------------------------------------ CONSUMER FINANCE 0.2% - ------------------------------------------------------------------------------ Capital One Financial 7,378 235,284 - ------------------------------------------------------------------------------ CONTAINERS AND PACKAGING 0.0% - ------------------------------------------------------------------------------ Smurfit-Stone Container* 30,823 7,860 - ------------------------------------------------------------------------------ DISTRIBUTORS 0.2% - ------------------------------------------------------------------------------ Genuine Parts 5,043 190,928 - ------------------------------------------------------------------------------ DIVERSIFIED CONSUMER SERVICES 0.3% - ------------------------------------------------------------------------------ H&R Block 14,256 323,896 - ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES 8.0% - ------------------------------------------------------------------------------ Bank of America 160,819 2,264,332 - ------------------------------------------------------------------------------ CIT Group 16,751 76,050 - ------------------------------------------------------------------------------ Citigroup 319,648 2,144,838 - ------------------------------------------------------------------------------ JPMorgan Chase 113,518 3,579,223 - ------------------------------------------------------------------------------ 8,064,443 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 15 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE DIVERSIFIED TELECOMMUNICATION SERVICES 0.5% - ------------------------------------------------------------------------------ CenturyTel 7,509 $ 205,221 - ------------------------------------------------------------------------------ Embarq 6,262 225,182 - ------------------------------------------------------------------------------ Frontier Communications 6,197 54,162 - ------------------------------------------------------------------------------ 484,565 - ------------------------------------------------------------------------------ ELECTRIC UTILITIES 1.5% - ------------------------------------------------------------------------------ Entergy 2,351 195,439 - ------------------------------------------------------------------------------ Exelon 13,106 728,825 - ------------------------------------------------------------------------------ FirstEnergy 12,058 585,778 - ------------------------------------------------------------------------------ 1,510,042 - ------------------------------------------------------------------------------ ELECTRICAL EQUIPMENT 0.5% - ------------------------------------------------------------------------------ Emerson Electric 13,296 486,767 - ------------------------------------------------------------------------------ ELECTRONIC EQUIPMENT, INSTRUMENTS AND COMPONENTS 0.4% - ------------------------------------------------------------------------------ Jabil Circuit 33,645 227,104 - ------------------------------------------------------------------------------ Tyco Electronics 12,908 209,239 - ------------------------------------------------------------------------------ 436,343 - ------------------------------------------------------------------------------ ENERGY EQUIPMENT AND SERVICES 1.9% - ------------------------------------------------------------------------------ Baker Hughes 2,990 95,889 - ------------------------------------------------------------------------------ BJ Services 19,063 222,465 - ------------------------------------------------------------------------------ Ensco International 6,653 188,879 - ------------------------------------------------------------------------------ Halliburton 34,991 636,136 - ------------------------------------------------------------------------------ Nabors Industries* 15,458 185,032 - ------------------------------------------------------------------------------ Noble 6,708 148,180 - ------------------------------------------------------------------------------ Smith International 7,419 169,821 - ------------------------------------------------------------------------------ Weatherford International* 28,340 306,638 - ------------------------------------------------------------------------------ 1,953,040 - ------------------------------------------------------------------------------ FOOD AND STAPLES RETAILING 5.8% - ------------------------------------------------------------------------------ Rite Aid* 891,664 276,416 - ------------------------------------------------------------------------------ Wal-Mart Stores 95,464 5,351,711 - ------------------------------------------------------------------------------ Walgreen 10,140 250,154 - ------------------------------------------------------------------------------ 5,878,281 - ------------------------------------------------------------------------------ FOOD PRODUCTS 2.4% - ------------------------------------------------------------------------------ Archer-Daniels-Midland 7,304 210,574 - ------------------------------------------------------------------------------ Campbell Soup 6,365 191,014 - ------------------------------------------------------------------------------ General Mills 16,427 997,940 - ------------------------------------------------------------------------------ J.M. Smucker 4,530 196,421 - ------------------------------------------------------------------------------ Kellogg 4,655 204,122 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 16 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE FOOD PRODUCTS (continued) - ------------------------------------------------------------------------------ Sara Lee 30,873 $ 302,247 - ------------------------------------------------------------------------------ Tyson Foods (Class A) 31,499 275,931 - ------------------------------------------------------------------------------ 2,378,249 - ------------------------------------------------------------------------------ GAS UTILITIES 0.2% - ------------------------------------------------------------------------------ Questar 6,486 212,027 - ------------------------------------------------------------------------------ HEALTH CARE EQUIPMENT AND SUPPLIES 0.4% - ------------------------------------------------------------------------------ Becton, Dickinson 3,160 216,112 - ------------------------------------------------------------------------------ Covidien 5,295 191,891 - ------------------------------------------------------------------------------ 408,003 - ------------------------------------------------------------------------------ HEALTH CARE PROVIDERS AND SERVICES 1.1% - ------------------------------------------------------------------------------ Cardinal Health 6,312 217,575 - ------------------------------------------------------------------------------ CIGNA 33,750 568,687 - ------------------------------------------------------------------------------ Quest Diagnostics 4,565 236,969 - ------------------------------------------------------------------------------ UnitedHealth Group 2,116 56,286 - ------------------------------------------------------------------------------ 1,079,517 - ------------------------------------------------------------------------------ HOUSEHOLD DURABLES 1.8% - ------------------------------------------------------------------------------ Black & Decker 4,826 201,775 - ------------------------------------------------------------------------------ Centex 25,320 269,405 - ------------------------------------------------------------------------------ D.R. Horton 28,623 202,365 - ------------------------------------------------------------------------------ Leggett & Platt 14,280 216,913 - ------------------------------------------------------------------------------ Lennar 32,752 283,960 - ------------------------------------------------------------------------------ Pulte Homes 20,112 219,824 - ------------------------------------------------------------------------------ Snap-on 6,135 241,596 - ------------------------------------------------------------------------------ Whirlpool 5,246 216,922 - ------------------------------------------------------------------------------ 1,852,760 - ------------------------------------------------------------------------------ HOUSEHOLD PRODUCTS 0.6% - ------------------------------------------------------------------------------ Colgate-Palmolive 5,214 357,368 - ------------------------------------------------------------------------------ Kimberly-Clark 3,696 194,927 - ------------------------------------------------------------------------------ 552,295 - ------------------------------------------------------------------------------ INDUSTRIAL CONGLOMERATES 1.1% - ------------------------------------------------------------------------------ 3M 9,400 540,876 - ------------------------------------------------------------------------------ Tyco International 27,872 602,035 - ------------------------------------------------------------------------------ 1,142,911 - ------------------------------------------------------------------------------ INSURANCE 4.9% - ------------------------------------------------------------------------------ AFLAC 10,815 495,760 - ------------------------------------------------------------------------------ Allstate 56,683 1,856,935 - ------------------------------------------------------------------------------ Chubb 7,448 379,848 - ------------------------------------------------------------------------------ Marsh & McLennan 15,548 377,350 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 17 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE INSURANCE (continued) - ------------------------------------------------------------------------------ MetLife 4,508 $ 157,149 - ------------------------------------------------------------------------------ Progressive* 54,485 806,923 - ------------------------------------------------------------------------------ Prudential Financial 2,527 76,467 - ------------------------------------------------------------------------------ Travelers 18,736 846,867 - ------------------------------------------------------------------------------ 4,997,299 - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES 0.4% - ------------------------------------------------------------------------------ SAVVIS* 29,425 202,738 - ------------------------------------------------------------------------------ Symantec* 17,055 230,584 - ------------------------------------------------------------------------------ 433,322 - ------------------------------------------------------------------------------ IT SERVICES 1.4% - ------------------------------------------------------------------------------ Affiliated Computer Services (Class A)* 4,949 227,407 - ------------------------------------------------------------------------------ Automatic Data Processing 7,118 280,022 - ------------------------------------------------------------------------------ MasterCard (Class A) 2,861 408,923 - ------------------------------------------------------------------------------ Paychex 7,169 188,401 - ------------------------------------------------------------------------------ Western Union 22,056 316,283 - ------------------------------------------------------------------------------ 1,421,036 - ------------------------------------------------------------------------------ LEISURE EQUIPMENT AND PRODUCTS 0.6% - ------------------------------------------------------------------------------ Eastman Kodak 26,368 173,501 - ------------------------------------------------------------------------------ Hasbro 7,547 220,146 - ------------------------------------------------------------------------------ Mattel 15,146 242,336 - ------------------------------------------------------------------------------ 635,983 - ------------------------------------------------------------------------------ MACHINERY 1.4% - ------------------------------------------------------------------------------ Dover 7,205 237,189 - ------------------------------------------------------------------------------ Eaton 4,373 217,382 - ------------------------------------------------------------------------------ Flowserve 4,249 218,823 - ------------------------------------------------------------------------------ Illinois Tool Works 7,296 255,725 - ------------------------------------------------------------------------------ Ingersoll-Rand (Class A) 14,249 247,220 - ------------------------------------------------------------------------------ Pall 7,791 221,498 - ------------------------------------------------------------------------------ 1,397,837 - ------------------------------------------------------------------------------ MEDIA 2.4% - ------------------------------------------------------------------------------ CBS (Class B) 39,912 326,879 - ------------------------------------------------------------------------------ Comcast (Class A)* 84,398 1,424,638 - ------------------------------------------------------------------------------ Gannett 27,201 217,608 - ------------------------------------------------------------------------------ New York Times (Class A) 27,468 201,340 - ------------------------------------------------------------------------------ News Corp. (Class B) 29,044 264,010 - ------------------------------------------------------------------------------ 2,434,475 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 18 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE METALS AND MINING 1.3% - ------------------------------------------------------------------------------ AK Steel Holdings 28,790 $ 268,323 - ------------------------------------------------------------------------------ Alcoa 4,814 54,206 - ------------------------------------------------------------------------------ Freeport-McMoRan Copper & Gold 2,273 55,552 - ------------------------------------------------------------------------------ Nucor 14,620 675,444 - ------------------------------------------------------------------------------ US Steel 7,163 266,464 - ------------------------------------------------------------------------------ 1,319,989 - ------------------------------------------------------------------------------ MULTI-UTILITIES 0.2% - ------------------------------------------------------------------------------ Wisconsin Energy 4,596 192,940 - ------------------------------------------------------------------------------ MULTILINE RETAIL 0.5% - ------------------------------------------------------------------------------ Big Lots* 12,297 178,184 - ------------------------------------------------------------------------------ Family Dollar Stores 6,942 180,978 - ------------------------------------------------------------------------------ Kohl's* 3,613 130,791 - ------------------------------------------------------------------------------ 489,953 - ------------------------------------------------------------------------------ OIL, GAS AND CONSUMABLE FUELS 13.1% - ------------------------------------------------------------------------------ Apache 6,669 497,041 - ------------------------------------------------------------------------------ Cabot Oil & Gas 7,148 185,848 - ------------------------------------------------------------------------------ Chesapeake Energy 20,619 333,409 - ------------------------------------------------------------------------------ Chevron 57,292 4,237,889 - ------------------------------------------------------------------------------ ConocoPhillips 29,500 1,528,100 - ------------------------------------------------------------------------------ Consol Energy 7,246 207,091 - ------------------------------------------------------------------------------ El Paso 1,887 14,775 - ------------------------------------------------------------------------------ EOG Resources 7,526 501,081 - ------------------------------------------------------------------------------ Exxon Mobil 11,689 933,133 - ------------------------------------------------------------------------------ Hess 8,562 459,266 - ------------------------------------------------------------------------------ Marathon Oil 20,516 561,318 - ------------------------------------------------------------------------------ Massey Energy 13,763 189,792 - ------------------------------------------------------------------------------ Murphy Oil 4,618 204,808 - ------------------------------------------------------------------------------ Noble Energy 6,831 336,222 - ------------------------------------------------------------------------------ Occidental Petroleum 12,200 731,878 - ------------------------------------------------------------------------------ Peabody Energy 10,757 244,722 - ------------------------------------------------------------------------------ Pioneer Natural Resources 10,313 166,864 - ------------------------------------------------------------------------------ Range Resources Corp. 4,996 171,812 - ------------------------------------------------------------------------------ Southwestern Energy 16,904 489,709 - ------------------------------------------------------------------------------ Spectra Energy 18,039 283,934 - ------------------------------------------------------------------------------ Sunoco 5,420 235,553 - ------------------------------------------------------------------------------ Tesoro 23,795 313,380 - ------------------------------------------------------------------------------ Valero Energy 12,352 267,297 - ------------------------------------------------------------------------------ XTO Energy 5,664 199,769 - ------------------------------------------------------------------------------ 13,294,691 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 19 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES VALUE PERSONAL PRODUCTS 0.2% - ------------------------------------------------------------------------------ Estee Lauder Companies (Class A) 7,320 $ 226,627 - ------------------------------------------------------------------------------ PHARMACEUTICALS 13.1% - ------------------------------------------------------------------------------ Abbott Laboratories 6,628 353,736 - ------------------------------------------------------------------------------ Eli Lilly 18,537 746,485 - ------------------------------------------------------------------------------ Forest Laboratories* 9,278 236,311 - ------------------------------------------------------------------------------ Johnson & Johnson 75,058 4,490,720 - ------------------------------------------------------------------------------ Merck 17,748 539,539 - ------------------------------------------------------------------------------ Pfizer 332,441 5,887,530 - ------------------------------------------------------------------------------ Schering-Plough 31,885 543,002 - ------------------------------------------------------------------------------ Wyeth 12,410 465,499 - ------------------------------------------------------------------------------ 13,262,822 - ------------------------------------------------------------------------------ REAL ESTATE INVESTMENT TRUSTS 0.5% - ------------------------------------------------------------------------------ Equity Residential 8,007 238,769 - ------------------------------------------------------------------------------ Public Storage 3,788 301,146 - ------------------------------------------------------------------------------ 539,915 - ------------------------------------------------------------------------------ ROAD AND RAIL 4.5% - ------------------------------------------------------------------------------ Burlington Northern Santa Fe 16,711 1,265,190 - ------------------------------------------------------------------------------ CSX 24,120 783,176 - ------------------------------------------------------------------------------ Norfolk Southern 18,332 862,521 - ------------------------------------------------------------------------------ Ryder System 5,892 228,492 - ------------------------------------------------------------------------------ Union Pacific 30,128 1,440,118 - ------------------------------------------------------------------------------ 4,579,497 - ------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT 3.1% - ------------------------------------------------------------------------------ Altera 13,898 232,236 - ------------------------------------------------------------------------------ Intel 120,082 1,760,402 - ------------------------------------------------------------------------------ Linear Technology 10,335 228,610 - ------------------------------------------------------------------------------ LSI Logic* 71,557 235,423 - ------------------------------------------------------------------------------ Microchip Technology 10,930 213,463 - ------------------------------------------------------------------------------ National Semiconductor 18,685 188,158 - ------------------------------------------------------------------------------ Xilinx 13,507 240,695 - ------------------------------------------------------------------------------ 3,098,987 - ------------------------------------------------------------------------------ SOFTWARE 0.6% - ------------------------------------------------------------------------------ BMC Software* 3,785 101,854 - ------------------------------------------------------------------------------ Compuware* 32,971 222,554 - ------------------------------------------------------------------------------ salesforce.com* 7,605 243,436 - ------------------------------------------------------------------------------ 567,844 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 20 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES OR SHARES SUBJECT TO CALL VALUE SPECIALTY RETAIL 5.0% - ------------------------------------------------------------------------------ Abercrombie & Fitch (Class A) 6,200 $ 143,034 - ------------------------------------------------------------------------------ AutoNation* 25,484 251,782 - ------------------------------------------------------------------------------ AutoZone* 1,914 266,946 - ------------------------------------------------------------------------------ Bed Bath & Beyond* 10,196 259,182 - ------------------------------------------------------------------------------ Best Buy 9,875 277,586 - ------------------------------------------------------------------------------ The Gap 16,390 219,462 - ------------------------------------------------------------------------------ Home Depot 93,570 2,153,981 - ------------------------------------------------------------------------------ Limited Brands 23,072 231,643 - ------------------------------------------------------------------------------ Lowe's 27,373 589,067 - ------------------------------------------------------------------------------ RadioShack 21,168 252,746 - ------------------------------------------------------------------------------ Sherwin-Williams 3,450 206,137 - ------------------------------------------------------------------------------ Staples 11,529 206,600 - ------------------------------------------------------------------------------ 5,058,166 - ------------------------------------------------------------------------------ TEXTILES, APPAREL AND LUXURY GOODS 1.1% - ------------------------------------------------------------------------------ Coach* 13,511 280,623 - ------------------------------------------------------------------------------ Liz Clairborne 83,332 216,663 - ------------------------------------------------------------------------------ NIKE (Class B) 4,007 204,357 - ------------------------------------------------------------------------------ Polo Ralph Lauren 5,022 228,049 - ------------------------------------------------------------------------------ VF 4,070 222,914 - ------------------------------------------------------------------------------ 1,152,606 - ------------------------------------------------------------------------------ TRADING COMPANIES AND DISTRIBUTORS 0.4% - ------------------------------------------------------------------------------ Fastenal 5,278 183,938 - ------------------------------------------------------------------------------ W.W. Grainger 2,918 230,055 - ------------------------------------------------------------------------------ 413,993 - ------------------------------------------------------------------------------ WIRELESS TELECOMMUNICATION SERVICES 0.2% - ------------------------------------------------------------------------------ Sprint Nextel* 84,763 155,116 - ------------------------------------------------------------------------------ TOTAL COMMON STOCKS (Cost $120,218,454) 100,464,614 - ------------------------------------------------------------------------------ OPTIONS PURCHASED* 0.0% - ------------------------------------------------------------------------------ COMMUNICATIONS EQUIPMENT 0.0% - ------------------------------------------------------------------------------ JDS Uniphase, Call expiring January 2009 at $15 87,800 878 - ------------------------------------------------------------------------------ DIVERSIFIED FINANCIAL SERVICES 0.0% - ------------------------------------------------------------------------------ Citigroup, Call expiring January 2009 at $30 49,100 491 - ------------------------------------------------------------------------------ INTERNET SOFTWARE AND SERVICES 0.0% - ------------------------------------------------------------------------------ Yahoo!, Call expiring January 2009 at $25 105,600 2,640 - ------------------------------------------------------------------------------ Yahoo!, Call expiring January 2009 at $30 48,900 978 - ------------------------------------------------------------------------------ 3,618 - ------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 22. 21 Portfolio of Investments December 31, 2008 <Table> <Caption> SHARES, SHARES SUBJECT TO CALL OR PRINCIPAL AMOUNT VALUE PHARMACEUTICALS 0.0% - ------------------------------------------------------------------------------ Bristol-Myers Squibb, Call expiring January 2009 at $25 64,400 shs. $ 14,168 - ------------------------------------------------------------------------------ SEMICONDUCTORS AND SEMICONDUCTOR EQUIPMENT 0.0% - ------------------------------------------------------------------------------ Marvell Technology Group, Call expiring January 2009 at $15 30,200 1,510 - ------------------------------------------------------------------------------ Marvell Technology Group, Call expiring January 2009 at $20 79,300 1,982 - ------------------------------------------------------------------------------ 3,492 - ------------------------------------------------------------------------------ TOTAL OPTIONS PURCHASED (Cost $1,168,949) 22,647 - ------------------------------------------------------------------------------ SHORT-TERM HOLDINGS 1.2% - ------------------------------------------------------------------------------ EQUITY-LINKED NOTES+ 0.2% - ------------------------------------------------------------------------------ Lehman Brothers: - ------------------------------------------------------------------------------ 53.51%, 9/14/2008(a)** $1,275,000 80,803 - ------------------------------------------------------------------------------ 39.5%, 10/2/2008(b)** 1,275,000 100,049 - ------------------------------------------------------------------------------ Total Equity-Linked Notes (Cost $2,550,000) 180,852 - ------------------------------------------------------------------------------ MONEY MARKET FUND 1.0% - ------------------------------------------------------------------------------ SSgA U.S. Treasury Money Market Fund (Cost $1,016,982) 1,016,982 shs. 1,016,982 - ------------------------------------------------------------------------------ TOTAL SHORT-TERM HOLDINGS (Cost $3,566,982) 1,197,834 - ------------------------------------------------------------------------------ TOTAL INVESTMENTS (Cost $124,954,385) 100.4% 101,685,095 - ------------------------------------------------------------------------------ OTHER ASSETS LESS LIABILITIES (0.4)% (396,182) - ------------------------------------------------------------------------------ NET ASSETS 100.0% $101,288,913 - ------------------------------------------------------------------------------ </Table> - ------- <Table> * Non-income producing security. ** Security in default and non-income producing. + The security may be offered and sold only to "qualified institutional buyers" under Rule 144A of the Securities Act of 1933. These notes are exchangeable at maturity, based on the terms of the respective notes, for shares of common stock of a company or cash at a maturity value which is generally determined as follows: The principal amount of the notes plus or minus the lowest return of the companies' respective stock prices determined at maturity from the date of purchase of the notes: (a) Delta Air Lines, Intel and Mylan (b) Health Net, Kohl's and Prudential Financial Industry classifications have not been audited by Deloitte & Touche LLP. </Table> See Notes to Financial Statements. 22 Statement of Assets and Liabilities December 31, 2008 <Table> ASSETS: - -------------------------------------------------------------------- Investments, at value: - -------------------------------------------------------------------- Common stocks (cost $120,218,454) $100,464,614 - -------------------------------------------------------------------- Options purchased (cost $1,168,949) 22,647 - -------------------------------------------------------------------- Short-term holdings (cost $3,566,982) 1,197,834 - -------------------------------------------------------------------- Total investments (cost $124,954,385) 101,685,095 - -------------------------------------------------------------------- Restricted cash 72,682 - -------------------------------------------------------------------- Dividends receivable 158,894 - -------------------------------------------------------------------- Receivable for securities sold 126,285 - -------------------------------------------------------------------- Receivable for Capital Stock sold 52,703 - -------------------------------------------------------------------- Investment in, and expenses prepaid to, shareholder service agent 31,134 - -------------------------------------------------------------------- Other 7,128 - -------------------------------------------------------------------- TOTAL ASSETS 102,133,921 - -------------------------------------------------------------------- LIABILITIES: - -------------------------------------------------------------------- Payable for securities purchased 368,216 - -------------------------------------------------------------------- Payable for Capital Stock repurchased 308,174 - -------------------------------------------------------------------- Management fee payable 55,027 - -------------------------------------------------------------------- Distribution and service (12b-1) fees payable 27,179 - -------------------------------------------------------------------- Bank overdraft 2,913 - -------------------------------------------------------------------- Accrued expenses and other 83,499 - -------------------------------------------------------------------- TOTAL LIABILITIES 845,008 - -------------------------------------------------------------------- NET ASSETS $101,288,913 - -------------------------------------------------------------------- COMPOSITION OF NET ASSETS: - -------------------------------------------------------------------- Capital Stock, at par ($0.50 par value; 1,000,000,000 shares authorized; 16,864,763 shares outstanding): - -------------------------------------------------------------------- Class A $ 7,250,363 - -------------------------------------------------------------------- Class B 109,112 - -------------------------------------------------------------------- Class C 586,882 - -------------------------------------------------------------------- Class I 361,288 - -------------------------------------------------------------------- Class R 124,736 - -------------------------------------------------------------------- Additional paid-in capital 195,830,873 - -------------------------------------------------------------------- Undistributed net investment income (Note 7) 297,174 - -------------------------------------------------------------------- Accumulated net realized loss (Note 7) (80,002,225) - -------------------------------------------------------------------- Net unrealized depreciation of investments (23,269,290) - -------------------------------------------------------------------- NET ASSETS $101,288,913 - -------------------------------------------------------------------- NET ASSET VALUE PER SHARE: - -------------------------------------------------------------------- CLASS A ($87,221,883 / 14,500,725 shares) $6.02 - -------------------------------------------------------------------- CLASS B ($1,280,176 / 218,223 shares) $5.87 - -------------------------------------------------------------------- CLASS C ($6,895,904 / 1,173,765 shares) $5.88 - -------------------------------------------------------------------- CLASS I ($4,385,375 / 722,577 shares) $6.07 - -------------------------------------------------------------------- CLASS R ($1,505,575 / 249,473 shares) $6.04 - -------------------------------------------------------------------- </Table> - ------- See Notes to Financial Statements. 23 Statement of Operations For the Year Ended December 31, 2008 <Table> INVESTMENT INCOME: - --------------------------------------------------------------------- Interest $ 2,949,593 - --------------------------------------------------------------------- Dividends (net of foreign taxes withheld of $6,209) 2,885,755 - --------------------------------------------------------------------- TOTAL INVESTMENT INCOME 5,835,348 - --------------------------------------------------------------------- EXPENSES: - --------------------------------------------------------------------- Management fee 1,046,446 - --------------------------------------------------------------------- Shareholder account services 562,799 - --------------------------------------------------------------------- Distribution and service (12b-1) fees 487,033 - --------------------------------------------------------------------- Registration 83,120 - --------------------------------------------------------------------- Auditing and legal fees 68,046 - --------------------------------------------------------------------- Custody and related services 59,590 - --------------------------------------------------------------------- Shareholder reports and communications 49,997 - --------------------------------------------------------------------- Directors' fees and expenses 13,263 - --------------------------------------------------------------------- Miscellaneous 22,113 - --------------------------------------------------------------------- TOTAL EXPENSES 2,392,407 - --------------------------------------------------------------------- NET INVESTMENT INCOME 3,442,941 - --------------------------------------------------------------------- NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND OPTIONS WRITTEN: - --------------------------------------------------------------------- Net realized loss on investments (78,990,456) - --------------------------------------------------------------------- Net realized gain on options written 51,754 - --------------------------------------------------------------------- Net change in unrealized depreciation of investments and options written (12,816,966) - --------------------------------------------------------------------- NET LOSS ON INVESTMENTS AND OPTIONS WRITTEN (91,755,668) - --------------------------------------------------------------------- DECREASE IN NET ASSETS FROM OPERATIONS $(88,312,727) - --------------------------------------------------------------------- </Table> - ------- See Notes to Financial Statements. 24 Statements of Changes in Net Assets <Table> <Caption> YEAR ENDED DECEMBER 31, ---------------------------- 2008 2007 - ---------------------------------------------------------------------------- OPERATIONS: - ---------------------------------------------------------------------------- Net investment income $ 3,442,941 $ 5,825,760 - ---------------------------------------------------------------------------- Net realized gain (loss) on investments (78,990,456) 22,032,830 - ---------------------------------------------------------------------------- Net realized gain on options written 51,754 844,246 - ---------------------------------------------------------------------------- Net change in unrealized depreciation of investments and options written (12,816,966) (31,397,909) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM OPERATIONS (88,312,727) (2,695,073) - ---------------------------------------------------------------------------- DISTRIBUTIONS TO SHAREHOLDERS: - ---------------------------------------------------------------------------- Net investment income: - ---------------------------------------------------------------------------- Class A (2,991,828) (5,293,316) - ---------------------------------------------------------------------------- Class B (35,052) (80,757) - ---------------------------------------------------------------------------- Class C (107,099) (69,733) - ---------------------------------------------------------------------------- Class D (47,893) (224,454) - ---------------------------------------------------------------------------- Class I (153,717) (192,584) - ---------------------------------------------------------------------------- Class R (38,920) (33,259) - ---------------------------------------------------------------------------- Total (3,374,509) (5,894,103) - ---------------------------------------------------------------------------- Net realized short-term gain on investments: - ---------------------------------------------------------------------------- Class A (426,134) (8,459,565) - ---------------------------------------------------------------------------- Class B (7,270) (171,538) - ---------------------------------------------------------------------------- Class C (34,019) (158,713) - ---------------------------------------------------------------------------- Class D -- (521,573) - ---------------------------------------------------------------------------- Class I (17,622) (289,115) - ---------------------------------------------------------------------------- Class R (6,579) (85,867) - ---------------------------------------------------------------------------- Total (491,624) (9,686,371) - ---------------------------------------------------------------------------- Net realized long-term gain on investments: - ---------------------------------------------------------------------------- Class A (3,926,523) (9,265,435) - ---------------------------------------------------------------------------- Class B (66,987) (202,937) - ---------------------------------------------------------------------------- Class C (313,464) (177,264) - ---------------------------------------------------------------------------- Class D -- (580,598) - ---------------------------------------------------------------------------- Class I (162,368) (298,791) - ---------------------------------------------------------------------------- Class R (60,620) (95,532) - ---------------------------------------------------------------------------- Total (4,529,962) (10,620,557) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM DISTRIBUTIONS (8,396,095) (26,201,031) - ---------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS: - ---------------------------------------------------------------------------- Net proceeds from sales of shares 6,758,776 9,272,400 - ---------------------------------------------------------------------------- Investment of dividends 2,278,987 3,824,632 - ---------------------------------------------------------------------------- Exchanged from associated funds 1,231,676 1,716,566 - ---------------------------------------------------------------------------- Investment of gain distribution 3,859,786 15,372,224 - ---------------------------------------------------------------------------- Total 14,129,225 30,185,822 - ---------------------------------------------------------------------------- Cost of shares repurchased (24,744,390) (39,161,240) - ---------------------------------------------------------------------------- Exchanged into associated funds (2,382,182) (2,044,222) - ---------------------------------------------------------------------------- Total (27,126,572) (41,205,462) - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS FROM CAPITAL SHARE TRANSACTIONS (12,997,347) (11,019,640) - ---------------------------------------------------------------------------- PROCEEDS FROM REGULATORY SETTLEMENT (NOTE 10) 209,621 -- - ---------------------------------------------------------------------------- DECREASE IN NET ASSETS (109,496,548) (39,915,744) - ---------------------------------------------------------------------------- NET ASSETS: - ---------------------------------------------------------------------------- Beginning of year 210,785,461 250,701,205 - ---------------------------------------------------------------------------- END OF YEAR (including undistributed net investment income of $297,174 and $21,190, respectively) $ 101,288,913 $210,785,461 - ---------------------------------------------------------------------------- </Table> - ------- See Notes to Financial Statements. 25 Notes to Financial Statements 1. ORGANIZATION AND MULTIPLE CLASSES OF SHARES -- Seligman Common Stock Fund, Inc. (the "Fund") is registered with the Securities and Exchange Commission (the "SEC") under the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end diversified management investment company (Note 13). The Fund offers the following five classes of shares: Class A shares are sold with an initial sales charge of up to 5.75% (4.75% prior to January 7, 2008) and are subject to a continuing service fee of up to 0.25% on an annual basis. Class A shares purchased in an amount of $1,000,000 or more are sold without an initial sales charge but are subject to a contingent deferred sales charge ("CDSC") of 1% on redemptions made within 18 months of purchase. Effective January 7, 2008, eligible employee benefit plans which have at least $2,000,000 in plan assets may purchase Class A shares at net asset value, but, in the event of plan termination, will be subject to a CDSC of 1% on shares purchased within 18 months prior to plan termination. Class B shares are sold without an initial sales charge but are subject to a distribution fee of 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 5% on redemptions made in the first year of purchase, declining to 1% in the sixth year and 0% thereafter. Class B shares will automatically convert to Class A shares approximately eight years after their date of purchase. If Class B shares of the Fund are exchanged for Class B shares of another Seligman mutual fund, the holding period of the shares exchanged will be added to the holding period of the shares acquired, both for determining the applicable CDSC and the conversion of Class B shares to Class A shares. Class C shares are sold without an initial sales charge but are subject to a distribution fee of up to 0.75% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% imposed on redemptions made within one year of purchase. The Board of Directors of the Fund approved the automatic conversion of all of the Fund's outstanding Class D shares to Class C shares at their relative net asset values. The conversion was implemented on May 16, 2008. Effective at the close of business on May 16, 2008, the Fund no longer offers Class D shares. The conversion did not affect individual shareholder account values. Class I shares are offered to certain institutional clients and other investors, as described in the Fund's Class I shares prospectus. Class I shares are sold without any sales charges and are not subject to distribution or service fees. Class R shares are offered to certain employee benefit plans and are not available to all investors. They are sold without an initial sales charge, but are subject to a distribution fee of up to 0.25% and a service fee of up to 0.25% on an annual basis, and a CDSC, if applicable, of 1% on redemptions made within one year of a plan's initial purchase of Class R shares. All classes of shares represent interests in the same portfolio of investments, have the same rights and are generally identical in all respects except that each class bears its own class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. 2. SIGNIFICANT ACCOUNTING POLICIES -- The financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America which require management to make certain estimates and assumptions at the date of the financial statements. Actual results may differ from these estimates. The following summarizes the significant accounting policies of the Fund: A. SECURITY VALUATION AND RISK -- Securities traded on an exchange are valued at the last sales price on the primary exchange or market on which they are traded. Securities not listed on an exchange or security market, or securities for which there is no last sales price, are valued at the mean of the most recent bid and asked prices or are valued by RiverSource Investments, LLC 26 Notes to Financial Statements ("RiverSource" or the "Manager") based on quotations provided by primary market makers in such securities. Securities for which market quotations are not readily available (or are otherwise no longer valid or reliable) are valued at fair value determined in accordance with procedures approved by the Board of Directors. This can occur in the event of, among other things, natural disasters, acts of terrorism, market disruptions, intra-day trading halts, and extreme market volatility. The determination of fair value involves subjective judgments. As a result, using fair value to price a security may result in a price materially different from the prices used by other mutual funds to determine net asset value or the price that may be realized upon the actual sale of the security. Short-term holdings maturing in 60 days or less are valued at current market quotations or amortized cost if the Fund's Manager believes it approximates fair value. Short-term holdings that mature in more than 60 days are valued at current market quotations until the 60th day prior to maturity and are then valued as described above for securities maturing in 60 days or less. Investments in money market funds are valued at net asset value. On January 1, 2008, the Fund adopted Statement of Financial Accounting Standards No. 157 ("SFAS 157"), "Fair Value Measurements." SFAS 157 establishes a three-tier hierarchy to classify the assumptions, referred to as inputs, used in valuation techniques (as described above) to measure fair value of the Fund's investments. These inputs are summarized in three broad levels: Level 1 -- quoted prices in active markets for identical investments; Level 2 -- other significant observable inputs (including quoted prices in inactive markets or for similar investments); and Level 3 -- significant unobservable inputs (including the Fund's own assumptions in determining fair value) (Note 3). Observable inputs are those based on market data obtained from sources independent of the Fund, and unobservable inputs reflect the Fund's own assumptions based on the best information available. The inputs or methodology used for valuing securities may not be an indication of the risk associated with investing in those securities. To the extent that the Fund invests a substantial percentage of its assets in an industry, the Fund's performance may be negatively affected if that industry falls out of favor. Stocks of large-capitalization companies have at times experienced periods of volatility and negative performance. During such periods, the value of such stocks may decline and the Fund's performance may be negatively affected. B. EQUITY-LINKED NOTES -- The Fund may purchase notes created by a counterparty, typically an investment bank. The notes bear interest at a fixed or floating rate. At maturity, the notes must be exchanged for an amount based on the value of one or more equity securities ("Underlying Stocks") of third party issuers. The exchange value may be limited to an amount less than the actual value of the Underlying Stocks at the maturity date. Any difference between the exchange amount and the original cost of the notes will be a gain or loss. C. OPTIONS -- The Fund is authorized to write and purchase put and call options. When the Fund writes an option, an amount equal to the premium received by the Fund is reflected as an asset and an equivalent liability. The amount of the liability is subsequently marked to market to reflect the current market value of the option written. When a security is purchased or sold through an exercise of an option, the related premium paid (or received) is added to (or deducted from) the basis of the security acquired or deducted from (or added to) the proceeds of the security sold. When an option expires (or the Fund enters into a closing transaction), the Fund realizes a gain or loss on the option to the extent of the premiums received or paid (or gain or loss to the extent the cost of the closing transaction exceeds the premium paid or received). The Fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Written and purchased options are non-income producing investments. 27 Notes to Financial Statements D. RESTRICTED CASH -- Restricted cash represents deposits that are being held by banks as collateral for letters of credit issued in connection with the Fund's insurance policies. E. MULTIPLE CLASS ALLOCATIONS -- All income, expenses (other than class- specific expenses), and realized and unrealized gains or losses are allocated daily to each class of shares based upon the relative value of shares of each class. Class-specific expenses, which include distribution and service (12b-1) fees and any other items that are specifically attributable to a particular class, are charged directly to such class. For the year ended December 31, 2008, distribution and service (12b-1) fees, shareholder account services and registration expenses were class-specific expenses. F. SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME -- Investment transactions are recorded on trade dates. Identified cost of investments sold is used for both financial reporting and federal income tax purposes. Dividends receivable are recorded on ex-dividend dates, except that certain dividends from foreign securities where the ex-dividend dates may have passed are recorded as soon as the Fund is informed of the dividend. Interest income is recorded on an accrual basis. G. DISTRIBUTIONS TO SHAREHOLDERS -- Dividends and distributions to shareholders are recorded on ex-dividend dates. H. TAXES -- There is no provision for federal income tax. The Fund has elected to be taxed as a regulated investment company and intends to distribute substantially all taxable net income and net gain realized. Financial Accounting Standards Board ("FASB") Interpretation No. 48 ("FIN 48"), "Accounting for Uncertainty in Income Taxes -- an interpretation of FASB Statement No. 109," requires the Fund to measure and recognize in its financial statements the benefit of a tax position taken (or expected to be taken) on an income tax return if such position will more likely than not be sustained upon examination based on the technical merits of the position. The Fund files income tax returns in the US Federal jurisdiction, as well as the New York State and New York City jurisdictions. Based upon its review of tax positions for the Fund's open tax years of 2005-2008 in these jurisdictions, the Fund has determined that FIN 48 did not have a material impact on the Fund's financial statements for the year ended December 31, 2008. 3. FAIR VALUE MEASUREMENTS -- A summary of the value of the Fund's investments as of December 31, 2008, based on the level of inputs used in accordance with SFAS 157 (Note 2a), is as follows: <Table> <Caption> VALUATION INPUTS VALUE ------------------------------------------------------------------ Level 1 -- Quoted Prices in Active Markets for Identical Investments $101,504,243 ------------------------------------------------------------------ Level 2 -- Other Significant Observable Inputs 180,852 ------------------------------------------------------------------ Level 3 -- Significant Unobservable Inputs -- ------------------------------------------------------------------ Total $101,685,095 ------------------------------------------------------------------ </Table> 4. MANAGEMENT AND DISTRIBUTION SERVICES, AND OTHER RELATED-PARTY TRANSACTIONS -- A. MANAGEMENT AND ADMINISTRATIVE SERVICES -- On November 7, 2008, RiverSource, investment manager to the RiverSource complex of funds, and a wholly owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise"), announced the closing of its acquisition (the "Acquisition") of J. & W. Seligman & Co. Incorporated ("JWS"). With the Acquisition completed and shareholders of the Fund having previously approved (at a Special Meeting held earlier in November 2008) a new Investment Management Services Agreement between RiverSource and the Fund, RiverSource is the new investment manager of the Fund effective November 7, 2008. 28 Notes to Financial Statements The Manager receives a fee (and, prior to November 7, 2008, JWS received a fee), calculated daily and payable monthly, equal to 0.65% per annum of the first $1 billion of the Fund's average daily net assets, 0.60% per annum of the next $1 billion of the Fund's average daily net assets, and 0.55% per annum of the Fund's average daily net assets in excess of $2 billion. The management fee reflected in the Statement of Operations represents 0.65% per annum of the Fund's average daily net assets. For the year ended December 31, 2008, RiverSource received $97,946 of such fee and the balance was paid to JWS. Under an Administrative Services Agreement, effective November 7, 2008, Ameriprise administers certain aspects of the Fund's business and other affairs at no cost. Ameriprise provides the Fund with office space, and certain administrative and other services and executive and other personnel as are necessary for Fund operations. Ameriprise pays all of the compensation of Board members of the Fund who are employees or consultants of RiverSource and of the officers and other personnel of the Fund. Ameriprise reserves the right to seek Board approval to increase the fees payable by the Fund under the Administrative Services Agreement. However, Ameriprise anticipates that any such increase in fees would be offset by corresponding decreases in advisory fees under the Investment Management Services Agreement. If an increase in fees under the Administrative Services Agreement would not be offset by corresponding decreases in advisory fees, the Fund will inform shareholders prior to the effectiveness of such increase. Prior to November 7, 2008, administrative services were provided to the Fund by JWS as part of its former management agreement with the Fund. B. DISTRIBUTION SERVICES -- For the year ended December 31, 2008, RiverSource Fund Distributors, Inc. (formerly Seligman Advisors, Inc.) (the "Distributor"), agent for the distribution of the Fund's shares and an affiliate of the Manager, received commissions and concessions of $3,252 from sales of Class A shares. Commissions of $14,175 were also paid to dealers for sales of Class A shares. The Fund has an Administration, Shareholder Services and Distribution Plan (the "Plan") with respect to distribution of its shares. Under the Plan, with respect to Class A shares, service organizations can enter into agreements with the Distributor and receive a continuing fee of up to 0.25% on an annual basis, payable monthly, of the average daily net assets of the Class A shares attributable to the particular service organizations for providing personal services and/or the maintenance of shareholder accounts. The Distributor charges such fees to the Fund pursuant to the Plan. For the year ended December 31, 2008, fees incurred under the Plan aggregated $341,378, or 0.24% per annum of the average daily net assets of Class A shares. Under the Plan, with respect to Class B shares, Class C shares, Class D shares (only through May 16, 2008), and Class R shares, service organizations can enter into agreements with the Distributor and receive a continuing fee for providing personal services and/or the maintenance of shareholder accounts of up to 0.25% on an annual basis of the average daily net assets of the Class B, Class C, Class D, and Class R shares for which the organizations are responsible; and, for Class C, Class D and Class R shares, fees for providing other distribution assistance of up to 0.75% (0.25%, in the case of Class R shares) on an annual basis of such average daily net assets. Such fees are paid monthly by the Fund to the Distributor pursuant to the Plan. For the year ended December 31, 2008, fees incurred under the Plan, equivalent to 1% per annum of the average daily net assets of Class B, Class C, and Class D shares, and 0.50% per annum of the average daily net assets of Class R shares, amounted to $24,726, $72,347, $38,153, and $10,429, respectively. The Distributor and RiverSource Services, Inc. (formerly Seligman Services, Inc.), also an affiliate of the Manager, are eligible to receive distribution and service (12b-1) fees pursuant to the Plan. 29 Notes to Financial Statements For the year ended December 31, 2008, the Distributor and RiverSource Services, Inc. received distribution and service (12b-1) fees of $78,425. The Distributor is entitled to retain any CDSC imposed on certain redemptions of Class A, Class C, Class D, and Class R shares. For the year ended December 31, 2008, such charges amounted to $1,252. The Distributor has sold to third parties its rights to collect any CDSC imposed on redemptions of Class B shares. C. TRANSFER AGENT AND SHAREHOLDER SERVICES -- For the year ended December 31, 2008, Seligman Data Corp., which is owned by the Fund and certain associated investment companies, charged the Fund at cost $562,799 for shareholder account services in accordance with a methodology approved by the Fund's directors. Class I shares receive more limited shareholder services than the Fund's other classes of shares (the "Retail Classes"). Seligman Data Corp. does not allocate to Class I the costs of any of its departments that do not provide services to the Class I shareholders. Costs of Seligman Data Corp. directly attributable to the Retail Classes of the Fund were charged to those classes in proportion to their relative net asset values. Costs directly attributable to Class I shares were charged to Class I. The remaining charges were allocated to the Retail Classes and Class I by Seligman Data Corp. pursuant to a formula based on their net assets, shareholder transaction volumes and number of shareholder accounts. The Fund and certain other associated investment companies (together, the "Guarantors") have severally but not jointly guaranteed the performance and observance of all the terms and conditions of a lease entered into by Seligman Data Corp., including the payment of rent by Seligman Data Corp. (the "Guaranty"). The lease and the related Guaranty expire in January 2019. The obligation of the Fund to pay any amount due under the Guaranty is limited to a specified percentage of the full amount, which generally is based on the Fund's percentage of the expenses billed by Seligman Data Corp. to all Guarantors in the preceding calendar quarter. As of December 31, 2008, the Fund's potential obligation under the Guaranty is $242,800. As of December 31, 2008, no event has occurred which would result in the Fund becoming liable to make any payment under the Guaranty. A portion of the rent paid by Seligman Data Corp. is charged to the Fund as part of Seligman Data Corp.'s shareholder account services cost. As of December 31, 2008, the Fund's investment in Seligman Data Corp. is recorded at a cost of $22,506. The Fund's Board has approved RiverSource Service Corporation ("RSC") as the Fund's new transfer and shareholder service agent, and the termination of the Fund's relationship with Seligman Data Corp., effective on or about May 9, 2009. RSC is an affiliate of RiverSource. The fees and expenses expected to be charged to the Fund by RSC are generally lower than the fees and expenses charged by Seligman Data Corp. Nevertheless, as a result of the termination of the relationship with Seligman Data Corp., the Fund will incur certain non-recurring charges, including charges relating to Seligman Data Corp.'s leases, that would in the aggregate approximate 0.16% of the Fund's net assets as of January 23, 2009 (the "Non-Recurring Charges"). These Non-Recurring Charges will be incurred over a period of several months beginning January 28, 2009. Fund shareholders would bear their proportionate share of the Fund's expenses, including the Non-Recurring Charges. D. DIRECTORS' FEES AND EXPENSES -- Directors' fees and expenses includes the compensation of Board members who are not employees of RiverSource and the Fund's proportionate share of certain expenses of a company providing limited administrative services to the Fund and the other Seligman and RiverSource Funds. These expenses include boardroom and office expense, 30 Notes to Financial Statements employee compensation, employee health and retirement benefits and certain other expenses. For the period from November 7, 2008 through December 31, 2008, the Fund paid $60 to this company for such services. The Fund has a compensation arrangement under which directors who receive fees may elect to defer receiving such fees. Directors may elect to have their deferred fees accrue interest or earn a return based on the performance of the Fund or other funds in the Seligman and RiverSource Groups of Investment Companies. The cost of such fees and earnings/loss accrued thereon is included in directors' fees and expenses and the accumulated balance thereof at December 31, 2008, of $1,638 is included in accrued expenses and other liabilities. Deferred fees and related accrued earnings are not deductible by the Fund for federal income tax purposes until such amounts are paid. Certain officers and directors of the Fund are officers or directors of the Manager, Ameriprise, the Distributor, RiverSource Services, Inc., RSC, and/or Seligman Data Corp. 5. COMMITTED LINE OF CREDIT -- The Fund is a participant in a joint $200 million committed line of credit that is shared by substantially all open-end funds in the Seligman Group of Investment Companies. The directors have currently limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility are subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurs a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may be drawn upon only for temporary purposes and is subject to certain other customary restrictions. The credit facility commitment expires in June 2009, but is renewable annually with the consent of the participating banks. For the year ended December 31, 2008, the Fund did not borrow from the credit facility. 6. PURCHASES AND SALES OF SECURITIES -- Purchases and sales of portfolio securities, excluding short-term investments, for the year ended December 31, 2008, amounted to $194,120,652 and $203,742,084, respectively. 7. FEDERAL TAX INFORMATION -- Certain components of income, expense and realized capital gain and loss are recognized at different times or have a different character for federal income tax purposes and for financial reporting purposes. Where such differences are permanent in nature, they are reclassified in the components of net assets based on their characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset value per share of the Fund. As a result of the differences described above, the treatment for financial reporting purposes of distributions made during the year from net investment income or net realized gains may differ from their treatment for federal income tax purposes. Further, the cost of investments also can differ for federal income tax purposes. At December 31, 2008, the cost of investments for federal income tax purposes was $125,682,074. The tax basis cost was greater than the cost for financial reporting purposes due to the tax deferral of losses on wash sales of $767,660, which is partially offset by the tax deferral of gains on limited partnerships of $39,971. 31 Notes to Financial Statements The tax basis components of accumulated losses at December 31, 2008 are presented below. <Table> Gross unrealized appreciation of portfolio securities $ 4,084,047 ------------------------------------------------------------------- Gross unrealized depreciation of portfolio securities (28,081,026) ------------------------------------------------------------------- Net unrealized depreciation of portfolio securities (23,996,979) ------------------------------------------------------------------- Undistributed ordinary income 198,051 ------------------------------------------------------------------- Capital loss carryforward (18,820,220) ------------------------------------------------------------------- Timing differences (post-October losses) (60,409,401) ------------------------------------------------------------------- Total accumulated losses $(103,028,549) ------------------------------------------------------------------- </Table> At December 31, 2008, the Fund had a capital loss carryforward for federal income tax purposes of $18,820,220, all of which expires in 2016 and is available for offset against future taxable net capital gains. Accordingly, no capital gain distributions are expected to be paid to shareholders until net capital gains have been realized in excess of the available capital loss carryforward. There is no assurance that the Fund will be able to utilize all of its capital loss carryforward before it expires. In addition, from November 1, 2008 through December 31, 2008, the Fund incurred $60,409,401 of net realized capital losses. As permitted by tax regulations, the Fund intends to elect to defer these losses and treat them as arising in the fiscal year ended December 31, 2009. These losses will be available to offset future taxable net gains. 8. OPTIONS WRITTEN -- Transactions in options written during the year ended December 31, 2008, were as follows: <Table> <Caption> SHARES SUBJECT TO CALL PREMIUMS ----------------------------------------------------------------------- Options outstanding, December 31, 2007 -- $ -- ----------------------------------------------------------------------- Options written 64,300 63,430 ----------------------------------------------------------------------- Options expired (60,100) (51,754) ----------------------------------------------------------------------- Options exercised (4,200) (11,676) ----------------------------------------------------------------------- Options outstanding, December 31, 2008 -- $ -- ----------------------------------------------------------------------- </Table> 9. CAPITAL SHARE TRANSACTIONS -- Transactions in shares of Capital Stock were as follows: <Table> <Caption> YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008 2007 ---------------------------------------------------------------------------------- CLASS A SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 213,538 $ 1,699,273 194,974 $ 2,562,851 ---------------------------------------------------------------------------------------- Investment of dividends 212,577 1,908,482 253,765 3,288,401 ---------------------------------------------------------------------------------------- Exchanged from associated funds 99,660 860,251 67,798 902,296 ---------------------------------------------------------------------------------------- Converted from Class B* 85,010 814,533 90,142 1,192,556 ---------------------------------------------------------------------------------------- Investment of gain distribution 346,649 3,209,972 1,035,053 12,902,409 ---------------------------------------------------------------------------------------- Total 957,434 8,492,511 1,641,732 20,848,513 ---------------------------------------------------------------------------------------- Cost of shares repurchased (2,246,839) (19,151,497) (2,329,652) (31,051,541) ---------------------------------------------------------------------------------------- Exchanged into associated funds (245,247) (1,923,819) (104,428) (1,359,094) ---------------------------------------------------------------------------------------- Total (2,492,086) (21,075,316) (2,434,080) (32,410,635) ---------------------------------------------------------------------------------------- Decrease (1,534,652) $(12,582,805) (792,348) $(11,562,122) ---------------------------------------------------------------------------------------- </Table> ------- See footnotes on page 34. 32 Notes to Financial Statements <Table> <Caption> YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008+ 2007 ---------------------------------------------------------------------------------------- CLASS B SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 15,838 $ 128,998 23,644 $ 302,735 ---------------------------------------------------------------------------------------- Investment of dividends 3,464 31,142 5,423 68,978 ---------------------------------------------------------------------------------------- Exchanged from associated funds 6,787 58,822 43,908 523,464 ---------------------------------------------------------------------------------------- Investment of gain distribution 7,587 68,511 27,525 336,428 ---------------------------------------------------------------------------------------- Total 33,676 287,473 100,500 1,231,605 ---------------------------------------------------------------------------------------- Cost of shares repurchased (57,688) (468,429) (115,603) (1,506,990) ---------------------------------------------------------------------------------------- Exchanged into associated funds (9,293) (73,428) (28,316) (352,012) ---------------------------------------------------------------------------------------- Converted to Class A* (87,341) (814,533) (92,275) (1,192,556) ---------------------------------------------------------------------------------------- Total (154,322) (1,356,390) (236,194) (3,051,558) ---------------------------------------------------------------------------------------- Decrease (120,646) $ (1,068,917) (135,694) $ (1,819,953) ---------------------------------------------------------------------------------------- CLASS C SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 117,534 $ 910,222 7,340 $ 95,107 ---------------------------------------------------------------------------------------- Investment of dividends 11,949 101,494 4,901 62,054 ---------------------------------------------------------------------------------------- Exchanged from associated funds 30,867 223,321 9,370 120,650 ---------------------------------------------------------------------------------------- Converted from Class D** 970,012 10,243,323 -- -- ---------------------------------------------------------------------------------------- Investment of gain distribution 36,959 334,114 25,387 309,282 ---------------------------------------------------------------------------------------- Total 1,167,321 11,812,474 46,998 587,093 ---------------------------------------------------------------------------------------- Cost of shares repurchased (261,629) (2,165,324) (74,545) (981,174) ---------------------------------------------------------------------------------------- Exchanged into associated funds (37,194) (268,071) (9,385) (120,127) ---------------------------------------------------------------------------------------- Total (298,823) (2,433,395) (83,930) (1,101,301) ---------------------------------------------------------------------------------------- Increase (decrease) 868,498 $ 9,379,079 (36,932) $ (514,208) ---------------------------------------------------------------------------------------- CLASS D SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 109,904 $ 1,129,972 162,959 $ 2,111,477 ---------------------------------------------------------------------------------------- Investment of dividends 4,550 45,232 15,146 193,072 ---------------------------------------------------------------------------------------- Exchanged from associated funds 7,151 73,491 13,023 166,580 ---------------------------------------------------------------------------------------- Investment of gain distribution -- -- 86,663 1,054,800 ---------------------------------------------------------------------------------------- Total 121,605 1,248,695 277,791 3,525,929 ---------------------------------------------------------------------------------------- Cost of shares repurchased (143,009) (1,441,922) (320,391) (4,166,341) ---------------------------------------------------------------------------------------- Exchanged into associated funds (10,443) (106,809) (16,848) (212,989) ---------------------------------------------------------------------------------------- Converted to Class C** (970,012) (10,243,323) -- -- ---------------------------------------------------------------------------------------- Total (1,123,464) (11,792,054) (337,239) (4,379,330) ---------------------------------------------------------------------------------------- Decrease (1,001,859) $(10,543,359) (59,448) $ (853,401) ---------------------------------------------------------------------------------------- </Table> ------- See footnotes on page 34. 33 Notes to Financial Statements <Table> <Caption> YEAR ENDED DECEMBER 31, -------------------------------------------------- 2008 2007 ---------------------------------------------------------------------------------------- CLASS I SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 206,695 $ 1,703,090 118,049 $ 1,530,621 ---------------------------------------------------------------------------------------- Investment of dividends 17,321 153,717 14,798 192,584 ---------------------------------------------------------------------------------------- Investment of gain distribution 19,271 179,990 46,978 587,906 ---------------------------------------------------------------------------------------- Total 243,287 2,036,797 179,825 2,311,111 ---------------------------------------------------------------------------------------- Cost of shares repurchased (112,062) (829,119) (38,578) (508,773) ---------------------------------------------------------------------------------------- Increase 131,225 $ 1,207,678 141,247 $ 1,802,338 ---------------------------------------------------------------------------------------- CLASS R SHARES AMOUNT SHARES AMOUNT ---------------------------------------------------------------------------------------- Net proceeds from sales of shares 133,420 $ 1,187,221 194,890 $ 2,669,609 ---------------------------------------------------------------------------------------- Investment of dividends 4,320 38,920 1,415 19,543 ---------------------------------------------------------------------------------------- Exchanged from associated funds 1,561 15,791 273 3,576 ---------------------------------------------------------------------------------------- Investment of gain distribution 7,234 67,199 14,538 181,399 ---------------------------------------------------------------------------------------- Total 146,535 1,309,131 211,116 2,874,127 ---------------------------------------------------------------------------------------- Cost of shares repurchased (81,527) (688,099) (70,987) (946,421) ---------------------------------------------------------------------------------------- Exchanged into associated funds (1,457) (10,055) -- -- ---------------------------------------------------------------------------------------- Total (82,984) (698,154) (70,987) (946,421) ---------------------------------------------------------------------------------------- Increase 63,551 $ 610,977 140,129 $ 1,927,706 ---------------------------------------------------------------------------------------- </Table> -------- * Automatic conversion of Class B shares to Class A shares approximately eight years after their initial purchase date. ** Effective May 16, 2008, Class D shares were converted to Class C shares. + January 1, 2008 to May 16, 2008, in the case of Class D shares. 10. PROCEEDS FROM REGULATORY SETTLEMENT -- In June 2008, as a result of a settlement of an administrative proceeding brought by the SEC against an unaffiliated third party relating to market timing and/or late trading of mutual funds, the Fund received $209,621, which represented the Fund's portion of the proceeds from the settlement (the Fund was not a party to the proceeding). The proceeds received by the Fund were recorded as an increase to additional paid-in capital. 11. OTHER MATTERS -- In late 2003, JWS conducted an extensive internal review concerning mutual fund trading practices. JWS's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies then managed by JWS (the "Seligman Funds"); this arrangement was in the process of being closed down by JWS before September 2003. JWS identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, JWS, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. JWS 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 2005, the New York staff of the SEC indicated that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against JWS and the Distributor relating to frequent trading in the Seligman Funds. JWS 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 JWS had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. 34 In September 2006, the NYAG commenced a civil action in New York State Supreme Court against JWS, the Distributor, Seligman Data Corp. and Brian T. Zino (collectively, the "Seligman Parties"), alleging, in substance, that, in addition to the four arrangements noted above, the Seligman Parties permitted other persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by JWS is and has been misleading. The NYAG included other related claims and also claimed that the fees charged by JWS to the Seligman Funds were excessive. The NYAG is seeking damages of at least $80 million and restitution, disgorgement, penalties and costs and injunctive relief. The Seligman Parties answered the complaint in December 2006 and believe that the claims are without merit. Any resolution of these matters may include the relief noted above or other sanctions or changes in procedures. Any damages would be paid by JWS and not by the Seligman Funds. If the NYAG obtains injunctive relief, each of JWS, RiverSource Investments, LLC ("RiverSource") and their affiliates could, in the absence of the SEC in its discretion granting exemptive relief, be enjoined from providing advisory and underwriting services to the Seligman Funds and other registered investment companies, including those funds in the RiverSource complex. Neither JWS nor RiverSource believes that the foregoing legal action or other possible actions will have a material adverse impact on JWS, RiverSource or their current and former clients, including the Seligman Funds and other investment companies managed by RiverSource; however, there can be no assurance of this or that these matters and any related publicity will not affect demand for shares of the Seligman Funds and such other investment companies or have other adverse consequences. 12. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT -- In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161 ("SFAS 161"), "Disclosures about Derivative Instruments and Hedging Activities -- an amendment of FASB Statement No. 133," which requires enhanced disclosures about a fund's derivative and hedging activities. Funds are required to provide enhanced disclosures about (a) how and why a fund uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect a fund's financial position, financial performance, and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. As of December 31, 2008, management does not believe the adoption of SFAS 161 will impact the financial statement amounts; however, additional footnote disclosures may be required about the use of derivative instruments and hedging items. 13. SUBSEQUENT EVENTS -- On January 8, 2009, the Fund's Board approved in principle the merger of the Fund into RiverSource Disciplined Equity Fund. The completion of the merger is subject to approval by shareholders of the Fund. It is currently anticipated that proxy materials regarding the merger will be distributed to shareholders of the Fund during the first or second quarter of 2009, and that a special meeting of shareholders to consider such merger will be scheduled for the second quarter of 2009. 35 Financial Highlights The tables below are intended to help you understand each Class's financial performance for the periods presented. Certain information reflects financial results for a single share of a Class that was held throughout the periods shown. Per share amounts are calculated using average shares outstanding during the period. Total return shows the rate that you would have earned (or lost) on an investment in each Class, assuming you reinvested all your dividend and capital gain distributions, if any. Total returns do not reflect any sales charges or transaction costs on your investment or taxes investors may incur on distributions or on the redemption of shares, and are not annualized for periods of less than one year. <Table> <Caption> CLASS A - ---------------------------------------------------------------------------------------------- YEAR ENDED DECEMBER 31, ---------------------------------------------------------- 2008 2007 2006 2005 2004 - ---------------------------------------------------------------------------------------------- PER SHARE DATA: - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, BEGINNING OF YEAR $11.44 $13.08 $11.67 $11.58 $10.42 - ---------------------------------------------------------------------------------------------- INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ---------------------------------------------------------------------------------------------- Net investment income 0.20 0.33 0.09 0.06 0.07 - ---------------------------------------------------------------------------------------------- Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.14) (0.49) 1.80 0.09 1.16 - ---------------------------------------------------------------------------------------------- TOTAL FROM INVESTMENT OPERATIONS (4.94) (0.16) 1.89 0.15 1.23 - ---------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: - ---------------------------------------------------------------------------------------------- Dividends from net investment income (0.20) (0.33) (0.09) (0.06) (0.07) - ---------------------------------------------------------------------------------------------- Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ---------------------------------------------------------------------------------------------- TOTAL DISTRIBUTIONS (0.49) (1.48) (0.48) (0.06) (0.07) - ---------------------------------------------------------------------------------------------- PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ---------------------------------------------------------------------------------------------- NET ASSET VALUE, END OF YEAR $6.02 $11.44 $13.08 $11.67 $11.58 - ---------------------------------------------------------------------------------------------- TOTAL RETURN (44.56)%(1) (1.84)% 16.23% 1.26% 11.82%# - ---------------------------------------------------------------------------------------------- RATIOS/SUPPLEMENTAL DATA: - ---------------------------------------------------------------------------------------------- Net assets, end of year (000s $183,4- $220,1- $223,8- $264,1- omitted) $87,222 49 52 00 42 - ---------------------------------------------------------------------------------------------- Ratio of expenses to average net assets 1.44% 1.33% 1.33% 1.29% 1.28% - ---------------------------------------------------------------------------------------------- Ratio of net investment income to average net assets 2.18% 2.47% 0.71% 0.50% 0.66% - ---------------------------------------------------------------------------------------------- Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ---------------------------------------------------------------------------------------------- </Table> - ------- See footnotes on page 41. 36 Financial Highlights <Table> <Caption> CLASS B - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.17 $12.79 $11.43 $11.37 $10.25 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.13 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.03) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.90) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.12) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.41) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $5.87 $11.17 $12.79 $11.43 $11.37 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (45.02)%(1) (2.54)% 15.38% 0.53% 10.93%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $1,280 $3,784 $6,068 $9,049 $13,581 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.20% 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.42% 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 41. 37 Financial Highlights <Table> <Caption> CLASS C - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.18 $12.80 $11.44 $11.38 $10.26 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.12 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.02) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.90) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.12) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.41) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $5.88 $11.18 $12.80 $11.44 $11.38 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.98)%(1) (2.54)% 15.37% 0.53% 10.92%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $6,896 $3,412 $4,381 $4,674 $5,227 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.20% 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.42% 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 41. 38 Financial Highlights <Table> <Caption> CLASS D - ------------------------------------------------------------------------------------------------ 1/1/08 YEAR ENDED DECEMBER 31, TO ---------------------------------------- 5/16/08* 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF PERIOD $11.17 $12.79 $11.43 $11.37 $10.25 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income (loss) 0.07 0.22 (0.01) (0.03) (0.01) - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (0.64) (0.46) 1.76 0.09 1.13 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (0.57) (0.24) 1.75 0.06 1.12 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.05) (0.22) -- -- -- - ------------------------------------------------------------------------------------------------ Dividends in excess of net investment income -- (0.01) -- -- -- - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain -- (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.05) (1.38) (0.39) -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF PERIOD $10.55 $11.17 $12.79 $11.43 $11.37 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (5.09)% (2.54)% 15.38% 0.53% 10.93%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of period (000s omitted) -- $11,189 $13,578 $13,704 $16,370 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 2.13%+ 2.08% 2.08% 2.05% 2.04% - ------------------------------------------------------------------------------------------------ Ratio of net investment income (loss) to average net assets 1.79%+ 1.72% (0.04)% (0.26)% (0.10)% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09%(o) 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 41. 39 Financial Highlights <Table> <Caption> CLASS I - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.53 $13.16 $11.71 $11.61 $10.44 - ------------------------------------------------------------------------------------------------ INCOME (LOSS) FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income 0.25 0.39 0.14 0.10 0.11 - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.19) (0.49) 1.81 0.10 1.17 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.94) (0.10) 1.95 0.20 1.28 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.24) (0.38) (0.11) (0.10) (0.11) - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.53) (1.53) (0.50) (0.10) (0.11) - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $6.07 $11.53 $13.16 $11.71 $11.61 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.30)%(1) (1.42)% 16.74% 1.69% 12.23%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $4,385 $6,818 $5,923 $4,134 $4,005 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 0.90% 0.88% 0.91% 0.93% 0.90% - ------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 2.72% 2.92% 1.13% 0.86% 1.04% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------ </Table> - ------- See footnotes on page 41. 40 Financial Highlights <Table> <Caption> CLASS R - ------------------------------------------------------------------------------------------------ YEAR ENDED DECEMBER 31, ------------------------------------------------------ 2008 2007 2006 2005 2004 - ------------------------------------------------------------------------------------------------ PER SHARE DATA: - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, BEGINNING OF YEAR $11.47 $13.09 $11.67 $11.58 $10.42 - ------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: - ------------------------------------------------------------------------------------------------ Net investment income 0.18 0.29 0.06 0.03 0.04 - ------------------------------------------------------------------------------------------------ Net realized and unrealized gain (loss) on investments, options written and foreign currency transactions (5.16) (0.49) 1.80 0.09 1.17 - ------------------------------------------------------------------------------------------------ TOTAL FROM INVESTMENT OPERATIONS (4.98) (0.20) 1.86 0.12 1.21 - ------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: - ------------------------------------------------------------------------------------------------ Dividends from net investment income (0.17) (0.27) (0.05) (0.03) (0.05) - ------------------------------------------------------------------------------------------------ Distributions from net realized capital gain (0.29) (1.15) (0.39) -- -- - ------------------------------------------------------------------------------------------------ TOTAL DISTRIBUTIONS (0.46) (1.42) (0.44) (0.03) (0.05) - ------------------------------------------------------------------------------------------------ PROCEEDS FROM REGULATORY SETTLEMENT 0.01(1) -- -- -- -- - ------------------------------------------------------------------------------------------------ NET ASSET VALUE, END OF YEAR $6.04 $11.47 $13.09 $11.67 $11.58 - ------------------------------------------------------------------------------------------------ TOTAL RETURN (44.67)%(1) (2.15)% 15.99% 1.01% 11.57%# - ------------------------------------------------------------------------------------------------ RATIOS/SUPPLEMENTAL DATA: - ------------------------------------------------------------------------------------------------ Net assets, end of year (000s omitted) $1,506 $2,133 $600 $385 $321 - ------------------------------------------------------------------------------------------------ Ratio of expenses to average net assets 1.70% 1.58% 1.58% 1.55% 1.54% - ------------------------------------------------------------------------------------------------ Ratio of net investment income to average net assets 1.92% 2.22% 0.46% 0.24% 0.40% - ------------------------------------------------------------------------------------------------ Portfolio turnover rate 129.09% 119.23% 93.45% 68.31% 43.50% - ------------------------------------------------------------------------------------------------ </Table> - -------- + Annualized. * Date of conversion to Class C shares. (o) Computed at the Fund level for the year ended December 31, 2008. # Excluding the effect of certain payments received from the Manager in 2004, total return would have been as follows: Class A 11.79%; Class B 10.90%; Class C 10.89%; Class D 10.90%; Class I 12.20%; and Class R 11.54%. (1) In June 2008, the Fund received its portion of the proceeds from a regulatory settlement between an unaffiliated third party and the SEC, which increased the net asset value per share and total return by $0.01 and 0.10%, respectively (Note 10). See Notes to Financial Statements. 41 Report of Independent Registered Public Accounting Firm THE BOARD OF DIRECTORS AND STOCKHOLDERS OF SELIGMAN COMMON STOCK FUND, INC.: We have audited the accompanying statement of assets and liabilities of Seligman Common Stock Fund, Inc. (the "Fund"), including the portfolio of investments, as of December 31, 2008, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the periods presented. These financial statements and financial highlights are the responsibility of the Fund's management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits. We conducted our audits in accordance with 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. The Fund is not require to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of December 31, 2008, by correspondence with the custodian and brokers; where replies were not received from brokers we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Seligman Common Stock Fund, Inc. as of December 31, 2008, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the respective stated periods, in conformity with accounting principles generally accepted in the United States of America. DELOITTE & TOUCHE LLP New York, New York February 27, 2009 42 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement BACKGROUND On July 7, 2008, RiverSource Investments, LLC ("RiverSource"), a wholly owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise"), entered into a stock purchase agreement with the shareholders of J. & W. Seligman & Co. Incorporated ("Seligman") under which RiverSource would acquire all of the outstanding capital stock of Seligman (the "Transaction"). The consummation of the Transaction resulted in the automatic termination of the Fund's management agreement with Seligman (the "Seligman Management Agreement"). In anticipation of the termination of the Seligman Management Agreement, at a meeting held on July 29, 2008, the directors of the Fund then serving unanimously approved an investment management agreement with RiverSource (the "Proposed Advisory Agreement"). At the special meeting of shareholders of the Fund held on November 3, 2008, the shareholders approved the Proposed Advisory Agreement. The Transaction closed on November 7, 2008, and upon the closing, RiverSource became the investment advisor to the Fund. BOARD CONSIDERATIONS Prior to their approval of the Proposed Advisory Agreement, the directors requested and evaluated extensive materials from, and were provided materials and information about the Transaction and matters related to the proposed approval by, Seligman, RiverSource and Ameriprise. In consultation with experienced counsel, who advised on the legal standards for consideration by the directors, the directors reviewed the Proposed Advisory Agreement with RiverSource. The independent directors also discussed the proposed approval with counsel in private sessions. At their meetings on June 12, 2008, July 17, 2008 and July 29, 2008, the directors discussed the Transaction with Seligman, and the Transaction and RiverSource's plans and intentions regarding the Fund with representatives of Ameriprise and RiverSource. The directors considered all factors they believed relevant, including the specific matters discussed below. In their deliberations, the directors did not identify any particular information that was all-important or controlling, and directors may have attributed different weights to the various factors. The directors determined that the selection of RiverSource to advise the Fund, and the overall arrangements between the Fund and RiverSource as provided in the Proposed Advisory Agreement, including the proposed advisory fee and the related administration arrangements between the Fund and Ameriprise, were fair and reasonable in light of the services to be performed, expenses incurred and such other matters as the directors considered relevant. The material factors and conclusions that formed the basis for the directors' determination included, in addition, the factors discussed in further detail below: (i) the reputation, financial strength and resources of RiverSource, and its parent, Ameriprise; (ii) the capabilities of RiverSource with respect to compliance and its regulatory histories; (iii) an assessment of RiverSource's compliance system by the Fund's Chief Compliance Officer; (iv) that RiverSource and Ameriprise assured the directors that following the Transaction there will not be any diminution in the nature, quality and extent of services provided to the Fund or its shareholders; 43 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement (v) that within the past year the directors had performed a full annual review of the Seligman Management Agreement, as required by the Investment Company Act of 1940 ("1940 Act"), for the Fund and had determined that they were satisfied with the nature, extent and quality of services provided thereunder and that the management fee rate for the Fund was satisfactory; (vi) the potential benefits to the Fund of the combination of RiverSource and Seligman to the Fund, including: greater resources to attract and retain high quality investment personnel; greater depth and breadth of investment management capabilities, including a new team of portfolio managers for the Fund; a continued high level of service to the Fund; and the potential for realization of economies of scale over time since the Fund will be part of a much larger fund complex; (vii) the fact that the Fund's total advisory and administrative fees would not increase by virtue of the Proposed Advisory Agreement, but would remain the same; (viii) that RiverSource, and not the Fund, would bear the costs of obtaining all approvals of the Proposed Advisory Agreement; (ix) the qualifications of the personnel of RiverSource and Ameriprise that would provide advisory and administrative services to the Fund; (x) the terms and conditions of the Proposed Advisory Agreement, including the directors' review of differences from the Seligman Management Agreement; (xi) that RiverSource and Ameriprise have agreed to refrain from imposing or seeking to impose, for a period of two years after the closing of the Transaction, any "unfair burden" (within the meaning of Section 15(f) of 1940 Act) on the Fund; and (xii) that certain members of RiverSource's management have a significant amount of experience integrating other fund families. NATURE, EXTENT AND QUALITY OF SERVICES PROVIDED In considering the nature, extent and quality of the services to be provided under the Proposed Advisory Agreement, the directors of the Fund considered, among other things, the expected impact of the Transaction on the operations of the Fund, the information provided by RiverSource with respect to the nature, extent and quality of services to be provided by it, RiverSource's compliance programs and compliance records, and presentations provided on the quality of RiverSource's investment research capabilities and the other resources it and Ameriprise have indicated that they would dedicate to performing services for the Fund. The directors noted the professional experience and qualifications of the new portfolio management team proposed for the Fund and other senior personnel of RiverSource. The directors considered a report by, the Fund's Chief Compliance Officer, assessing RiverSource's compliance system, which was followed by a private session with the Fund's Chief Compliance Officer. They also discussed RiverSource's compliance system with the Chief Compliance Officer for the funds managed by RiverSource. The directors also considered RiverSource's presentation on the selection of brokers and dealers for portfolio transactions. As administrative services (provided under the Seligman Management Agreement) would be provided to the Fund by Ameriprise at no additional cost under a new administrative services agreement rather than pursuant to the Proposed Advisory Agreement, the directors considered Ameriprise's capability to provide such administrative services as well as RiverSource's and Ameriprise's roles in 44 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement coordinating the activities of the Fund's other service providers. The directors noted that Ameriprise intended to continue Seligman's practice of sub- contracting administrative services provided by Seligman for the Fund to State Street Bank and Trust Company for the foreseeable future. The directors concluded that, overall, they were satisfied with assurances from RiverSource and Ameriprise as to the expected nature, extent and quality of the services to be provided to the Fund under the Proposed Advisory Agreement and the new administrative services agreement. COSTS OF SERVICES PROVIDED AND PROFITABILITY In considering the costs of services to be provided by RiverSource under the Proposed Advisory Agreement, the directors considered, among other things, the projected pre-tax, pre-distribution expense profitability of RiverSource's proposed relationship with the Fund and discussed the assumptions of RiverSource and the limitations of the information provided. The directors noted that RiverSource had undertaken to provide profitability information in connection with future contract continuances. The directors also considered RiverSource's financial condition based on information provided by it. The directors noted that the proposed fee under the Proposed Advisory Agreement was the same as provided under the Seligman Management Agreement. The directors recognized that it is difficult to make comparisons of profitability from fund advisory contracts because comparative information is not generally publicly available and is affected by numerous factors. In reviewing the projected profitability information, the directors considered the effect of fall-out benefits on RiverSource's expenses. The directors concluded that they were satisfied that RiverSource's estimated future profitability from its relationship with the Fund was not excessive. FALL-OUT BENEFITS The directors considered that RiverSource would benefit from soft dollar arrangements using portfolio brokerage of the Fund. The directors also noted RiverSource's representation that none of its affiliated broker-dealers was expected to provide brokerage services to the Fund. The directors reviewed information about RiverSource's practices with respect to allocating portfolio brokerage for brokerage and research services. The directors also considered that broker-dealer affiliates of RiverSource, including a broker-dealer affiliate of Seligman (which became an affiliate of RiverSource following the closing of the Transaction) will receive 12b-1 fees from the Fund in respect of shares held in certain accounts, and that the Fund's distributor (which also became a subsidiary of RiverSource following the closing of the Transaction) retains a portion of the 12b-1 fees from the Fund and receives a portion of the sales charges on sales or redemptions of certain classes of shares of the Fund. The directors recognized that RiverSource's profitability would be somewhat lower without these benefits. The directors noted that RiverSource may derive reputational and other benefits from its association with the Fund. INVESTMENT RESULTS The directors received and reviewed detailed performance information on the Fund at each regular Board meeting during the year in addition to the information received for the meeting regarding approval of the Proposed Advisory Agreement. The directors noted that a new portfolio manager was being proposed by RiverSource for the Fund. The directors discussed the proposed portfolio management team, its investment strategy and process and historical performance record with representatives of RiverSource. The directors reviewed performance 45 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement information of the Fund covering a wide range of periods, including the first six months of the calendar year, the preceding seven calendar years and annualized one-, three- and five-year rolling periods ending June 30, 2008. The directors reviewed information showing performance of the Fund compared to the Lipper Large-Cap Core Funds Average and the Standard & Poor's 500 Composite Stock Price Index ("S&P 500"), as well as performance relative to the other funds in the Lipper Large-Cap Core Funds Average and to a group of competitor funds selected by Seligman. The directors also reviewed annualized performance information for RiverSource Disciplined Equity Fund, which is currently advised by the proposed portfolio manager, for annualized one-, three- and five-years ended June 30, 2008, the past four calendar years, as well as year-to-date information as of July 10, 2008. The directors noted that information for RiverSource Disciplined Equity Fund was not available for all corresponding periods because it did not commence operations until April 2003. The directors noted that the results of RiverSource Disciplined Equity Fund were generally better than that of the Fund for the periods presented and the performance information was helpful in demonstrating the skill of the proposed portfolio management team, although they recognized that the performance of the Fund would differ from that of RiverSource Disciplined Equity Fund since it would use a modified version of such fund's investment process to comply with the Fund's strategy as disclosed in its prospectus. The directors noted that RiverSource Disciplined Equity Fund's calendar year results were above its benchmarks, the S&P 500 Index and Lipper Large Cap Core Funds, in 2005 and 2006, although they trailed the benchmarks in 2007. The directors recognized that it is not possible to predict what effect, if any, consummation of the Transaction would have on the future performance of the Fund. MANAGEMENT FEE AND OTHER EXPENSES The directors considered the proposed advisory fee rate to be paid by the Fund to RiverSource, which is the same as the management fee rate paid by the Fund under the Seligman Management Agreement. In addition to the materials provided by Seligman, RiverSource provided information regarding the fees for each of the RiverSource funds and managed accounts. The directors noted that the effective advisory fee rate for the RiverSource funds in the same Lipper category as the Fund were lower than the proposed advisory fee rate for the Fund, and that the RiverSource equity fund fee rates are generally subject to adjustments based on investment performance whereas the proposed fee rate for the Fund, consistent with those in the Seligman Management Agreement, do not reflect performance adjustments. The directors recognized that it is difficult to make comparisons of advisory and management fees because there are variations in the services that are included in the fees paid by other funds. The directors compared the Fund's proposed advisory fee rate to the rate paid by other funds in its Lipper category (the "peer group"). In considering the proposed advisory fee rate, the directors noted that the management fee rate under the Seligman Management Agreement covers administrative services provided by Seligman, whereas the Proposed Advisory Agreement does not include such services, but that Ameriprise will provide such services to the Fund pursuant to a separate administrative services agreement initially without a fee. The directors further considered that the administrative fees, since they are not included in an advisory agreement, could be increased without stockholder approval, although RiverSource noted that, at that time, it did not have an intention to seek an increase, and that any such administrative fee increase would require board approval. The directors also noted RiverSource's and 46 Matters Relating to the Directors' Consideration of the Approval of the Investment Management Services Agreement Ameriprise's covenants in the Transaction's stock purchase agreement regarding compliance with Section 15(f) of the 1940 Act. The directors noted that the management fee rate paid by a registered investment company managed by Seligman that is a "clone" of the Fund is lower than the rate paid by the Fund primarily for historical reasons. Seligman explained that the lower fee rate was largely the result of fee rate increases at the Fund that had not been sought for the "clone" portfolio. This was because, in view of the small size of the clone portfolio and the fact that, at various times, the Fund had been subsidized by Seligman, Seligman had determined not to recommend fee rate increases for the clone portfolio to match those recommended for the Fund. The directors also reviewed the Fund's total expense ratio as compared to the fees and expenses of funds within its peer group. In considering the expense ratios of the Fund, the directors noted that the Fund has elected to have shareholder services provided at cost by Seligman Data Corp. ("SDC"). SDC provides services exclusively to the Seligman Group of Funds, and the directors believed that the arrangement with SDC has provided the Fund and its shareholders with a consistently high level of service. The directors noted that RiverSource had previously indicated that no changes to the arrangements with SDC were being proposed at the time by RiverSource. The directors noted that they had concluded in their most recent continuance considerations regarding the Seligman Management Agreement that the management fee and total expense ratio were at an acceptable level in light of the quality of services provided to the Fund and in comparison to the Fund's peer group; that the advisory fee would not be increased and would stay the same for the Fund; that the total expense ratio had not changed since that determination; and that RiverSource had represented that the overall expenses for the Fund were not expected to be adversely affected by the Transaction. On that basis, the directors concluded that the total expense ratio and the proposed advisory fee for the Fund anticipated to result from the proposed arrangements with RiverSource was acceptable. ECONOMIES OF SCALE The directors noted that the management fee schedule for the Fund contains breakpoints that reduce the fee rate on assets above specified levels. The directors recognized that there is no direct relationship between the economies of scale realized by funds and those realized by their investment advisers as assets increase. The directors do not believe that there is a uniform methodology for establishing breakpoints that give effect to fund-specific economies of scale with respect to services provided by fund advisers. The directors also observed that in the investment company industry as a whole, as well as among funds similar to the Fund, there is no uniformity or pattern in the fees and asset levels at which breakpoints (if any) apply, and that the advisory agreements for many competitor funds do not have breakpoints at all. The directors noted that RiverSource had indicated that no changes to the Fund's breakpoint arrangements were proposed to be made at the time. Having taken these factors into account, the directors concluded that the Fund's breakpoint arrangements were acceptable under the Fund's circumstances. The directors also recognized that the Fund may benefit from certain economies of scale over time from becoming a part of the larger RiverSource fund complex, based on potential future synergies of operations. 47 Proxy Results Shareholders of Seligman Common Stock Fund, Inc. voted on two proposals at a Special Meeting of Stockholders held on November 3, 2008. Shareholders voted in favor of each of the proposals. The description of each proposal and number of shares voted are as follows: PROPOSAL 1 To consider and vote upon the proposed Investment Management Services Agreement with RiverSource Investments, LLC: <Table> <Caption> FOR AGAINST ABSTAIN --------------------------------------------------------------------- 8,963,650.766 400,673.139 305,851.343 --------------------------------------------------------------------- </Table> PROPOSAL 2 To elect ten directors to the Board: <Table> <Caption> FOR WITHHELD ------------------------------------------------------- Kathleen Blatz 10,629,944.599 503,263.649 ------------------------------------------------------- Arne H. Carlson 10,637,834.502 495,423.746 ------------------------------------------------------- Pamela G. Carlton 10,644,221.021 489,037.227 ------------------------------------------------------- Patricia M. Flynn 10,649,627.704 483,630.544 ------------------------------------------------------- Anne P. Jones 10,641,163.306 492,094.942 ------------------------------------------------------- Jeffrey Laikind 10,639,992.531 493,265.717 ------------------------------------------------------- Stephen R. Lewis, Jr. 10,647,976.488 485,281.760 ------------------------------------------------------- Catherine James Paglia 10,653,224.568 480,033.680 ------------------------------------------------------- Alison Taunton-Rigby 10,654,570.495 487,687.753 ------------------------------------------------------- William F. Truscott 10,649,864.613 483,393.635 ------------------------------------------------------- </Table> 48 Directors and Officers Shareholders elect a Board of Directors that oversees the Fund's operations. In connection with the acquisition of the Fund's prior investment manager, J. & W. Seligman & Co. Incorporated, by RiverSource Investments, LLC, shareholders of the Fund voted at a Special Meeting of Shareholders held on November 3, 2008 to elect 10 members to the Fund's Board. Messrs. Maher and Richie served on the Fund's Board prior to the acquisition and will continue to do so. Each member of the Board oversees 163 portfolios in the fund complex managed by RiverSource Investments, which includes 59 Seligman Funds and 104 RiverSource Funds. The address of each Director is 901 S. Marquette Ave., Minneapolis, MN 55402. Independent Directors <Table> <Caption> PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, (AGE), POSITION(S) YEARS, DIRECTORSHIPS AND OTHER HELD WITH FUND INFORMATION - ------------------------------------------------------------------------ KATHLEEN BLATZ (54)(1,2,6,7) Attorney. Formerly, Chief Justice, Minnesota Supreme Court, 1998-2006. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ ARNE H. CARLSON Formerly, Chairman, RiverSource Funds, (74)(1,2,3,5,6) 1999-2006; Governor of Minnesota. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ PAMELA G. CARLTON (54)(4,6,7) President, Springboard -- Partners in Cross Cultural Leadership (consulting - - Director: From company). November 7, 2008 - ------------------------------------------------------------------------ PATRICIA M. FLYNN (58)(1,3,6) Trustee Professor of Economics and Management, Bentley College. Formerly, - - Director: From Dean, McCallum Graduate School of November 7, 2008 Business, Bentley College. - ------------------------------------------------------------------------ ANNE P. JONES (73)(1,2,6,7) Attorney and Consultant. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ JEFFREY LAIKIND, CFA Director, American Progressive (73)(4,6,7) Insurance. Formerly, Managing Director, Shikiar Asset Management. - - Director: From November 7, 2008 - ------------------------------------------------------------------------ STEPHEN R. LEWIS, JR. President Emeritus and Professor of (69)(1,2,3,4,6) Economics, Carleton College; Director, Valmont Industries, Inc. (manufactures - - Director and Chairman of the irrigation systems). Board: From November 7, 2008 - ------------------------------------------------------------------------ JOHN F. MAHER (64)(4,6,7) Retired President and Chief Executive Officer, and former Director, Great - - Director: December 2006 Western Financial Corporation (bank to Date holding company) and its principal subsidiary, Great Western Bank (a federal savings bank). - ------------------------------------------------------------------------ </Table> - ------- See footnotes on page 50. 49 Directors and Officers Independent Directors (continued) <Table> <Caption> PRINCIPAL OCCUPATION(S) DURING PAST FIVE NAME, (AGE), POSITION(S) YEARS, DIRECTORSHIPS AND OTHER HELD WITH FUND INFORMATION - ------------------------------------------------------------------------ CATHERINE JAMES PAGLIA Director, Enterprise Asset Management, (56)(2,3,4,5,6) Inc. (private real estate and asset management company). - - Director: From November 7, 2008 - ------------------------------------------------------------------------ LEROY C. RICHIE (66)(3,4,6) Counsel, Lewis & Munday, P.C. (law firm); Director, Vibration Control - - Director: 2000 to Date Technologies, LLC (auto vibration technology); Lead Outside Director, Digital Ally Inc. (digital imaging) and Infinity, Inc. (oil and gas exploration and production); Director and Chairman, Highland Park Michigan Economic Development Corp.; and Chairman, Detroit Public Schools Foundation; Director, OGE Energy Corp. (energy and energy services provider). Formerly, Chairman and Chief Executive Officer, Q Standards Worldwide, Inc. (library of technical standards); Director, Kerr-McGee Corporation (diversified energy and chemical company); Trustee, New York University Law Center Foundation; and Vice Chairman, Detroit Medical Center and Detroit Economic Growth Corp. - ------------------------------------------------------------------------ ALISON TAUNTON-RIGBY Chief Executive Officer and Director, (64)(3,4,5,6) RiboNovix, Inc. since 2003 (biotechnology); Director, Idera - - Director: From Pharmaceutical, Inc. (biotechnology); November 7, 2008 Healthways, Inc. (health management programs). Formerly, President, Forester Biotech. - ------------------------------------------------------------------------ Interested Director* - ------------------------------------------------------------------------ WILLIAM F. TRUSCOTT President-US Asset Management and Chief (48)*(6) Investment Officer, Ameriprise Financial, Inc. and President, Chairman - - Director and Vice President: of the Board, and Chief Investment From November 7, 2008 Officer, RiverSource Investments, LLC; Director, President and Chief Executive Officer, Ameriprise Certificate Company; and Chairman of the Board, Chief Executive Officer, and President, RiverSource Distributors, Inc. Formerly, Senior Vice President-Chief Investment Officer, Ameriprise Financial, Inc.; and Chairman of the Board and Chief Investment Officer, RiverSource Investments, LLC, 2001-2005. - ------------------------------------------------------------------------ </Table> - ------- * Mr. Truscott is considered an "interested person" of the Fund, as defined in the Investment Company Act of 1940, as amended, by virtue of his position with Ameriprise Financial, Inc. and its affiliates. <Table> Member: Board Governance Committee 5 Executive Committee 2 Compliance Committee 6 Investment Review Committee 3 Contracts Committee 7 Joint Audit Committee 4 Distribution Committee </Table> 50 Directors and Officers Fund Officers The Board appoints officers who are responsible for day-to-day business decisions based on policies it has established. The officers serve at the pleasure of the Board. In addition to Mr. Truscott, who is a Director and Vice President of the Fund, the Fund's other officers are: <Table> <Caption> NAME, (AGE), POSITION(S) HELD WITH PRINCIPAL OCCUPATION(S) DURING PAST FIVE FUND, ADDRESS YEARS - ------------------------------------------------------------------------ PATRICK T. BANNIGAN (43) Director and Senior Vice President -- Asset Management, Products - - President: and Marketing, RiverSource Investments, From November 7, 2008 LLC; Director and Vice - - 172 Ameriprise Financial President -- Asset Management, Products Center Minneapolis, MN 55474 and Marketing, RiverSource Distributors, Inc. Formerly, Managing Director and Global Head of Product, Morgan Stanley Investment Management, 2004-2006; President, Touchstone Investments, 2002- 2004. - ------------------------------------------------------------------------ MICHELLE M. KEELEY (44) Executive Vice President -- Equity and Fixed Income, Ameriprise Financial, Inc. - - Vice President: and RiverSource Investments, LLC; Vice From November 7, 2008 President -- Investments, Ameriprise - - 172 Ameriprise Financial Certificate Company. Formerly, Senior Center Minneapolis, MN 55474 Vice President -- Fixed Income, Ameriprise Financial, Inc., 2002-2006 and RiverSource Investments, LLC, 2004- 2006. - ------------------------------------------------------------------------ AMY K. JOHNSON (43) Vice President -- Asset Management and Trust Company Services, RiverSource - - Vice President: Investments, LLC. Formerly, Vice From November 7, 2008 President -- Operations and Compliance, - - 5228 Ameriprise Financial RiverSource Investments, LLC, 2004-2006; Center Minneapolis, MN 55474 Director of Product Development -- Mutual Funds, Ameriprise Financial, Inc., 2001-2004. - ------------------------------------------------------------------------ SCOTT R. PLUMMER (49) Vice President and Chief Counsel -- Asset Management, Ameriprise - - Vice President, General Financial, Inc.; Chief Counsel, Counsel and Secretary: RiverSource Distributors, Inc. and Chief From November 7, 2008 Legal Officer and Assistant Secretary, - - 5228 Ameriprise Financial RiverSource Investments, LLC; Vice Center Minneapolis, MN 55474 President, General Counsel, and Secretary, Ameriprise Certificate Company. Formerly, Vice President -- Asset Management Compliance, Ameriprise Financial, Inc., 2004-2005; Senior Vice President and Chief Compliance Officer, USBancorp Asset Management, 2002-2004. - ------------------------------------------------------------------------ LAWRENCE P. VOGEL (52) Treasurer of each of the investment companies of the Seligman Group of Funds - - Treasurer: since 2000; and Treasurer, Seligman Data 2000 to Date Corp. since 2000. Formerly, Senior Vice - - 100 Park Avenue President, J. & W. Seligman & Co. New York, NY 10017 Incorporated and Vice President of each of the investment companies of the Seligman Group of Funds, 1992-2008. - ------------------------------------------------------------------------ ELEANOR T.M. HOAGLAND (56) Chief Compliance Officer, RiverSource Investments, LLC (J. & W. Seligman & Co. - - Chief Compliance Officer: Incorporated prior to November 7, 2008), 2004 to Date of each of the investment companies of - - Money Laundering Prevention the Seligman Group of Funds since 2004; Officer and Identity Theft Money Laundering Prevention Officer and Prevention Officer: From Identity Theft Prevention Officer, November 7, 2008 RiverSource Investments, LLC for each of - - 100 Park Avenue the investment companies of the Seligman New York, NY 10017 Group of Funds since November 7, 2008. Formerly, Managing Director, J. & W. Seligman & Co. Incorporated and Vice President of each of the investment companies of the Seligman Group of Funds, 2004-2008. - ------------------------------------------------------------------------ </Table> The Fund's Statement of Additional Information (SAI) includes additional information about Fund directors and is available, without charge, upon request. You may call toll-free (800) 221-2450 in the US or call collect (212) 682-7600 outside the US to request a copy of the SAI, to request other information about the Fund, or to make shareholder inquiries. 51 Required Federal Income Tax Information (unaudited) Dividends paid for the year ended December 31, 2008, other than qualified dividend income, are subject to federal income tax as "ordinary income." In order to claim the dividends received deduction for these distributions, corporate shareholders must have held their shares for 46 days or more during the 90-day period beginning 45 days before each ex-dividend date. Under the Internal Revenue Code, the dividends paid to corporate shareholders that qualify for the dividends received deduction were as follows: <Table> <Caption> - ------------------------------------------------------------------------ DIVIDENDS RECEIVED DEDUCTION PERCENT - ------------------------------------------------------------------------ Class A 72.62% - ------------------------------------------------------------------------ Class B 100.00 - ------------------------------------------------------------------------ Class C 95.53 - ------------------------------------------------------------------------ Class D 100.00 - ------------------------------------------------------------------------ Class I 62.04 - ------------------------------------------------------------------------ Class R 88.45 - ------------------------------------------------------------------------ </Table> For the year ended December 31, 2008, the Fund designates the following as qualified dividends to individual shareholders: <Table> <Caption> - ------------------------------------------------------------------------- QUALIFIED DIVIDENDS PERCENT - ------------------------------------------------------------------------- Class A 72.46% - ------------------------------------------------------------------------- Class B 100.00 - ------------------------------------------------------------------------- Class C 95.32 - ------------------------------------------------------------------------- Class D 100.00 - ------------------------------------------------------------------------- Class I 61.90 - ------------------------------------------------------------------------- Class R 88.25 - ------------------------------------------------------------------------- </Table> In order for an individual to claim dividends received as qualified dividends, individual shareholders must have held their shares for more than 60 days during the 121-day period beginning 60 days before each ex-dividend rate. 52 Additional Fund Information FUND SYMBOLS Class A: SCSFX Class B: SBCSX Class C: SCKCX Class R: SCSRX MANAGER From November 7, 2008 RiverSource Investments, LLC 200 Ameriprise Financial Center Minneapolis, MN 55474 Until November 6, 2008 J. & W. Seligman & Co. Incorporated 100 Park Avenue New York, NY 10017 GENERAL DISTRIBUTOR RiverSource Fund Distributors, Inc. (formerly Seligman Advisors, Inc.) 100 Park Avenue New York, NY 10017 SHAREHOLDER SERVICE AGENT Seligman Data Corp. 100 Park Avenue New York, NY 10017 Mail inquiries to: P.O. Box 9759 Providence, RI 02940-9759 INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM Deloitte & Touche LLP IMPORTANT TELEPHONE NUMBERS (800) 221-2450 Shareholder Services (800) 445-1777 Retirement Plan Services (212) 682-7600 Outside the United States (800) 622-4597 24-Hour Automated Telephone Access Service - -------------------------------------------------------------------------------- QUARTERLY SCHEDULE OF INVESTMENTS A complete schedule of portfolio holdings owned by the Fund will be filed with the SEC for the first and third quarters of each fiscal year on Form N-Q, and will be available to shareholders (i) without charge, upon request, by calling toll-free (800) 221-2450 in the US or collect (212) 682-7600 outside the US or (ii) on the SEC's website at WWW.SEC.GOV.(1) In addition, the Form N-Q may be reviewed and copied at the SEC's Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330. Certain of the information contained on the Fund's Form N-Q is also made available to shareholders on Seligman's website at WWW.SELIGMAN.COM.(1) PROXY VOTING A description of the policies and procedures used by the Fund to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities during the 12-month period ended June 30 of each year will be 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.(1) Information for each new 12-month period ending June 30 will be available no later than August 31 of that year. - ------- (1) These website references are inactive textual references and information contained in or otherwise accessible through these websites does not form a part of this report or the Fund's prospectuses or statement of additional information. 53 [This Page Intentionally Left Blank] LOGO This report is intended only for the information of shareholders or those who have received the offering prospectus covering shares of Capital Stock of Seligman Common Stock Fund, Inc., which contains information about the investment objectives, risks, charges, and expenses of the Fund, each of which should be considered carefully before investing or sending money. EQCS2 12/08