Fourth Quarter 2009 Fund Update

Seligman Communications and Information Fund (the Fund) Class A shares gained 8.81% (excluding sales charge) for the three months ended Dec. 31, 2009. The Fund underperformed its benchmark, the S&P North American Technology Sector Index (S&P NATS Index), which rose 10.61% during the period. The Fund outperformed its peer group, measured by the Lipper Science & Technology Funds Index, which increased 7.83% for the same period.

The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information shown. To obtain performance information current to the most recent 
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Environment

Looking back, the technology industry was not as adversely affected by the economic malaise as many had expected. One reason is that business spending on software proved to be fairly resilient, in part because so many software-driven business processes are mission critical. Also, many software licenses require ongoing maintenance payments, which generate valuable recurring revenue. This helped the Fund, which has had a large concentration in software companies for some time.

Other tech market elements ended somewhat stronger than expected as well. PC units worldwide were off 8% in 2009. Mobile phones units are estimated to have fallen a less-than-expected 5%. Overall IT spending was off somewhere in the neighborhood of 8% or 9%. Not good numbers, but not a cataclysmic decline.

Now that the economy is stabilizing, we expect companies will step up investments in technology. Among corporations, there is evidence of considerable pent up demand. On the consumer side, demand is firming for PCs and mobile phones. PC demand has shifted to emerging economies, where markets held up better economically than Europe and the United States and penetration rates remain low. The ongoing move to smart phones with greater functionality and features is fueling mobile phone sales and accelerating replacement cycles.

The electronics area has been a significant beneficiary of the improving environment in PCs and mobile phones. Inventories were rebuilt throughout the electronics industry supply chain and the capital spending environment has improved dramatically in response to the better fundamentals and the improved balance sheets of chip companies. We have also seen a great improvement in pricing for commodity semiconductors, especially DRAM memory chips and band flash chips.

The Fund’s largest weighting and greatest contributor to performance during the fourth quarter (and overall in 2009) was software. Top software holdings Synopsys, Check Point Software Technologies, Symantec, and BMC each contributed meaningfully to the Fund's performance. Microsoft, another top software holding, shows a lot of promise for 2010. The introduction of Windows 7 operating system, Windows 2010 server and Microsoft Office 2010 represent Microsoft’s biggest new product refresh cycle in a decade. At the same time, Microsoft has a new collaboration with a major Internet search engine, which should finally get their Internet search business to break even. They have also been cutting expenses and getting serious again about repurchasing stock.

The Fund also benefited from a number of computer hardware and storage companies, in particular Apple, which we added at a very favorable cost basis, and a prominent data management and storage company that we held a large position in for most of the year. While we did not have much of presence communications equipment during the year, the few stocks we did own contributed positively. As a group, our medical technology holdings also contributed nicely to fourth quarter returns.

While the majority of the Fund’s holdings performed well, we did miss some opportunities amid the broad technology rally. Overall, our underweight to semiconductors hurt us, but we made some of it up with good stock selection. Commodity semiconductor companies, however, were among the top performing semiconductor companies in 2009 and we had no involvement in that industry. We had very little exposure in semiconductor capital equipment at the beginning of 2009, but by year-end we had built positions in a few stocks we like in that space. We had very little exposure to contract manufacturing services, an area in which many companies came back strongly. The Fund was also late to invest and only modestly involved in disk drive stocks, which were also extremely strong performers. Another area we missed was travel related Internet sites and we missed out on gains enjoyed by some Internet retailers. Internet software and services was the largest overall area of detraction for the Fund’s results versus the S&P NATS Index during the quarter.

For the most part, these are areas in which we are typically underweight. The Fund’s strongest stock performance in technology during the quarter came out of semiconductors, to which we had very little exposure. That the Fund still posted strong results highlights the value of our bottom-up investment process and considerable research capabilities.

Outlook

Generally speaking, we are fairly positive about the outlook for the industry as well as the potential for good investment performance in the sector over the long term. It appears that global enterprise budgets for 2010 may grow around 4% to 5%, which we feel may prove to be a conservative estimate. One focus of pent up demand is storage and servers, so data center equipment is an area we will be watching. We are anticipating good results from the data center-centric companies in our portfolio in 2010.

Now that the recovery is showing some legs and things appear to have stabilized, we believe companies are in all likelihood going to start deploying some of the software projects that they had put on hold. There are still a lot of technology companies with healthy cash balances, which should enable U.S. technology companies to engage in further merger and acquisition activity in 2010. We believe we will also likely see an increase in share repurchase activity as companies gain more confidence in the economy.