N-CSRS 1 c52495nvcsrs.txt N-CSRS UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM N-CSR CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES Investment Company Act File Number 811-05221 SELIGMAN PORTFOLIOS, INC. (Exact name of registrant as specified in charter) 50606 Ameriprise Financial Center, Minneapolis, Minnesota 55474 (Address of principal executive offices) (Zip code) Scott R. Plummer - 5228 Ameriprise Financial Center, Minneapolis, MN 55474 (Name and address of agent for service) Registrant's telephone number, including area code: (612) 671-1947 Date of fiscal year end: 12/31 Date of reporting period: 6/30 Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN COMMON STOCK PORTFOLIO SELIGMAN COMMON STOCK PORTFOLIO SEEKS TOTAL RETURN THROUGH A COMBINATION OF CAPITAL APPRECIATION AND CURRENT INCOME. Seligman Common Stock Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 Statement of Assets and Liabilities...................... 14 Statement of Operations............ 15 Statements of Changes in Net Assets........................... 16 Financial Highlights............... 17 Notes to Financial Statements...... 18 Proxy Voting....................... 30 Change in Independent Registered Public Accounting Firm........... 31
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Common Stock Portfolio shares lost 0.96% for the six-month period ended June 30, 2009. > The Fund underperformed its benchmark, the Standard & Poor's 500 Index, which rose 3.16% during the same six-month period. > The Fund also underperformed its peer group, as represented by the Lipper Large-Cap Core Funds Average, which rose 4.83% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------- Seligman Common Stock Portfolio -0.96% -36.79% -14.85% -7.15% -6.13% --------------------------------------------------------------------------- S&P 500 Index(1) (unmanaged) +3.16% -26.21% -8.22% -2.24% -2.22% --------------------------------------------------------------------------- Lipper Large-Cap Core Funds Average(2) +4.83% -25.92% -8.14% -2.21% -1.82% ---------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the index does not reflect the effect of expenses. It is not possible to invest directly in an average or index. (1) The Standard & Poor's 500 Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Large-Cap Core Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper's U.S. Diversified large-cap floor. Large-cap core funds have more latitude in the companies in which they invest. These funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P 500 Index. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Consumer Discretionary 12.0% ------------------------------------------------ Consumer Staples 11.5% ------------------------------------------------ Energy 13.2% ------------------------------------------------ Financials 19.6% ------------------------------------------------ Health Care 19.2% ------------------------------------------------ Industrials 4.4% ------------------------------------------------ Information Technology 12.0% ------------------------------------------------ Materials 1.8% ------------------------------------------------ Telecommunication Services 2.0% ------------------------------------------------ Utilities 2.7% ------------------------------------------------ Other(2) 1.6% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Chevron 5.9% ------------------------------------------------ Johnson & Johnson 4.8% ------------------------------------------------ Pfizer 4.6% ------------------------------------------------ Bank of America 4.1% ------------------------------------------------ Procter & Gamble 3.9% ------------------------------------------------ McDonald's 3.7% ------------------------------------------------ Home Depot 3.6% ------------------------------------------------ IBM 3.4% ------------------------------------------------ Amgen 2.7% ------------------------------------------------ Cisco Systems 2.6% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 990.40 $7.01(c) 1.42% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.75 $7.10(c) 1.42% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return of -0.96% for the six months ended June 30, 2009. (c) RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 1.26%. Any amounts waived will not be reimbursed by the Fund. This change was effective May 11, 2009. Had this change been in place for the entire six month period ended June 30, 2009, the actual expenses paid would have been $6.22 for Class 1; the hypothetical expenses paid would have been $6.31 for Class 1. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (98.8%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (1.0%) General Dynamics 322 $17,835 Northrop Grumman 145 6,624 --------------- Total 24,459 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (0.5%) FedEx 213 11,847 ------------------------------------------------------------------------------------- BEVERAGES (3.2%) Coca-Cola 1,224 58,739 PepsiCo 334 18,357 --------------- Total 77,096 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (3.2%) Amgen 1,227(b) 64,957 Biogen Idec 110(b) 4,967 Cephalon 113(b) 6,401 --------------- Total 76,325 ------------------------------------------------------------------------------------- CAPITAL MARKETS (2.6%) Charles Schwab 518 9,086 Goldman Sachs Group 84 12,385 Morgan Stanley 1,159 33,043 State Street 154 7,269 --------------- Total 61,783 ------------------------------------------------------------------------------------- CHEMICALS (0.9%) Dow Chemical 1,341 21,644 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.3%) BB&T 312 6,858 PNC Financial Services Group 465 18,047 SunTrust Banks 469 7,715 Wells Fargo & Co 1,909 46,312 --------------- Total 78,932 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.3%) Cisco Systems 3,344(b) 62,331 Corning 561 9,010 QUALCOMM 713 32,228 --------------- Total 103,569 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (5.3%) Dell 1,973(b) 27,089 Hewlett-Packard 343 13,257 IBM 785 81,970 Lexmark Intl Cl A 281(b) 4,454 --------------- Total 126,770 ------------------------------------------------------------------------------------- CONSUMER FINANCE (0.5%) Capital One Financial 500 10,940 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.4%) Apollo Group Cl A 126(b) 8,961 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (6.7%) Bank of America 7,577 100,015 Citigroup 8,312 24,687 JPMorgan Chase & Co 1,053 35,918 --------------- Total 160,620 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.8%) Embarq 96 4,038 Verizon Communications 1,267 38,935 --------------- Total 42,973 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.4%) Progress Energy 263 9,949 Southern 742 23,121 --------------- Total 33,070 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.3%) Emerson Electric 204 6,610 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.4%) Tyco Electronics 538(c) 10,001 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ENERGY EQUIPMENT & SERVICES (1.6%) Baker Hughes 323 $11,770 ENSCO Intl 245 8,543 Halliburton 250 5,175 Natl Oilwell Varco 389(b) 12,705 --------------- Total 38,193 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.0%) Walgreen 264 7,762 Wal-Mart Stores 825 39,963 --------------- Total 47,725 ------------------------------------------------------------------------------------- FOOD PRODUCTS (1.1%) Archer-Daniels-Midland 331 8,861 General Mills 197 11,035 Sara Lee 685 6,686 --------------- Total 26,582 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.7%) Cardinal Health 176 5,377 CIGNA 447 10,768 DaVita 100(b) 4,946 McKesson 122 5,368 Quest Diagnostics 231 13,035 UnitedHealth Group 976 24,381 --------------- Total 63,875 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (3.9%) McDonald's 1,573 90,432 Starbucks 281(b) 3,903 --------------- Total 94,335 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (5.0%) Clorox 180 10,049 Colgate-Palmolive 231 16,341 Procter & Gamble 1,825 93,258 --------------- Total 119,648 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (1.7%) General Electric 2,855 33,460 Tyco Intl 267(c) 6,937 --------------- Total 40,397 ------------------------------------------------------------------------------------- INSURANCE (6.1%) AFLAC 281 8,736 Allstate 1,474 35,966 Aon 302 11,437 Chubb 194 7,737 MetLife 552 16,566 Principal Financial Group 476 8,968 Progressive 913(b) 13,795 Prudential Financial 234 8,709 Torchmark 134 4,963 Travelers Companies 703 28,851 --------------- Total 145,728 ------------------------------------------------------------------------------------- IT SERVICES (1.1%) Affiliated Computer Services Cl A 87(b) 3,865 Automatic Data Processing 283 10,029 Computer Sciences 196(b) 8,683 Paychex 176 4,435 --------------- Total 27,012 ------------------------------------------------------------------------------------- MACHINERY (0.9%) Illinois Tool Works 207 7,729 Ingersoll-Rand 714(c) 14,923 --------------- Total 22,652 ------------------------------------------------------------------------------------- MEDIA (0.5%) CBS Cl B 921 6,373 DIRECTV Group 258(b) 6,376 --------------- Total 12,749 ------------------------------------------------------------------------------------- METALS & MINING (0.9%) Alcoa 476 4,917 Nucor 140 6,220 United States Steel 317 11,330 --------------- Total 22,467 ------------------------------------------------------------------------------------- MULTILINE RETAIL (0.8%) Family Dollar Stores 303 8,575 Kohl's 236(b) 10,089 --------------- Total 18,664 ------------------------------------------------------------------------------------- MULTI-UTILITIES (1.3%) Consolidated Edison 262 9,804 PG&E 430 16,529 Xcel Energy 309 5,689 --------------- Total 32,022 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) OIL, GAS & CONSUMABLE FUELS (11.6%) Chevron 2,155 $142,768 ConocoPhillips 894 37,602 Hess 224 12,040 Marathon Oil 754 22,718 Murphy Oil 181 9,832 Occidental Petroleum 694 45,671 Valero Energy 586 9,898 --------------- Total 280,529 ------------------------------------------------------------------------------------- PHARMACEUTICALS (13.4%) Forest Laboratories 352(b) 8,839 Johnson & Johnson 2,040 115,871 Merck & Co 1,472 41,157 Pfizer 7,483 112,245 Schering-Plough 1,224 30,747 Wyeth 331 15,024 --------------- Total 323,883 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.2%) MEMC Electronic Materials 250(b) 4,453 ------------------------------------------------------------------------------------- SOFTWARE (0.8%) Intuit 490(b) 13,799 Symantec 352(b) 5,477 --------------- Total 19,276 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (6.3%) Bed Bath & Beyond 159(b) 4,889 Best Buy 287 9,612 Gap 624 10,234 Home Depot 3,703 87,502 Lowe's Companies 883 17,139 O'Reilly Automotive 230(b) 8,758 Sherwin-Williams 233 12,524 --------------- Total 150,658 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.2%) Coach 190 5,107 ------------------------------------------------------------------------------------- THRIFTS & MORTGAGE FINANCE (0.4%) People's United Financial 567 8,528 ------------------------------------------------------------------------------------- TOBACCO (0.3%) Lorillard 114 7,726 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (0.2%) Sprint Nextel 1,247(b) 5,998 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,550,302) $2,373,807 -------------------------------------------------------------------------------------
BONDS (0.3%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BROKERAGE Lehman Brothers Holdings Equity-Linked Notes (ELNs) Sr Unsecured 09-14-08 53.31% $330(b,d,e) $3,522 10-02-08 39.50 330(b,d,e) 4,362 --------------- Total 7,884 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $66,000) $7,884 -------------------------------------------------------------------------------------
MONEY MARKET FUND (1.5%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 37,199(f) $37,199 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $37,199) $37,199 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,653,501)(g) $2,418,890 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the value of foreign securities represented 1.3% of net assets. (d) This position is in bankruptcy. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) Identifies issues considered to be illiquid as to their marketability (see Note 2 to the financial statements). The aggregate value of such securities at June 30, 2009, was $7,884 representing 0.3% of net assets. Information concerning such security holdings at June 30, 2009, is as follows:
ACQUISITION SECURITY DATES COST ---------------------------------------------------------------- Lehman Brothers Holdings Equity-Linked Notes (ELNs) 53.31% 2008 03-07-08 $33,000 39.50% 2008 03-26-08 33,000
(f) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (g) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $2,654,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $140,000 Unrealized depreciation (375,000) ---------------------------------------------------------- Net unrealized depreciation $(235,000) ----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 -------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Equity Securities Common Stocks $2,373,807(a) $-- $-- $2,373,807 ----------------------------------------------------------------------------------- Total Equity Securities 2,373,807 -- -- 2,373,807 ----------------------------------------------------------------------------------- Bonds Corporate Debt Securities -- 7,884 -- 7,884 ----------------------------------------------------------------------------------- Total Bonds -- 7,884 -- 7,884 ----------------------------------------------------------------------------------- Other Affiliated Money Market Fund 37,199(b) -- -- 37,199 ----------------------------------------------------------------------------------- Total Other 37,199 -- -- 37,199 ----------------------------------------------------------------------------------- Total $2,411,006 $7,884 $-- $2,418,890 -----------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $2,616,302) $ 2,381,691 Affiliated money market fund (identified cost $37,199) 37,199 ------------------------------------------------------------------------------ Total investments in securities (identified cost $2,653,501) 2,418,890 Dividends and accrued interest receivable 2,751 ------------------------------------------------------------------------------ Total assets 2,421,641 ------------------------------------------------------------------------------ LIABILITIES Accrued investment management services fees 763 Accrued transfer agency fees 129 Accrued administrative services fees 129 Other accrued expenses 17,024 ------------------------------------------------------------------------------ Total liabilities 18,045 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 2,403,596 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.001 par value $ 390 Additional paid-in capital 6,052,330 Undistributed net investment income 118,681 Accumulated net realized gain (loss) (3,533,194) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (234,611) ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 2,403,596 ------------------------------------------------------------------------------ Shares outstanding 389,582 ------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 6.17 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 32,464 Interest 1,929 Income distributions from affiliated money market fund 10 ---------------------------------------------------------------------------- Total income 34,403 ---------------------------------------------------------------------------- Expenses: Investment management services fees 4,478 Transfer agency fees 212 Administrative services fees 212 Compensation of board members 38 Custodian fees 2,879 Printing and postage 1,629 Professional fees 6,667 Other 469 ---------------------------------------------------------------------------- Total expenses 16,584 Expenses waived/reimbursed by the Investment Manager and its affiliates (162) ---------------------------------------------------------------------------- Total net expenses 16,422 ---------------------------------------------------------------------------- Investment income (loss) -- net 17,981 ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET ---------------------------------------------------------------------------- Net realized gain (loss) on security transactions (187,760) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 121,812 ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (65,948) ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (47,967) ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 17,981 $ 101,862 Net realized gain (loss) on investments (187,760) (2,445,408) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 121,812 27,510 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (47,967) (2,316,036) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income -- (186,201) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 16,431 130,290 Net asset value of shares issued for reinvestment of distributions -- 186,201 Payments for redemptions of shares (211,985) (866,634) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (195,554) (550,143) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (243,521) (3,052,380) Net assets at beginning of period 2,647,117 5,699,497 --------------------------------------------------------------------------------------------- Net assets at end of period $2,403,596 $ 2,647,117 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 118,681 $ 100,700 ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED DEC. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $6.23 $12.19 $12.56 $10.87 $10.84 $9.72 ------------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) .15 .24 .34 .14 .10 .13 Net gains (losses) (both realized and unrealized) (.21) (5.73) (.54) 1.70 .12 1.10 ------------------------------------------------------------------------------------------------------------------ Total from investment operations (.06) (5.49) (.20) 1.84 .22 1.23 ------------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income -- (.47) (.17) (.15) (.19) (.11) ------------------------------------------------------------------------------------------------------------------ Net asset value, end of period $6.17 $6.23 $12.19 $12.56 $10.87 $10.84 ------------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $6 $8 $8 $11 ------------------------------------------------------------------------------------------------------------------ Gross expenses prior to expense waiver/reimbursement(c) 1.43%(d) 1.26% 1.12% .90% .86% .69% ------------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(c),(e) 1.42%(d) 1.26% 1.12% .90% .86% .69% ------------------------------------------------------------------------------------------------------------------ Net investment income (loss) 1.55%(d) 2.45% 2.64% 1.14% .95% 1.30% ------------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 44% 131% 117% 96% 70% 43% ------------------------------------------------------------------------------------------------------------------ Total return(f) (.96%)(g) (45.07%) (1.60%) 16.92% 2.03% 12.65% ------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized. (h) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Common Stock Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund usually invests in the common stock of larger U.S. companies (e.g. companies with market capitalizations over $3 billion at the time of investment); however, it may invest in companies of any size. The Fund may also invest in fixed-income securities and cash equivalents. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net assets value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- ILLIQUID SECURITIES At June 30, 2009, investments in securities included issues that are illiquid which the Fund currently limits to 15% of net assets, at market value, at the time of purchase. The aggregate value of such securities at June 30, 2009 was $7,884 representing 0.33% of net assets. Certain illiquid securities may be valued by management at fair value according to procedures approved, in good faith, by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. OPTION TRANSACTIONS The Fund may buy and write options traded on any U.S. or foreign exchange, or in the over-the-counter (OTC) market to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments. The Fund may also buy and sell put and call options, write covered call options on portfolio securities and write cash-secured put options. Options are contracts which entitle the holder to purchase or sell securities or other financial instruments at a specified price, or in the case of index options, to receive or pay the difference between the index value and the strike price of the index option. Completion of options traded in the OTC market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain OTC options trades. Cash collateral held by the Fund for such option trades must be returned to the counterparty or the Fund upon closure, exercise or expiration of the contract. Option contracts purchased are recorded as investments and options contracts written are recorded as liabilities of the Fund. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- loss when the option transaction expires or is exercised. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The Fund's maximum payout in the case of written put option contracts represents the maximum potential amount of future payments (undiscounted) that the Fund could be required to make as a guarantor for written put options. For OTC option contracts, the transaction is also subject to counterparty credit risk. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained upon the exercise of the put options by holders of the option contracts or proceeds received upon entering into the contracts. At June 30, 2009, the Fund had no outstanding written or purchased option contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2009 At June 30, 2009, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009 AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME --------------------------------------------------------------------------------
RISK EXPOSURE CATEGORY OPTIONS --------------------------------------------------------------------------- Equity contracts $(31,478) --------------------------------------------------------------------------- Total $(31,478) ---------------------------------------------------------------------------
-------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME --------------------------------------------------------------------------------
RISK EXPOSURE CATEGORY OPTIONS -------------------------------------------------------------------------- Equity contracts $30,878 -------------------------------------------------------------------------- Total $30,878 --------------------------------------------------------------------------
4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.40% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.39% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's net assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $11. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the period from May 11, 2009 through June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 1.42% of the Fund's average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.26% of the Fund's average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $1,017,232 and $1,195,104, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 ---------------------------------------------------------------------- Sold 2,710 12,217 Reinvested distributions -- 29,603 Redeemed (38,034) (84,322) ---------------------------------------------------------------------- Net increase (decrease) (35,324) (42,502) ----------------------------------------------------------------------
7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $84,741 and $47,542, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, re- characterization of REIT distributions, post-October losses, and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $1,519,433 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2010 2011 2016 $519,960 $366,561 $632,912
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $1,816,483 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMON STOCK PORTFOLIO -- 2009 SEMIANNUAL REPORT 31 SELIGMAN COMMON STOCK PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9966 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO SELIGMAN INTERNATIONAL GROWTH PORTFOLIO SEEKS LONG- TERM CAPITAL APPRECIATION. Seligman International Growth Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 16 Statement of Operations............ 17 Statements of Changes in Net Assets........................... 18 Financial Highlights............... 19 Notes to Financial Statements...... 20 Proxy Voting....................... 32 Change in Independent Registered Public Accounting Firm........... 33 Results of Meeting of Shareholders..................... 33
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman International Growth Portfolio shares gained 3.99% for the six-month period ended June 30, 2009. > The Fund underperformed its benchmark, the MSCI EAFE Growth Index, which gained 6.73% during the same six-month period. > The Fund also underperformed its peer group, as represented by the Lipper International Multi-Cap Funds Average, which rose 14.67% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- Seligman International Growth Portfolio +3.99% -45.15% -14.49% -4.76% -4.94% ------------------------------------------------------------------------- MSCI EAFE Growth Index(1) (unmanaged) +6.73% -33.36% -7.03% +2.55% -0.27% ------------------------------------------------------------------------- MSCI EAFE Index(2) (unmanaged) +8.42% -30.96% -7.51% +2.79% +1.59% ------------------------------------------------------------------------- Lipper International Multi-Cap Growth Funds Average(3) +14.67% -32.86% -7.30% +2.07% +1.59% -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses. It is not possible to invest directly in an average or index. (1) The Morgan Stanley Capital International (MSCI) EAFE Growth Index, an unmanaged index, is compiled from a composite of securities markets in Europe, Australasia and the Far East. The -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- index represents the growth portion of the market capitalizations of each country index, determined by price/book value, from the standard MSCI country indices. The index covers the full range of developed, emerging and MSCI All Country indices, including Free indices where applicable. The Country Growth indices are aggregated into regional Growth indices to create the composite. The index reflects reinvestment of all distributions and changes in market prices. (2) The MSCI EAFE Index, an unmanaged index, is compiled from a composite of securities markets of Europe, Australasia and the Far East. The index is widely recognized by investors in foreign markets as the measurement index for portfolios of non-North American securities. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper International Multi-Cap Growth Funds Average is an average of funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time. Multi- cap funds typically have 25% to 75% of their assets invested in companies strictly outside of the US with market capitalizations (on a three-year weighted basis) greater than the 250th-largest company in the S&P/Citigroup World ex-US Broad Market Index (BMI). Multi-cap growth funds typically have an above-average price-to-cash flow ratio, price-to-book ratio, and three- year sales-per-share growth value compared to the S&P/Citigroup World ex-US BMI. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. COUNTRY DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Australia 1.0% ------------------------------------------------ Austria 0.4% ------------------------------------------------ Belgium 1.1% ------------------------------------------------ Brazil 2.1% ------------------------------------------------ Canada 4.1% ------------------------------------------------ China 4.7% ------------------------------------------------ Denmark 1.8% ------------------------------------------------ Finland 1.7% ------------------------------------------------ France 4.2% ------------------------------------------------ Germany 7.4% ------------------------------------------------ Hong Kong 1.6% ------------------------------------------------ India 0.7% ------------------------------------------------ Ireland 0.9% ------------------------------------------------ Israel 2.9% ------------------------------------------------ Japan 8.5% ------------------------------------------------ Luxembourg 2.4% ------------------------------------------------ Netherlands 8.8% ------------------------------------------------ Russia 1.8% ------------------------------------------------ South Africa 1.1% ------------------------------------------------ Spain 4.0% ------------------------------------------------ Sweden 1.5% ------------------------------------------------ Switzerland 13.8% ------------------------------------------------ Taiwan 1.0% ------------------------------------------------ United Kingdom 18.8% ------------------------------------------------ Other(2) 3.7% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Teva Pharmaceutical Inds ADR (Israel) 2.9% ------------------------------------------------ Nestle (Switzerland) 2.9% ------------------------------------------------ Koninklijke (Royal) KPN (Netherlands) 2.5% ------------------------------------------------ ArcelorMittal (Luxembourg) 2.4% ------------------------------------------------ British American Tobacco (United Kingdom) 2.2% ------------------------------------------------ Vodafone Group (United Kingdom) 2.1% ------------------------------------------------ Metro (Germany) 2.1% ------------------------------------------------ Credit Suisse Group (Switzerland) 2.1% ------------------------------------------------ Reckitt Benckiser Group (United Kingdom) 2.0% ------------------------------------------------ Roche Holding (Switzerland) 2.0% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. There are specific risks associated with global investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non- affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,039.90 $10.12 2.00% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.88 $ 9.99 2.00% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return of +3.99% for the six months ended June 30, 2009. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.4%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (1.0%) CSL 592 $15,303 ------------------------------------------------------------------------------------- AUSTRIA (0.4%) OMV 157 5,902 ------------------------------------------------------------------------------------- BELGIUM (1.1%) Hansen Transmissions Intl 6,518(b) 16,583 ------------------------------------------------------------------------------------- BRAZIL (2.1%) Companhia Brasileira de Meios de Pagamento 300(b) 2,581 Itau Unibanco Banco Multipo ADR 1,120 17,730 Petroleo Brasileiro ADR 280 11,474 --------------- Total 31,785 ------------------------------------------------------------------------------------- CANADA (4.1%) Agnico-Eagle Mines 310 16,269 Potash Corp of Saskatchewan 180 16,749 Research In Motion 210(b) 14,921 Suncor Energy 430 13,078 --------------- Total 61,017 ------------------------------------------------------------------------------------- CHINA (4.6%) ANTA Sports Products 9,000 11,211 China Merchants Holdings Intl 2,120 6,072 China Zhongwang Holdings 10,820(b) 14,855 Industrial & Commercial Bank of China Series H 16,000 11,083 Suntech Power Holdings ADR 920(b) 16,432 Yingli Green Energy Holding ADR 700(b) 9,485 --------------- Total 69,138 ------------------------------------------------------------------------------------- DENMARK (1.8%) Carlsberg Series B 189 12,126 Vestas Wind Systems 211(b) 15,144 --------------- Total 27,270 ------------------------------------------------------------------------------------- FINLAND (1.7%) Nokia 1,705 24,972 ------------------------------------------------------------------------------------- FRANCE (4.1%) BNP Paribas 365 23,802 Renault 471(b) 17,401 Technip 228 11,242 Ubisoft Entertainment 400(b) 9,783 --------------- Total 62,228 ------------------------------------------------------------------------------------- GERMANY (7.3%) Daimler 652 23,622 Deutsche Bank 124 7,544 Metro 645 30,834 Siemens 394 27,284 ThyssenKrupp 804 20,052 --------------- Total 109,336 ------------------------------------------------------------------------------------- HONG KONG (1.6%) Li & Fung 4,120 11,001 Sun Hung Kai Properties 1,030 12,791 --------------- Total 23,792 ------------------------------------------------------------------------------------- INDIA (0.7%) HDFC Bank ADR 100 10,313 ------------------------------------------------------------------------------------- IRELAND (0.9%) Experian 1,848 13,857 ------------------------------------------------------------------------------------- ISRAEL (2.9%) Teva Pharmaceutical Inds ADR 870 42,926 ------------------------------------------------------------------------------------- JAPAN (8.4%) Honda Motor 620 17,061 Japan Tobacco 2 6,253 Komatsu 1,260 19,459 Mitsubishi UFJ Financial Group 1,800 11,117 Nippon Electric Glass 1,030 11,518 Panasonic 1,140 15,363 Rakuten 28 16,877
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) JAPAN (CONT.) SoftBank 1,030 $20,071 Sumitomo Mitsui Financial Group 210 8,500 --------------- Total 126,219 ------------------------------------------------------------------------------------- LUXEMBOURG (2.4%) ArcelorMittal 1,070 35,395 ------------------------------------------------------------------------------------- NETHERLANDS (8.7%) ASML Holding 1,164 25,228 Koninklijke (Royal) KPN 2,678 36,949 Koninklijke Ahold 1,884 21,719 Qiagen 1,550(b) 28,718 Unilever 781 18,889 --------------- Total 131,503 ------------------------------------------------------------------------------------- RUSSIA (1.8%) Gazprom ADR 533 10,823 Vimpel-Communications ADR 1,340(b) 15,772 --------------- Total 26,595 ------------------------------------------------------------------------------------- SOUTH AFRICA (1.1%) Impala Platinum Holdings 765 16,931 ------------------------------------------------------------------------------------- SPAIN (4.0%) Banco Santander 2,176 26,303 Red Electrica de Espana 564 25,565 Telefonica 353 8,016 --------------- Total 59,884 ------------------------------------------------------------------------------------- SWEDEN (1.5%) Lundin Petroleum 768(b) 5,975 Telefonaktiebolaget LM Ericsson Series B 1,621 15,978 --------------- Total 21,953 ------------------------------------------------------------------------------------- SWITZERLAND (13.6%) Credit Suisse Group 671 30,749 Julius Baer Holding 527 20,501 Nestle 1,127 42,563 Nobel Biocare Holding 906 19,831 Roche Holding 216 29,437 Sonova Holding 174 14,172 Swatch Group 64 10,303 UBS 1,180(b) 14,492 Xstrata 2,139 23,243 --------------- Total 205,291 ------------------------------------------------------------------------------------- TAIWAN (1.0%) HTC 1,030 14,477 ------------------------------------------------------------------------------------- UNITED KINGDOM (18.6%) ARM Holdings 10,915 21,538 AstraZeneca 345 15,210 Autonomy 602(b) 14,262 British American Tobacco 1,186 32,735 Burberry Group 1,152 8,028 Eurasian Natural Resources 1,391 15,051 HSBC Holdings 3,320 27,655 Imperial Tobacco Group 1,105 28,757 Kingfisher 7,744 22,717 Michael Page Intl 3,022 11,880 Reckitt Benckiser Group 653 29,818 Standard Chartered 1,098 20,643 Vodafone Group 15,936 30,990 --------------- Total 279,284 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,319,601) $1,431,954 ------------------------------------------------------------------------------------- MONEY MARKET FUND (3.7%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 55,147(d) $55,147 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $55,147) $55,147 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,374,748)(e) $1,487,101 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at June 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Automobiles 3.9% $58,084 Beverages 0.8 12,126 Biotechnology 1.0 15,303 Capital Markets 4.9 73,286 Chemicals 1.1 16,749 Commercial Banks 10.5 157,146 Communications Equipment 3.7 55,871 Computers & Peripherals 1.0 14,477 Distributors 0.7 11,001 Diversified Financial Services 0.2 2,581 Diversified Telecommunication Services 4.1 60,737 Electric Utilities 1.7 25,565 Electrical Equipment 2.7 41,061 Electronic Equipment, Instruments & Components 0.8 11,518 Energy Equipment & Services 0.7 11,242 Food & Staples Retailing 3.5 52,553 Food Products 4.1 61,452 Health Care Equipment & Supplies 2.3 34,003 Household Durables 1.0 15,363 Household Products 2.0 29,818 Industrial Conglomerates 1.8 27,284 Internet & Catalog Retail 1.1 16,877 Life Sciences Tools & Services 1.9 28,718 Machinery 2.4 36,042 Metals & Mining 9.5 141,796 Oil, Gas & Consumable Fuels 3.1 47,252 Pharmaceuticals 5.8 87,573 Professional Services 1.7 25,737 Real Estate Management & Development 0.9 12,791 Semiconductors & Semiconductor Equipment 3.1 46,766 Software 1.6 24,045 Specialty Retail 1.5 22,717 Textiles, Apparel & Luxury Goods 2.0 29,542 Tobacco 4.5 67,745 Transportation Infrastructure 0.4 6,072 Wireless Telecommunication Services 3.4 51,061 Other(1) 3.7 55,147 ----------------------------------------------------------------------- Total $1,487,101 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 2009
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION ------------------------------------------------------------------------------------------- July 1, 2009 22,843 32,147 $104 $-- European Monetary Unit U.S. Dollar ------------------------------------------------------------------------------------------- July 1, 2009 634,961 6,588 -- (5) Japanese Yen U.S. Dollar ------------------------------------------------------------------------------------------- July 2, 2009 5,555 3,354 -- (38) U.S. Dollar British Pound ------------------------------------------------------------------------------------------- Total $104 $(43) -------------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. (d) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (e) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $1,375,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $135,000 Unrealized depreciation (23,000) --------------------------------------------------------- Net unrealized appreciation $112,000 ---------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Equity Securities Common Stocks $220,541(a) $1,211,413(b) $-- $1,431,954 ---------------------------------------------------------------------------------- Total Equity Securities 220,541 1,211,413 -- 1,431,954 ---------------------------------------------------------------------------------- Other Affiliated Money Market Fund 55,147(c) -- -- 55,147 ---------------------------------------------------------------------------------- Total Other 55,147 -- -- 55,147 ---------------------------------------------------------------------------------- Investments in Securities 275,688 1,211,413 -- 1,487,101 Other Financial Instruments -- 61(d) -- 61 ---------------------------------------------------------------------------------- Total $275,688 $1,211,474 $-- $1,487,162 ----------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Indicates certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. All industry classifications are identified in the Portfolio of Investments. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. (d) Other financial instruments are derivative instruments, such as forwards, which are valued at the unrealized appreciation (depreciation) on the instrument. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $1,319,601) $ 1,431,954 Affiliated money market fund (identified cost $55,147) 55,147 ------------------------------------------------------------------------------ Total investments in securities (identified cost $1,374,748) 1,487,101 Foreign currency holdings (identified cost $108) 107 Dividends and accrued interest receivable 4,364 Receivable for investment securities sold 38,637 Reclaims receivable 8,475 Unrealized appreciation on forward foreign currency contracts 104 ------------------------------------------------------------------------------ Total assets 1,538,788 ------------------------------------------------------------------------------ LIABILITIES Disbursements in excess of cash 86 Payable for investment securities purchased 7,815 Unrealized depreciation on forward foreign currency contracts 43 Accrued investment management services fees 1,282 Accrued transfer agency fees 81 Accrued administrative services fees 108 Other accrued expenses 27,649 ------------------------------------------------------------------------------ Total liabilities 37,064 ------------------------------------------------------------------------------ Net assets applicable to outstanding capital stock $ 1,501,724 ------------------------------------------------------------------------------ REPRESENTED BY Capital stock -- $.001 par value $ 192 Additional paid-in capital 3,694,290 Undistributed net investment income 12,605 Accumulated net realized gain (loss) (2,318,862) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 113,499 ------------------------------------------------------------------------------ Total -- representing net assets applicable to outstanding capital stock $ 1,501,724 ------------------------------------------------------------------------------ Shares outstanding 192,238 ------------------------------------------------------------------------------ Net asset value per share of outstanding capital stock $ 7.81 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 30,426 Interest 15 Income distributions from affiliated money market fund 31 Less foreign taxes withheld (3,177) ---------------------------------------------------------------------------- Total income 27,295 ---------------------------------------------------------------------------- Expenses: Investment management services fees 6,980 Transfer agency fees 133 Administrative services fees 177 Compensation of board members 23 Custodian fees 37,564 Printing and postage 6,475 Professional fees 10,437 Other 387 ---------------------------------------------------------------------------- Total expenses 62,176 Expenses waived/reimbursed by the Investment Manager and its affiliates (47,985) ---------------------------------------------------------------------------- Total net expenses 14,191 ---------------------------------------------------------------------------- Investment income (loss) -- net 13,104 ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (183,545) Foreign currency transactions (71) ---------------------------------------------------------------------------- Net realized gain (loss) on investments (183,616) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 212,922 ---------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 29,306 ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 42,410 ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ 13,104 $ (6,669) Net realized gain (loss) on investments (183,616) (1,661,393) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 212,922 (705,291) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 42,410 (2,373,353) -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 34,810 165,746 Payments for redemptions of shares (148,939) (772,441) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (114,129) (606,695) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (71,719) (2,980,048) Net assets at beginning of period 1,573,443 4,553,491 -------------------------------------------------------------------------------------------------- Net assets at end of period $1,501,724 $ 1,573,443 -------------------------------------------------------------------------------------------------- Undistributed (excess of distributions over) net investment income $ 12,605 $ (499) --------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $7.51 $17.64 $14.38 $11.66 $11.10 $8.97 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) .07 (.03) (.02) (.07) (.03) (.04) Net gains (losses) (both realized and unrealized) .23 (10.10) 3.28 2.79 .59 2.21 ----------------------------------------------------------------------------------------------------------------- Total from investment operations .30 (10.13) 3.26 2.72 .56 2.17 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- (.04) ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $7.81 $7.51 $17.64 $14.38 $11.66 $11.10 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $5 $4 $4 $4 ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c) 8.77%(d) 4.63% 4.02% 3.94% 5.05% 4.08% ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c),(e) 2.00%(d) 2.00% 2.00% 2.00% 2.00% 2.00% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.85%(d) (.22%) (.15%) (.54%) (.24%) (.40%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 190% 365% 235% 166% 189% 214% ----------------------------------------------------------------------------------------------------------------- Total return(f) 3.99%(g) (57.43%) 22.67% 23.33% 5.04% 24.19% -----------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized. (h) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman International Growth Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 Shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund invests primarily in high-quality, large and mid-capitalization growth companies ($1 billion or more at the time of initial purchase by the Fund) that are considered leaders in their industries, emphasizing those industries that are growing on a global basis. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At June 30, 2009, foreign currency holdings in the Fund consisted of multiple denominations. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a foreign currency contract fluctuates with changes in foreign currency exchange rates. Foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the foreign currency contract is closed. The risks of foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount reflected in the Statement of Assets and Liabilities. The gross notional amount of these contracts was $44,000 at June 30, 2009. The fair value of such contracts on June 30, 2009 is set forth in the table below. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2009
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------- Foreign exchange Unrealized Unrealized contracts appreciation on depreciation on forward foreign forward foreign currency contracts $104 currency contracts $43 ------------------------------------------------------------------------------------- Total $104 $43 -------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS ON THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2009
AMOUNT OF REALIZED GAIN OR (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME -------------------------------------------------------------------------- RISK EXPOSURE CATEGORY FORWARD CURRENCY CONTRACTS -------------------------------------------------------------------- Foreign exchange contracts $(2,782) -------------------------------------------------------------------- Total $(2,782) --------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION OR (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME -------------------------------------------------------------------------- RISK EXPOSURE CATEGORY FORWARD CURRENCY CONTRACTS -------------------------------------------------------------------- Foreign exchange contracts $61 -------------------------------------------------------------------- Total $61 --------------------------------------------------------------------
4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.86% annually as the Fund's assets increase. Prior to May 11, 2009, the Investment Manager received a fee equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.90% annually as the Fund's assets increased. The management fee for the six months ended June 30, 2009 was 0.99% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SUBADVISORY AGREEMENT The Investment Manager has a Subadvisory Agreement with Wellington Management Company, LLP to subadvise the assets of the Fund. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.03% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $6. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- (excluding fees and expenses of acquired funds*) were 2.00% of the Fund's average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 1.00% per annum of the Fund's average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 2.00% of the Fund's average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary.) 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $2,659,965 and $2,809,893, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- Sold 5,006 11,174 Redeemed (22,343) (59,688) -------------------------------------------------------------------- Net increase (decrease) (17,337) (48,514) --------------------------------------------------------------------
7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- of RiverSource Short-Term Cash Fund aggregated $665,858 and $610,711, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, recognition of unrealized appreciation (depreciation) for certain derivative investments, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $1,806,932 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2010 2016 $481,074 $1,325,858
Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- net currency losses realized between Nov. 1 and its fiscal year end (post- October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $263,894 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 31 PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 32 SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. RESULTS OF MEETING OF SHAREHOLDERS -------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO (THE FUND) SPECIAL MEETING OF SHAREHOLDERS HELD ON JUNE 2, 2009 (UNAUDITED) A brief description of the proposal voted upon at the meeting and the votes cast for, against or withheld, as well as the number of abstentions and broker non- votes as to the proposal is set forth below. A vote is based on total number of shares outstanding in the Fund. To approve a policy authorizing RiverSource Investments, LLC, with the approval of the Board of Directors, to enter into and materially amend a subadvisory agreement, without obtaining shareholder approval.
SHARES VOTED SHARES VOTED "FOR" "AGAINST" ABSTENTIONS BROKER NON-VOTES --------------------------------------------------------------------------------------- 187,668.601 2,336.956 5,911.004 0.000
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INTERNATIONAL GROWTH PORTFOLIO -- 2009 SEMIANNUAL REPORT 33 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9967 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN CAPITAL PORTFOLIO SELIGMAN CAPITAL PORTFOLIO SEEKS CAPITAL APPRECIATION. Seligman Capital Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 14 Statement of Operations............ 15 Statements of Changes in Net Assets........................... 16 Financial Highlights............... 17 Notes to Financial Statements...... 18 Proxy Voting....................... 27 Change in Independent Registered Public Accounting Firm........... 28
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Capital Portfolio Class 1 shares gained 18.83% for the six-month period ended June 30, 2009. > The Fund outperformed its benchmark, the Russell(R) Midcap Growth Index, which gained 16.61% during the same six-month period. > The Fund also outperformed its peer group, as represented by the Lipper Mid- Cap Growth Funds Average, which rose 13.08% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 8/30/00 ---------------------------------------------------------------------------------------- Seligman Capital Portfolio Class 1 +18.83% -37.71% -8.26% -2.63% +0.96% N/A ---------------------------------------------------------------------------------------- Class 2 +18.76% -37.87% -8.50% -2.87% N/A -6.63% ---------------------------------------------------------------------------------------- Russell Midcap Growth Index(1) (unmanaged) +16.61% -30.33% -7.93% -0.44% +0.02% -4.92% ---------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Average(2) +13.08% -31.53% -8.27% -1.19% +0.64% -4.14% ----------------------------------------------------------------------------------------
* Not annualized. ** For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the index does not reflect the effect of expenses. It is not possible to invest directly in an average or index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (1) The Russell Midcap Growth Index, an unmanaged index, measures the performance of those Russell Midcap companies with higher price-to-book ratios and higher forecasted growth values, as determined by the Frank Russell Company. The stocks are also members of the Russell 1000 Growth Index. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Mid-Cap Growth Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity large-cap floor. Mid-cap growth funds typically have an above-average price-to-earnings ratio, price-to-book ratio, and three- year sales-per-share growth value, compared to the S&P MidCap 400 Index. The average reflects reinvestment of all dividends and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Consumer Discretionary 16.3% ------------------------------------------------ Consumer Staples 1.1% ------------------------------------------------ Energy 8.1% ------------------------------------------------ Financials 6.7% ------------------------------------------------ Health Care 13.3% ------------------------------------------------ Industrials 14.6% ------------------------------------------------ Information Technology 27.6% ------------------------------------------------ Materials 4.6% ------------------------------------------------ Telecommunication Services 2.3% ------------------------------------------------ Utilities 2.1% ------------------------------------------------ Other(2) 3.3% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. Investments in mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) --------------------------------------------------------------------
SAVVIS 4.5% ------------------------------------------------ Macrovision Solutions 4.2% ------------------------------------------------ Coinstar 3.5% ------------------------------------------------ Microsemi 3.0% ------------------------------------------------ FTI Consulting 2.9% ------------------------------------------------ Marvell Technology Group 2.9% ------------------------------------------------ McAfee 2.2% ------------------------------------------------ Prudential Financial 2.2% ------------------------------------------------ Noble Energy 2.2% ------------------------------------------------ Yum! Brands 1.7% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expense of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,188.30 $8.36 $8.41 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.16 $7.70 $7.75 ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,187.60 $9.17 $9.22 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.41 $8.45 $8.50 ------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES(b) EXPENSES ---------------------------------------------------------------------- Class 1 1.54% .01% 1.55% ---------------------------------------------------------------------- Class 2 1.69% .01% 1.70% ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended June 30, 2009: +18.83% for Class 1 and +18.76% for Class 2. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (96.9%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.5%) ITT 1,950 $86,775 Precision Castparts 1,100 80,333 --------------- Total 167,108 ------------------------------------------------------------------------------------- AIRLINES (0.5%) Delta Air Lines 5,760(b) 33,350 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (1.6%) Alexion Pharmaceuticals 940(b) 38,653 Vertex Pharmaceuticals 1,800(b) 64,152 --------------- Total 102,805 ------------------------------------------------------------------------------------- CHEMICALS (2.4%) Celanese Series A 1,300 30,875 Ecolab 800 31,192 Potash Corp of Saskatchewan 1,050(c) 97,703 --------------- Total 159,770 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (1.3%) GEO Group 4,600(b) 85,468 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.0%) Blue Coat Systems 5,220(b) 86,339 Brocade Communications Systems 13,340(b) 104,319 F5 Networks 2,210(b) 76,444 --------------- Total 267,102 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.0%) Fluor 800 41,032 Foster Wheeler 2,580(b) 61,275 Quanta Services 1,260(b) 29,144 --------------- Total 131,451 ------------------------------------------------------------------------------------- CONSUMER FINANCE (1.6%) Discover Financial Services 10,290 105,678 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (7.5%) Apollo Group Cl A 1,600(b) 113,792 Coinstar 8,650(b) 230,955 Corinthian Colleges 2,910(b) 49,266 DeVry 2,060 103,082 --------------- Total 497,095 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.8%) CME Group 110 34,222 Interactive Brokers Group Cl A 5,510(b) 85,570 --------------- Total 119,792 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.4%) Qwest Communications Intl 21,600 89,640 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.6%) ITC Holdings 2,400 108,864 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.3%) General Cable 2,350(b) 88,313 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (4.8%) Cameron Intl 2,600(b) 73,580 Natl Oilwell Varco 1,010(b) 32,987 Noble 3,770 114,043 Weatherford Intl 4,890(b,c) 95,648 --------------- Total 316,258 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.3%) Archer-Daniels-Midland 650 17,401 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (3.0%) Alcon 840(c) 97,541 Beckman Coulter 559 31,941 NuVasive 1,530(b) 68,238 --------------- Total 197,720 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) HEALTH CARE PROVIDERS & SERVICES (4.2%) AmerisourceBergen 2,360 $41,866 Community Health Systems 2,400(b) 60,600 Express Scripts 1,480(b) 101,751 WellPoint 1,370(b) 69,719 --------------- Total 273,936 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (0.9%) Cerner 920(b) 57,307 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (2.9%) Bally Technologies 2,550(b) 76,296 Yum! Brands 3,470 115,690 --------------- Total 191,986 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (2.8%) Lennar Cl A 7,000 67,830 Meritage Homes 2,750(b) 51,865 NVR 130(b) 65,311 --------------- Total 185,006 ------------------------------------------------------------------------------------- INSURANCE (3.3%) AFLAC 1,380 42,904 Principal Financial Group 1,629 30,690 Prudential Financial 3,875 144,228 --------------- Total 217,822 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (5.2%) Equinix 690(b) 50,191 SAVVIS 25,686(b) 294,361 --------------- Total 344,552 ------------------------------------------------------------------------------------- IT SERVICES (2.8%) Cognizant Technology Solutions Cl A 3,200(b) 85,440 MasterCard Cl A 590 98,713 --------------- Total 184,153 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (1.8%) Illumina 1,540(b) 59,968 Life Technologies 1,470(b) 61,328 --------------- Total 121,296 ------------------------------------------------------------------------------------- MACHINERY (1.7%) Cummins 950 33,450 Joy Global 2,190 78,226 --------------- Total 111,676 ------------------------------------------------------------------------------------- METALS & MINING (2.2%) Agnico-Eagle Mines 1,790(c) 93,939 United States Steel 1,400 50,036 --------------- Total 143,975 ------------------------------------------------------------------------------------- MULTILINE RETAIL (1.5%) Big Lots 2,540(b) 53,416 Kohl's 1,100(b) 47,025 --------------- Total 100,441 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.4%) Public Service Enterprise Group 900 29,367 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (3.3%) Massey Energy 1,340 26,184 Noble Energy 2,420 142,707 Southwestern Energy 1,300(b) 50,505 --------------- Total 219,396 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (0.9%) Mead Johnson Nutrition Cl A 1,800(b) 57,186 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.9%) Allergan 800 38,064 King Pharmaceuticals 3,740(b) 36,016 Mylan 3,820(b) 49,851 --------------- Total 123,931 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (3.0%) FTI Consulting 3,840(b) 194,765 ------------------------------------------------------------------------------------- ROAD & RAIL (1.4%) CSX 2,130 73,762 JB Hunt Transport Services 560 17,097 --------------- Total 90,859 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (7.8%) Intersil Cl A 7,600 $95,532 Marvell Technology Group 16,560(b,c) 192,758 MEMC Electronic Materials 1,740(b) 30,989 Microsemi 14,300(b) 197,340 --------------- Total 516,619 ------------------------------------------------------------------------------------- SOFTWARE (7.8%) BMC Software 2,550(b) 86,165 Macrovision Solutions 12,822(b) 279,647 McAfee 3,500(b) 147,664 --------------- Total 513,476 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.6%) Sherwin-Williams 1,950 104,813 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.9%) Aegean Marine Petroleum Network 3,990(c) 60,249 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.0%) NII Holdings 1,900(b) 36,233 SBA Communications Cl A 1,100(b) 26,994 --------------- Total 63,227 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $6,026,014) $6,393,853 ------------------------------------------------------------------------------------- MONEY MARKET FUND (3.3%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 220,163(d) $220,163 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $220,163) $220,163 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $6,246,177)(e) $6,614,016 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the value of foreign securities represented 9.7% of net assets. (d) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (e) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $6,246,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $682,000 Unrealized depreciation (314,000) ---------------------------------------------------------- Net unrealized appreciation $368,000 ----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------- Equity Securities Common Stocks $6,393,853(a) $-- $-- $6,393,853 -------------------------------------------------------------------------------------- Total Equity Securities 6,393,853 -- -- 6,393,853 -------------------------------------------------------------------------------------- Other Affiliated Money Market Fund 220,163(b) -- -- 220,163 -------------------------------------------------------------------------------------- Total Other 220,163 -- -- 220,163 -------------------------------------------------------------------------------------- Total $6,614,016 $-- $-- $6,614,016 --------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $6,026,014) $ 6,393,853 Affiliated money market fund (identified cost $220,163) 220,163 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $6,246,177) 6,614,016 Capital shares receivable 20 Dividends and accrued interest receivable 1,298 Receivable for investment securities sold 8,848 -------------------------------------------------------------------------------------- Total assets 6,624,182 -------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 1,765 Accrued investment management services fees 2,097 Accrued distribution fees 931 Accrued transfer agency fees 354 Accrued administrative services fees 354 Other accrued expenses 22,821 -------------------------------------------------------------------------------------- Total liabilities 28,322 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 6,595,860 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 634 Additional paid-in capital 16,326,842 Net operating loss (26,749) Accumulated net realized gain (loss) (10,072,706) Unrealized appreciation (depreciation) on investments 367,839 -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 6,595,860 --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $2,425,727 230,074 $10.54 Class 2 $4,170,133 403,931 $10.32 ---------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 22,175 Income distributions from affiliated money market fund 94 Less foreign taxes withheld (970) ------------------------------------------------------------------------ Total income 21,299 ------------------------------------------------------------------------ Expenses: Investment management services fees 11,422 Distribution fees -- Class 2 4,600 Transfer agency fees Class 1 4,824 Class 2 545 Administrative services fees 577 Compensation of board members 99 Custodian fees 6,522 Printing and postage 11,075 Professional fees 6,947 Other 896 ------------------------------------------------------------------------ Total net expenses 47,507 ------------------------------------------------------------------------ Investment income (loss) -- net (26,208) ------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (723,484) Net change in unrealized appreciation (depreciation) on investments 1,784,651 ------------------------------------------------------------------------ Net gain (loss) on investments 1,061,167 ------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $1,034,959 ------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (26,208) $ (72,460) Net realized gain (loss) on investments (723,484) (3,182,383) Net change in unrealized appreciation (depreciation) on investments 1,784,651 (1,775,876) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 1,034,959 (5,030,719) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 5,933 68,375 Class 2 shares 386,089 1,804,456 Payments for redemptions Class 1 shares (251,073) (913,055) Class 2 shares (359,263) (998,243) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (218,314) (38,467) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 816,645 (5,069,186) Net assets at beginning of period 5,779,215 10,848,401 --------------------------------------------------------------------------------------------- Net assets at end of period $6,595,860 $ 5,779,215 --------------------------------------------------------------------------------------------- Net operating loss $ (26,749) $ (541) ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS 1 PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED DEC. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $8.87 $17.03 $14.62 $13.78 $12.25 $11.28 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.03) (.10) (.14) (.05) (.06) (.05) Net gains (losses) (both realized and unrealized) 1.70 (8.06) 2.55 .89 1.59 1.02 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 1.67 (8.16) 2.41 .84 1.53 .97 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.54 $8.87 $17.03 $14.62 $13.78 $12.25 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $5 $6 $8 $10 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.54%(d) 1.32% 1.18% 1.05% 1.03% .92% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.78%)(d) (.71%) (.83%) (.33%) (.50%) (.46%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 83% 240% 196% 203% 174% 213% ----------------------------------------------------------------------------------------------------------------- Total return(e) 18.83%(f) (47.92%) 16.48% 6.10% 12.49% 8.60% -----------------------------------------------------------------------------------------------------------------
CLASS 2 PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED DEC. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $8.69 $16.74 $14.40 $13.61 $12.13 $11.20 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.04) (.13) (.18) (.08) (.09) (.08) Net gains (losses) (both realized and unrealized) 1.67 (7.92) 2.52 .87 1.57 1.01 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 1.63 (8.05) 2.34 .79 1.48 .93 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $10.32 $8.69 $16.74 $14.40 $13.61 $12.13 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $4 $3 $5 $5 $5 $5 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.69%(d) 1.57% 1.43% 1.30% 1.28% 1.17% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.97%)(d) (.96%) (1.08%) (.58%) (.75%) (.71%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 83% 240% 196% 203% 174% 213% ----------------------------------------------------------------------------------------------------------------- Total return(e) 18.76%(f) (48.09%) 16.25% 5.80% 12.20% 8.30% -----------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (f) Not annualized. (g) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Capital Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund primarily invests in the common stock of medium sized U.S. companies. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.40% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.39% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase for the six months ended June 30, 2009. For the period from May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $22. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $4,788,453 and $4,617,330, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- CLASS 1 -------------------------------------------------------------------- Sold 579 4,505 Redeemed (28,560) (63,152) -------------------------------------------------------------------- Net increase (decrease) (27,981) (58,647) -------------------------------------------------------------------- CLASS 2 -------------------------------------------------------------------- Sold 42,386 146,298 Redeemed (40,130) (70,421) -------------------------------------------------------------------- Net increase (decrease) 2,256 75,877 --------------------------------------------------------------------
6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $756,447 and $536,284, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $8,052,654 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2010 2016 $6,090,930 $1,961,724
Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $961,522 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 9. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- CAPITAL PORTFOLIO -- 2009 SEMIANNUAL REPORT SELIGMAN CAPITAL PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9950 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO SEEKS FAVORABLE CURRENT INCOME. Seligman Investment Grade Fixed Income Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 15 Statement of Operations............ 16 Statements of Changes in Net Assets........................... 17 Financial Highlights............... 18 Notes to Financial Statements...... 19 Proxy Voting....................... 29 Change in Independent Registered Public Accounting Firm........... 30
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Investment Grade Fixed Income Portfolio shares gained 1.85% for the six-month period ended June 30, 2009. > The Fund underperformed the Barclays Capital U.S. Aggregate Bond Index, which rose 1.90% for the period. > The Fund underperformed the Lipper Corporate Debt Funds BBB-Rated Average, representing the Fund's peer group, which increased 6.73% for the same time frame. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS -------------------------------------------------------------------------- Seligman Investment Grade Fixed Income Portfolio +1.85% +1.14% +3.95% +2.90% +4.33% -------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index(1) (unmanaged) +1.90% +6.05% +6.43% +5.01% +5.98% -------------------------------------------------------------------------- Barclays Capital U.S. Government/Credit Index(2) (unmanaged) +0.55% +5.26% +6.16% +4.80% +5.95% -------------------------------------------------------------------------- Lipper Corporate Debt Funds BBB-Rated Average(3) +6.73% -0.18% +2.48% +2.74% +4.28% --------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses. It is not possible to invest directly in an average or index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (1) The Barclays Capital U.S. Aggregate Bond Index, an unmanaged index, is made up of a representative list of government, corporate, asset-backed and mortgage-backed securities. The index is frequently used as a general measure of bond market performance. The index reflects reinvestment of all distributions and changes in market prices. (2) The Barclays Capital U.S. Government/Credit Index is composed of all bonds that are investment grade (rated Baa or higher by Moody's or BBB or higher by S&P, if unrated by Moody's), with at least one year to maturity. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Corporate Debt Funds BBB-Rated Average is an average of funds that invest primarily in corporate and government debt issues rated in the top four grades. The average reflects reinvestment of all distributions and changes in market prices. Effective Nov. 7, 2008, to better align the primary benchmark index with the investment strategy of the Fund, the Barclays Capital Government/Credit Index is replaced with the Barclays Capital U.S. Aggregate Bond Index, which will be used as the primary benchmark going forward. Information on both indexes will be included for a transition period. Thereafter, however, only the Barclays Capital U.S. Aggregate Bond Index will be included. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG X HIGH X MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Asset-Backed 1.3% ------------------------------------------------ Consumer Discretionary 0.3% ------------------------------------------------ Consumer Staples 0.3% ------------------------------------------------ Energy 2.3% ------------------------------------------------ Financials 2.4% ------------------------------------------------ Foreign Government 0.5% ------------------------------------------------ Industrials 0.3% ------------------------------------------------ Materials 0.2% ------------------------------------------------ Mortgage-Backed 16.1% ------------------------------------------------ Telecommunication 6.1% ------------------------------------------------ U.S. Government Obligations & Agencies 42.8% ------------------------------------------------ Utilities 7.7% ------------------------------------------------ Other(2) 19.7% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. There are risks associated with an investment in a bond fund, including credit risk, interest rate risk, and prepayment risk. See the Fund's prospectus for information on these and other risks associated with the Fund. In general, bond prices rise when interest rates fall and vice versa. This effect is more pronounced for longer-term securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- QUALITY BREAKDOWN (at June 30, 2009; % of portfolio assets excluding cash equivalents and equities) ------------------------------------------------------------------------
AAA bonds 73.0% -------------------------------------------------- AA bonds 0.9% -------------------------------------------------- A bonds 11.5% -------------------------------------------------- BBB bonds 13.1% -------------------------------------------------- Non-investment grade bonds 1.5% --------------------------------------------------
Bond ratings apply to the underlying holdings of the Fund and not the Fund itself. Whenever possible, the Standard and Poor's rating is used to determine the credit quality of a security. Standard and Poor's rates the creditworthiness of corporate bonds, with 15 categories, ranging from AAA (highest) to D (lowest). Ratings from AA to CCC may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. If Standard and Poor's doesn't rate a security, then Moody's rating is used. RiverSource Investments, LLC (the Investment Manager), rates a security using an internal rating system when Moody's doesn't provide a rating. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,018.50 $4.25 $4.40 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.58 $4.26 $4.41 ------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ANNUALIZED ACQUIRED FUND FEES AND EXPENSE RATIO EXPENSES() NET FUND EXPENSES ---------------------------------------------------------------------------------- .85% .03% .88% ----------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (c) Based on the actual return of +1.85% for the six months ended June 30, 2009. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (86.1%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) U.S. GOVERNMENT OBLIGATIONS & AGENCIES (45.8%) Federal Farm Credit Bank 02-07-13 3.40% $40,000 $41,590 Federal Home Loan Banks 05-20-11 2.63 45,000 45,873 11-17-17 5.00 10,000 10,641 Federal Home Loan Mtge Corp 07-15-14 5.00 5,000 5,479 Federal Natl Mtge Assn 06-09-10 3.26 15,000 15,373 08-12-10 3.25 10,000 10,294 11-19-12 4.75 10,000 10,876 01-02-14 5.13 17,000 17,312 U.S. Treasury 02-28-11 4.50 95,000 100,710 06-30-11 1.13 10,000 10,001 05-15-12 1.38 5,000 4,972 12-31-13 1.50 35,000 33,712 03-31-14 1.75 36,000 34,819 04-30-14 1.88 35,000 33,964 05-31-14 2.25 70,000 69,059 06-30-14 2.63 65,000 65,203 02-15-15 4.00 30,000 31,873 04-30-16 2.63 25,000 24,172 02-15-19 2.75 85,000 79,608 05-15-19 3.13 85,000 82,210 11-15-26 0.00 50,000 22,892 02-15-29 5.25 15,000 16,870 02-15-31 5.38 16,000 18,365 02-15-39 3.50 50,000 43,235 --------------- Total 829,103 ------------------------------------------------------------------------------------- ASSET-BACKED (1.4%) Caterpillar Financial Asset Trust Series 2008A Cl A3 04-25-14 4.94 15,000 15,003 Centex Home Equity Series 2002-D Cl M2 12-25-32 2.36 19,243(h) 2,491 Irwin Home Equity Corp Series 2005-A Cl A3 02-25-34 0.69 12,190(h) 8,159 --------------- Total 25,653 ------------------------------------------------------------------------------------- MORTGAGE-BACKED (17.3%)(f) Banc of America Mtge Securities Commercial Mtge Obligation Series 2004-F Cl 1A1 07-25-34 4.18 5,470(g) 4,383 Federal Home Loan Mtge Corp 07-01-24 5.50 100,000(e) 104,500 Federal Home Loan Mtge Corp #1Q0140 08-01-36 6.16 15,835(g) 16,714 Federal Natl Mtge Assn 07-01-39 6.50 25,000(e) 26,625 Federal Natl Mtge Assn #256901 09-01-37 6.50 31,352 33,333 Federal Natl Mtge Assn #745392 12-01-20 4.50 14,827 15,359 Federal Natl Mtge Assn #881886 04-01-36 5.36 18,612(g) 19,451 Federal Natl Mtge Assn #886764 08-01-36 6.00 17,949(g) 18,847 GSR Mtge Loan Trust Commercial Mtge Obligation Series 2005-AR4 Cl 4A1 07-25-35 5.36 15,386(g) 11,392 Homestar Mtge Acceptance Corporation Commercial Mtge Obligation Series 2004-1 Cl A1 03-25-34 0.63 8,771(g) 5,159 Indymac Index Mtge Loan Trust Commercial Mtge Obligation Series 2006-AR3 Cl 2A1B 03-25-36 6.17 26,730(g) 11,269 Structured Asset Securities Corp Series 2003-18XS Cl A6 06-25-33 4.04 32,315 29,799
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) MORTGAGE-BACKED (CONT.) Wells Fargo Mtge Backed Securities Trust Commercial Mtge Obligation Series 2004-K Cl 2A3 07-25-34 4.72% $17,121(g) $15,099 --------------- Total 311,930 ------------------------------------------------------------------------------------- BANKING (1.9%) Bank of America Sr Nts 06-01-19 7.63 5,000 5,014 Bank of America Sr Unsecured 05-01-18 5.65 5,000 4,424 Citigroup Sr Nts 05-22-19 8.50 10,000 10,172 Goldman Sachs Group Sr Unsecured 02-15-19 7.50 5,000 5,337 JPMorgan Chase & Co Sr Unsecured 01-15-18 6.00 5,000 4,967 Wells Fargo & Co Sr Unsecured 12-11-17 5.63 5,000 4,922 --------------- Total 34,836 ------------------------------------------------------------------------------------- BROKERAGE (0.1%) Lehman Brothers Holdings Sr Unsecured 05-02-18 6.88 15,000(b,i) 2,400 ------------------------------------------------------------------------------------- CHEMICALS (0.3%) Dow Chemical Sr Unsecured 05-15-19 8.55 5,000 5,009 ------------------------------------------------------------------------------------- ELECTRIC (5.1%) Cleveland Electric Illuminating 1st Mtge 11-15-18 8.88 10,000 12,058 Consumers Energy 1st Mtge 09-15-19 6.70 5,000 5,442 Dominion Resources Sr Unsecured 11-15-16 5.60 15,000 15,343 Indiana Michigan Power Sr Nts 03-15-19 7.00 5,000 5,392 Indiana Michigan Power Sr Unsecured 03-15-37 6.05 5,000 4,674 Jersey Central Power & Light Sr Unsecured 02-01-19 7.35 5,000 5,497 Nevada Power Series L 01-15-15 5.88 10,000 10,244 NiSource Finance 09-15-17 5.25 5,000 4,288 01-15-19 6.80 5,000 4,685 Potomac Electric Power Sr Secured 04-15-14 4.65 15,000 15,186 Sierra Pacific Power Series M 05-15-16 6.00 10,000 10,127 --------------- Total 92,936 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (0.3%) SABMiller 01-15-14 5.70 5,000(c,d) 5,104 ------------------------------------------------------------------------------------- GAS PIPELINES (3.2%) CenterPoint Energy Resources Sr Unsecured 02-15-11 7.75 10,000 10,599 CenterPoint Energy Resources Sr Unsecured Series B 04-01-13 7.88 5,000 5,333 Colorado Interstate Gas Sr Unsecured 11-15-15 6.80 20,000 20,546 Northwest Pipeline Sr Unsecured 06-15-16 7.00 5,000 5,274
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) GAS PIPELINES (CONT.) Transcontinental Gas Pipe Line LLC Sr Unsecured 04-15-16 6.40% $10,000 $10,263 Transcontinental Gas Pipe Line LLC Sr Unsecured Series B 08-15-11 7.00 5,000 5,277 --------------- Total 57,292 ------------------------------------------------------------------------------------- INDEPENDENT ENERGY (2.2%) Anadarko Petroleum Sr Unsecured 09-15-16 5.95 10,000 9,866 EnCana Sr Unsecured 12-01-17 5.90 15,000(c) 15,378 Nexen Sr Unsecured 05-15-37 6.40 5,000(c) 4,592 XTO Energy Sr Unsecured 08-01-17 6.25 10,000 10,523 --------------- Total 40,359 ------------------------------------------------------------------------------------- MEDIA CABLE (0.3%) Comcast 05-15-18 5.70 5,000 5,027 ------------------------------------------------------------------------------------- MEDIA NON CABLE (2.8%) News America 11-15-37 6.65 5,000 4,498 RR Donnelley & Sons Sr Unsecured 01-15-17 6.13 10,000 8,796 Thomson Reuters 07-15-18 6.50 35,000(c) 36,425 --------------- Total 49,719 ------------------------------------------------------------------------------------- NON CAPTIVE DIVERSIFIED (0.5%) General Electric Capital Sr Unsecured 01-10-39 6.88 10,000 9,001 ------------------------------------------------------------------------------------- OIL FIELD SERVICES (0.3%) Weatherford Intl LTD 03-15-38 7.00 5,000(c) 4,814 ------------------------------------------------------------------------------------- RAILROADS (0.3%) CSX Sr Unsecured 04-01-15 6.25 5,000 5,169 ------------------------------------------------------------------------------------- SUPRANATIONAL (0.5%) Corp Andina de Fomento Unsecured 01-12-17 5.75 10,000(c) 9,633 ------------------------------------------------------------------------------------- WIRELESS (0.3%) US Cellular Sr Unsecured 12-15-33 6.70 5,000 4,790 ------------------------------------------------------------------------------------- WIRELINES (3.5%) AT&T Sr Unsecured 02-01-18 5.50 5,000 5,026 BellSouth Sr Unsecured 09-15-14 5.20 15,000 15,616 TELUS Sr Unsecured 06-01-11 8.00 10,000(c) 10,733 Verizon New York Sr Unsecured Series A 04-01-12 6.88 30,000 31,794 --------------- Total 63,169 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $1,584,946) $1,555,944 -------------------------------------------------------------------------------------
MONEY MARKET FUND (21.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 380,630(j) $380,630 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $380,630) $380,630 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,965,576)(k) $1,936,574 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. For debt securities, principal amounts are denominated in U.S. dollar currency unless otherwise noted. At June 30, 2009, the value of foreign securities represented 4.8% of net assets. (d) Represents a security sold under Rule 144A, which is exempt from registration under the Securities Act of 1933, as amended. This security may be determined to be liquid under guidelines established by the Fund's Board of Directors. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2009, the value of these securities amounted to $5,104 or 0.3% of net assets. (e) At June 30, 2009, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $130,403. See Note 2 to the financial statements. (f) Mortgage-backed securities represent direct or indirect participations in, or are secured by and payable from, mortgage loans secured by real property, and include single- and multi-class pass-through securities and collateralized mortgage obligations. These securities may be issued or guaranteed by U.S. government agencies or instrumentalities, or by private issuers, generally originators and investors in mortgage loans, including savings associations, mortgage bankers, commercial banks, investment bankers and special purpose entities. The maturity dates shown represent the original maturity of the underlying obligation. Actual maturity may vary based upon prepayment activity on these obligations. Unless otherwise noted, the coupon rates presented are fixed rates. (g) Adjustable rate security; interest rate varies to reflect current market conditions; rate shown is the effective rate on June 30, 2009. (h) Interest rate varies either based on a predetermined schedule or to reflect current market conditions; rate shown is the effective rate on June 30, 2009. (i) This position is in bankruptcy. (j) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (k) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $1,966,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $44,000 Unrealized depreciation (73,000) --------------------------------------------------------- Net unrealized depreciation $(29,000) ---------------------------------------------------------
-------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------- Bonds U.S. Government Obligations & Agencies $648,774 $180,329 $-- $829,103 Corporate Debt Securities -- 389,258 -- 389,258 Asset-Backed Securities -- 25,653 -- 25,653 Residential Mortgage-Backed Securities -- 311,930 -- 311,930 -------------------------------------------------------------------------------------- Total Bonds 648,774 907,170 -- 1,555,944 -------------------------------------------------------------------------------------- Other Affiliated Money Market Fund 380,630(a) -- -- 380,630 -------------------------------------------------------------------------------------- Total Other 380,630 -- -- 380,630 -------------------------------------------------------------------------------------- Total $1,029,404 $907,170 $-- $1,936,574 --------------------------------------------------------------------------------------
(a) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $1,584,946) $1,555,944 Affiliated money market fund (identified cost $380,630) 380,630 ----------------------------------------------------------------------------- Total investments in securities (identified cost $1,965,576) 1,936,574 Dividends and accrued interest receivable 14,346 Receivable for investment securities sold 9,381 ----------------------------------------------------------------------------- Total assets 1,960,301 ----------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 629 Capital shares payable 11 Payable for investment securities purchased 9,058 Payable for securities purchased on a forward-commitment basis 130,403 Accrued investment management services fees 542 Accrued transfer agency fees 94 Accrued administrative services fees 110 Other accrued expenses 13,059 ----------------------------------------------------------------------------- Total liabilities 153,906 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $1,806,395 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 219 Additional paid-in capital 1,911,978 Undistributed net investment income 95,822 Accumulated net realized gain (loss) (172,622) Unrealized appreciation (depreciation) on investments (29,002) ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $1,806,395 ----------------------------------------------------------------------------- Shares outstanding 219,105 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 8.24 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Interest $ 28,419 Income distributions from affiliated money market fund 183 --------------------------------------------------------------------------- Total income 28,602 --------------------------------------------------------------------------- Expenses: Investment management services fees 3,416 Transfer agency fees 156 Administrative services fees 182 Compensation of board members 30 Custodian fees 6,629 Printing and postage 3,715 Professional fees 7,853 Other 378 --------------------------------------------------------------------------- Total expenses 22,359 Expenses waived/reimbursed by the Investment Manager and its affiliates (14,789) --------------------------------------------------------------------------- Total net expenses 7,570 --------------------------------------------------------------------------- Investment income (loss) -- net 21,032 --------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions (17,665) Net change in unrealized appreciation (depreciation) on investments 31,188 --------------------------------------------------------------------------- Net gain (loss) on investments 13,523 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 34,555 ---------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 21,032 $ 77,188 Net realized gain (loss) on investments (17,665) (14,681) Net change in unrealized appreciation (depreciation) on investments 31,188 (78,840) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 34,555 (16,333) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income -- (89,938) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 37,544 442,726 Net asset value of shares issued for reinvestment of distributions -- 89,938 Payments for redemptions of shares (77,690) (557,296) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (40,146) (24,632) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (5,591) (130,903) Net assets at beginning of period 1,811,986 1,942,889 --------------------------------------------------------------------------------------------- Net assets at end of period $1,806,395 $1,811,986 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 95,822 $ 74,790 ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $8.09 $8.57 $8.57 $8.80 $9.27 $10.85 ------------------------------------------------------------------------------------------------------------ INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) .10 .34 .39 .41 .34 .34 Net gains (losses) (both realized and unrealized) .05 (.40) .08 (.09) (.26) (.07) ------------------------------------------------------------------------------------------------------------ Total from investment operations .15 (.06) .47 .32 .08 .27 ------------------------------------------------------------------------------------------------------------ LESS DISTRIBUTIONS: Dividends from net investment income -- (.42) (.47) (.55) (.55) (.91) Dividends from net realized gain (loss) -- -- -- -- -- (.94) ------------------------------------------------------------------------------------------------------------ Total distributions -- (.42) (.47) (.55) (.55) (1.85) ------------------------------------------------------------------------------------------------------------ Net asset value, end of period $8.24 $8.09 $8.57 $8.57 $8.80 $9.27 ------------------------------------------------------------------------------------------------------------ RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $2 $2 $3 $4 Gross expenses prior to expense waiver/reimbursement(c) 2.51%(d) 2.20% 2.48% 2.38% 1.70% 1.11% ------------------------------------------------------------------------------------------------------------ Net expenses after expense waiver/reimbursement(c),(e) .85%(d) .85% .85% .85% .85% .85% ------------------------------------------------------------------------------------------------------------ Net investment income (loss) 2.36%(d) 3.97% 4.49% 4.59% 3.67% 3.13% ------------------------------------------------------------------------------------------------------------ Portfolio turnover rate 157% 232% 281% 768% 597% 184% ------------------------------------------------------------------------------------------------------------ Total return(f) 1.85%(g) (.70%) 5.59% 3.61% .95% 2.41% ------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized. (h) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Investment Grade Fixed Income Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund has 100 million authorized shares of capital stock. The Fund invests in fixed-income securities, diversified among a number of market sectors. The Fund has a fundamental policy that at least 80% of the Fund's assets will be invested in securities that are rated investment-grade when purchased by the Fund. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. SECURITIES PURCHASED ON A FORWARD-COMMITMENT BASIS Delivery and payment for securities that have been purchased by the Fund on a forward-commitment basis, including when-issued securities and other forward- commitments, can take place one month or more after the transaction date. During this period, such securities are subject to market fluctuations, and they may affect the Fund's net assets the same as owned securities. The Fund designates cash or liquid securities at least equal to the amount of its forward- commitments. At June 30, 2009, the Fund has outstanding when-issued securities of $130,403. The Fund also enters into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended June 30, 2009. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.345% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.40% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.38% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.07% to 0.04% annually as the Fund's assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $8. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 0.85% of the Fund's average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.45% per annum of the average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.85% of the Fund's average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $2,374,600 and $2,167,240, respectively, for -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- Sold 4,656 51,096 Reinvested distributions -- 11,063 Redeemed (9,578) (64,946) -------------------------------------------------------------------- Net increase (decrease) (4,922) (2,787) --------------------------------------------------------------------
6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $679,774 and $299,144, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $131,238 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2013 2014 $56,148 $75,090
Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $23,719 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 9. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts of disclosures in the Fund's financial statements. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------- The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ------------------------ On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2009 SEMIANNUAL REPORT SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9968 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN SMALLER-CAP VALUE PORTFOLIO SELIGMAN SMALLER-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Smaller-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 13 Statement of Operations............ 14 Statements of Changes in Net Assets........................... 15 Financial Highlights............... 16 Notes to Financial Statements...... 18 Proxy Voting....................... 28 Change in Independent Registered Public Accounting Firm........... 29
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Smaller-Cap Value Portfolio Class 1 shares gained 7.72% for the six- month period ended June 30, 2009. > The Fund significantly outperformed its benchmark, the Russell 2000(R) Value Index, which declined 5.17% during the same six-month period. > The Fund outperformed its peer group, as represented by the Lipper Small-Cap Core Funds Average, which rose 6.30% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 --------------------------------------------------------------------------------------- Seligman Smaller Cap Value Portfolio Class 1 +7.72% -23.64% -8.45% -2.41% +6.41% N/A --------------------------------------------------------------------------------------- Class 2 +7.49% -23.77% -8.62% -2.63% N/A +4.52% --------------------------------------------------------------------------------------- Russell 2000 Value Index(1) (unmanaged) -5.17% -25.24% -12.07% -2.27% +5.00% +5.58% --------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Average(2) +6.30% -25.41% -10.08% -1.63% +4.35% +3.11% --------------------------------------------------------------------------------------- Lipper Small-Cap Value Funds Average(3) +4.70% -24.24% -10.71% -1.70% +5.24% +5.52% ---------------------------------------------------------------------------------------
*Not annualized. **For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the index does not reflect the effect of expenses. It is not possible to invest directly in an average or index. (1) The Russell 2000 Value Index, an unmanaged index, measures the performance of those Russell 2000 companies with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Lipper Small-Cap Core Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity small-cap ceiling. Small-cap core funds typically have an average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P SmallCap 600 Index. The average reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Small-Cap Value Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) below Lipper's U.S. Diversified Equity small-cap ceiling. Small-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P SmallCap 600 Index. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE MEDIUM SIZE X SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Consumer Discretionary 11.8% ------------------------------------------------ Consumer Staples 8.2% ------------------------------------------------ Energy 3.4% ------------------------------------------------ Financials 18.1% ------------------------------------------------ Health Care 6.2% ------------------------------------------------ Industrials 28.9% ------------------------------------------------ Information Technology 19.4% ------------------------------------------------ Materials 3.6% ------------------------------------------------ Other(2) 0.4% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. A portfolio with fewer holdings, such as Seligman Smaller-Cap Value Portfolio, may be subject to greater volatility than a portfolio with a greater number of holdings. Investments in small-capitalization companies involve greater risks and volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
F5 Networks 4.6% ------------------------------------------------ Lincoln Natl 4.2% ------------------------------------------------ Cubic 4.1% ------------------------------------------------ Fred's Cl A 4.0% ------------------------------------------------ EnerSys 3.5% ------------------------------------------------ Delta Air Lines 3.5% ------------------------------------------------ Herbalife 3.4% ------------------------------------------------ Quest Software 3.4% ------------------------------------------------ Aspen Insurance Holdings 3.2% ------------------------------------------------ Hanover Insurance Group 3.2% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expense of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,077.20 $6.64(c) 1.29% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.40 $6.46(c) 1.29% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,074.90 $7.61(c) 1.48% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.46 $7.40(c) 1.48% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended June 30, 2009: +7.72% for Class 1 and +7.49% for Class 2. (c) The Investment Manager and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 1.22% for Class 1 and 1.47% for Class 2. Any amounts waived will not be reimbursed by the Fund. This change was effective May 11, 2009. Had this change been in place for the entire six month period ended June 30, 2009, the actual expenses paid would have been $6.28 for Class 1 and $7.56 for Class 2; the hypothetical expenses paid would have been $6.11 for Class 1 and $7.35 for Class 2. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (100.4%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (4.2%) Cubic 95,000 $3,400,050 ------------------------------------------------------------------------------------- AIRLINES (5.4%) Continental Airlines Cl B 170,000(b) 1,506,200 Delta Air Lines 500,000(b) 2,895,000 --------------- Total 4,401,200 ------------------------------------------------------------------------------------- BEVERAGES (2.6%) Central European Distribution 80,000(b) 2,125,600 ------------------------------------------------------------------------------------- CHEMICALS (1.7%) Minerals Technologies 40,000 1,440,800 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (4.3%) Brink's 50,000 1,451,500 Waste Connections 80,000(b) 2,072,800 --------------- Total 3,524,300 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.6%) F5 Networks 110,000(b) 3,804,900 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.0%) Shaw Group 60,000(b) 1,644,600 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (1.9%) Owens-Illinois 55,000(b) 1,540,550 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (2.1%) Sotheby's 120,000 1,693,200 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (7.9%) Belden 85,000 1,419,500 EnerSys 160,000(b) 2,910,400 SunPower Cl B 35,000(b) 838,250 Thomas & Betts 46,500(b) 1,341,990 --------------- Total 6,510,140 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (3.4%) Exterran Holdings 70,000(b) 1,122,800 TETRA Technologies 210,000(b) 1,671,600 --------------- Total 2,794,400 ------------------------------------------------------------------------------------- FOOD PRODUCTS (2.2%) Smithfield Foods 130,000(b) 1,816,100 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.8%) Analogic 17,400 642,930 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (2.5%) WellCare Health Plans 110,000(b) 2,033,900 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (3.0%) Eclipsys 140,000(b) 2,489,200 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (5.9%) Penn Natl Gaming 90,000(b) 2,619,900 Texas Roadhouse Cl A 200,000(b) 2,182,000 --------------- Total 4,801,900 ------------------------------------------------------------------------------------- INSURANCE (18.1%) Aspen Insurance Holdings 120,000(c) 2,680,800 Endurance Specialty Holdings 70,000(c) 2,051,000 Hanover Insurance Group 70,000 2,667,700 Infinity Property & Casualty 50,000 1,823,000 Lincoln Natl 200,000 3,441,999 WR Berkley 105,000 2,254,350 --------------- Total 14,918,849 ------------------------------------------------------------------------------------- IT SERVICES (2.6%) CACI Intl Cl A 50,000(b) 2,135,500 ------------------------------------------------------------------------------------- MACHINERY (2.3%) Mueller Inds 90,000 1,872,000 ------------------------------------------------------------------------------------- MULTILINE RETAIL (4.0%) Fred's Cl A 260,000 3,276,000 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (3.5%) Herbalife 90,000(c) 2,838,600 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (2.8%) School Specialty 112,000(b) 2,263,520 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (6.2%) Cypress Semiconductor 200,000(b) $1,840,000 ON Semiconductor 263,600(b) 1,808,296 Varian Semiconductor Equipment Associates 60,950(b) 1,462,191 --------------- Total 5,110,487 ------------------------------------------------------------------------------------- SOFTWARE (6.1%) Lawson Software 390,000(b) 2,176,200 Quest Software 200,000(b) 2,788,000 --------------- Total 4,964,200 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (0.3%) Aegean Marine Petroleum Network 15,300(c) 231,030 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $94,961,689) $82,273,956 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 341,733(d) $341,733 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $341,733) $341,733 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $95,303,422)(e) $82,615,689 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the value of foreign securities represented 9.5% of net assets. (d) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (e) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $95,303,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $10,293,000 Unrealized depreciation (22,980,000) ----------------------------------------------------------- Net unrealized depreciation $(12,687,000) -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 -------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Equity Securities Common Stocks $82,273,956(a) $-- $-- $82,273,956 ----------------------------------------------------------------------------------- Total Equity Securities 82,273,956 -- -- 82,273,956 ----------------------------------------------------------------------------------- Other Affiliated Money Market Fund 341,733(b) -- -- 341,733 ----------------------------------------------------------------------------------- Total Other 341,733 -- -- 341,733 ----------------------------------------------------------------------------------- Total $82,615,689 $-- $-- $82,615,689 -----------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $94,961,689) $ 82,273,956 Affiliated money market fund (identified cost $341,733) 341,733 ------------------------------------------------------------------------------- Total investments in securities (identified cost $95,303,422) 82,615,689 Dividends and accrued interest receivable 10,903 ------------------------------------------------------------------------------- Total assets 82,626,592 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 331,848 Payable for investment securities purchased 230,866 Accrued investment management services fees 69,265 Accrued distribution fees 4,285 Accrued transfer agency fees 4,445 Accrued administrative services fees 5,926 Other accrued expenses 66,345 ------------------------------------------------------------------------------- Total liabilities 712,980 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 81,913,612 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 15,962 Additional paid-in capital 108,001,907 Net operating loss (282,859) Accumulated net realized gain (loss) (13,133,665) Unrealized appreciation (depreciation) on investments (12,687,733) ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 81,913,612 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $62,971,816 12,192,213 $5.16 Class 2 $18,941,796 3,769,862 $5.02 ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 219,840 Income distributions from affiliated money market fund 748 ------------------------------------------------------------------------------- Total income 220,588 ------------------------------------------------------------------------------- Expenses: Investment management services fees 367,955 Distribution fees Class 2 21,798 Transfer agency fees Class 1 15,298 Class 2 3,486 Administrative services fees 9,663 Compensation of board members 1,235 Custodian fees 26,606 Printing and postage 22,549 Professional fees 27,563 Other 5,736 ------------------------------------------------------------------------------- Total net expenses 501,889 ------------------------------------------------------------------------------- Investment income (loss) -- net (281,301) ------------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (11,946,897) Net change in unrealized appreciation (depreciation) on investments 17,743,768 ------------------------------------------------------------------------------- Net gain (loss) on investments 5,796,871 ------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 5,515,570 -------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (281,301) $ (890,509) Net realized gain (loss) on investments (11,946,897) (1,089,345) Net change in unrealized appreciation (depreciation) on investments 17,743,768 (62,280,091) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 5,515,570 (64,259,945) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net realized gain Class 1 -- (33,558,758) Class 2 -- (10,283,193) --------------------------------------------------------------------------------------------- Total distributions -- (43,841,951) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 6,987,256 44,163,742 Class 2 shares 992,583 2,503,070 Reinvestment of distributions at net asset value Class 1 shares -- 33,558,758 Class 2 shares -- 10,283,193 Payments for redemptions Class 1 shares (12,238,325) (77,916,550) Class 2 shares (2,485,085) (10,017,638) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (6,743,571) 2,574,575 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,228,001) (105,527,321) Net assets at beginning of period 83,141,613 188,668,934 --------------------------------------------------------------------------------------------- Net assets at end of period $ 81,913,612 $ 83,141,613 --------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (282,859) $ (1,558) ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS 1 PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $4.79 $17.21 $18.51 $16.67 $19.40 $16.20 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.01) (.09) (.11) (.12) (.07) .08 Net gains (losses) (both realized and unrealized) .38 (6.83) .90 3.66 (.71) 3.15 ----------------------------------------------------------------------------------------------------------------- Total from investment operations .37 (6.92) .79 3.54 (.78) 3.23 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- (.11) -- Dividends from net realized gain (loss) -- (5.50) (2.09) (1.70) (1.84) (.03) ----------------------------------------------------------------------------------------------------------------- Total distributions -- (5.50) (2.09) (1.70) (1.95) (.03) ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.16 $4.79 $17.21 $18.51 $16.67 $19.40 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $63 $64 $148 $188 $199 $268 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.29%(d) 1.22% 1.14% 1.13% 1.14% 1.14% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.71%)(d) (.63%) (.58%) (.66%) (.37%) .47% ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 14% 27% 32% 23% 45% ----------------------------------------------------------------------------------------------------------------- Total return(e) 7.72%(f) (39.53%) 4.14% 21.25% (3.98%) 19.95% -----------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS 2 PER SHARE INCOME AND CAPITAL CHANGES(a)
FISCAL PERIOD ENDED DEC. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $4.67 $17.03 $18.37 $16.59 $19.26 $16.13 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.01) (.11) (.15) (.15) (.10) .05 Net gains (losses) (both realized and unrealized) .36 (6.75) .90 3.63 (.70) 3.11 ----------------------------------------------------------------------------------------------------------------- Total from investment operations .35 (6.86) .75 3.48 (.80) 3.16 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- (.03) -- Dividends from net realized gain (loss) -- (5.50) (2.09) (1.70) (1.84) (.03) ----------------------------------------------------------------------------------------------------------------- Total distributions -- (5.50) (2.09) (1.70) (1.87) (.03) ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $5.02 $4.67 $17.03 $18.37 $16.59 $19.26 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $19 $19 $41 $41 $36 $35 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.48%(d) 1.42% 1.33% 1.32% 1.33% 1.33% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.89%)(d) (.83%) (.77%) (.85%) (.56%) .28% ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 7% 14% 27% 32% 23% 45% ----------------------------------------------------------------------------------------------------------------- Total return(e) 7.49%(f) (39.58%) 3.96% 20.99% (4.13%) 19.60% -----------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (f) Not annualized. (g) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Smaller-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 150 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in the common stock of "value" companies with smaller market capitalization ($3 billion or less) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.935% to 0.745% annually as the Fund's assets increase. Prior to May 11, 2009, the Investment Manager received a fee equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.80% annually as the Fund's assets increased. The management fee for the six months ended June 30, 2009 was 0.98% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's net assets increase for the six months ended June 30, 2009. For the period from May 11, 2009 to June 30, 2009, the fee was 0.03% of the Fund's average daily net assets. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $312. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent at an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*), were as follows: Class 1............................................. 1.29% Class 2............................................. 1.48
Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 1.22% Class 2............................................. 1.47
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $5,158,159 and $10,705,258, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- CLASS 1 -------------------------------------------------------------------- Sold 1,746,980 3,947,171 Reinvested distributions -- 7,155,385 Redeemed (2,885,973) (6,357,579) -------------------------------------------------------------------- Net increase (decrease) (1,138,993) 4,744,977 -------------------------------------------------------------------- CLASS 2 -------------------------------------------------------------------- Sold 228,902 200,590 Reinvested distributions -- 2,250,152 Redeemed (577,651) (733,602) -------------------------------------------------------------------- Net increase (decrease) (348,749) 1,717,140 --------------------------------------------------------------------
6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $3,219,034 and $2,877,301, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility became effective June 18, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent, to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each participating fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings during the six months ended June 30, 2009. 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of re-characterization of REIT distributions and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $3,276,669 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 9. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the fund's financial statements. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- SMALLER-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 SELIGMAN SMALLER-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9953 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO SEEKS CAPITAL GAINS. Seligman Communications and Information Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 13 Statement of Operations............ 14 Statements of Changes in Net Assets........................... 15 Financial Highlights............... 16 Notes to Financial Statements...... 18 Proxy Voting....................... 29 Change in Independent Registered Public Accounting Firm........... 30
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Communications and Information Portfolio Class 1 shares gained 27.59% for the six-month period ended June 30, 2009. > The Fund outperformed its benchmark, the S&P North American Technology Sector Index, which gained 26.23% during the same six-month period. > The Fund also outperformed its peer group, as represented by the Lipper Science & Technology Funds Average, which rose 24.64% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 ------------------------------------------------------------------------------------- Seligman Communications and Information Portfolio Class 1 +27.59% -12.19% +3.12% +5.30% +2.75% N/A ------------------------------------------------------------------------------------- Class 2 +27.32% -12.40% +2.87% +5.02% N/A -3.41% ------------------------------------------------------------------------------------- S&P North American Technology Sector Index(1) (unmanaged) +26.23% -18.57% -1.29% -1.02% -5.23% -10.41% ------------------------------------------------------------------------------------- S&P 500 Index(2) (unmanaged) +3.16% -26.21% -8.22% -2.24% -2.22% -3.24% ------------------------------------------------------------------------------------- Lipper Science & Technology Funds Average(3) +24.64% -20.32% -4.23% -1.29% -4.18% -11.49% -------------------------------------------------------------------------------------
*Not annualized. **For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the subaccount, the annuity or life insurance contract, or any pension or retirement plan, including administrative fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses. It is not possible to invest directly in an average or index. (1) The Standard & Poor's North American Technology Sector Index (S&P NATS Index) is composed of equity benchmarks of US technology-related stocks. The index reflects reinvestment of all distributions and changes in market prices. (2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Science & Technology Funds Average is an average of funds that invest at least 65% of their equity portfolios in science and technology stocks. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH LARGE X MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Health Care 10.5% ------------------------------------------------ Industrials 0.1% ------------------------------------------------ Information Technology 76.5% ------------------------------------------------ Telecommunication Services 0.4% ------------------------------------------------ Other(2) 12.5% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Synopsys 7.0% ------------------------------------------------ Check Point Software Technologies 5.5% ------------------------------------------------ Amdocs 5.3% ------------------------------------------------ BMC Software 4.8% ------------------------------------------------ NetApp 4.7% ------------------------------------------------ Apple 4.7% ------------------------------------------------ Microsoft 4.6% ------------------------------------------------ Symantec 4.3% ------------------------------------------------ QUALCOMM 3.9% ------------------------------------------------ Open Text 3.6% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract, life insurance policy or through a qualified pension or retirement plan and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company or plan. As a contract/policy owner or plan holder investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts, life insurance policies and/or pension or retirement plans. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount, the contract or expenses associated with an investment through a qualified pension or retirement plan. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount, the contract or the plan were included, your costs would have been higher.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,275.90 $6.94 $7.00 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.70 $6.16 $6.21 ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,273.20 $8.23 $8.29 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.55 $7.30 $7.35 ------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES ---------------------------------------------------------------------- Class 1 1.23% .01% 1.24% ---------------------------------------------------------------------- Class 2 1.46% .01% 1.47% ----------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (c) Based on the actual return for the six months ended June 30, 2009: +27.59% for Class 1 and +27.32% for Class 2. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (89.0%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.1%) DigitalGlobe 1,228(b) $23,578 ------------------------------------------------------------------------------------- APPLICATION SOFTWARE (3.4%) Aspen Technology 20,200(b) 172,407 Mentor Graphics 105,200(b) 575,444 Parametric Technology 61,100(b) 714,259 --------------- Total 1,462,110 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (9.7%) Brocade Communications Systems 24,000(b) 187,680 Cisco Systems 77,500(b) 1,444,600 NICE Systems ADR 4,814(b,c) 111,059 Nortel Networks 16(b,c) 1 Polycom 6,700(b) 135,809 QUALCOMM 37,400 1,690,480 Riverbed Technology 24,900(b) 577,431 --------------- Total 4,147,060 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (17.7%) Apple 14,300(b) 2,036,749 Electronics for Imaging 66,200(b) 705,692 EMC 103,400(b) 1,354,540 Hewlett-Packard 38,700 1,495,755 NetApp 103,600(b) 2,042,992 --------------- Total 7,635,728 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (0.5%) Qwest Communications Intl 46,500 192,975 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (6.1%) Baxter Intl 8,200 434,272 Covidien 5,800(c) 217,152 Kinetic Concepts 12,100(b) 329,725 Medtronic 16,100 561,729 St. Jude Medical 14,000(b) 575,400 Varian Medical Systems 14,000(b) 491,960 --------------- Total 2,610,238 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.1%) AmerisourceBergen 14,600 259,004 DaVita 1,755(b) 86,802 Laboratory Corp of America Holdings 14,500(b) 982,955 --------------- Total 1,328,761 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (14.5%) eBay 24,100(b) 412,833 LogMein 1,303(b) 20,848 McAfee 29,600(b) 1,248,824 Open Text 43,100(b,c) 1,569,702 SonicWALL 29,500(b) 161,660 Symantec 121,623(b) 1,892,454 Yahoo! 57,500(b) 900,450 --------------- Total 6,206,771 ------------------------------------------------------------------------------------- IT SERVICES (6.6%) Amdocs 106,800(b,c) 2,290,860 Fidelity Natl Information Services 20,500 409,180 Fiserv 2,700(b) 123,390 --------------- Total 2,823,430 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (0.5%) Life Technologies 4,862(b) 202,843 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.0%) Abbott Laboratories 9,300 437,472 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (1.0%) Intel 13,100 216,805 Maxim Integrated Products 4,500 70,605 Xilinx 6,300 128,898 --------------- Total 416,308 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SYSTEMS SOFTWARE (17.6%) BMC Software 62,100(b) $2,098,359 Check Point Software Technologies 102,000(b,c) 2,393,940 Microsoft 84,700 2,013,319 Oracle 51,000 1,092,420 --------------- Total 7,598,038 ------------------------------------------------------------------------------------- TECHNICAL SOFTWARE (7.2%) Magma Design Automation 15,800(b) 23,068 Synopsys 156,000(b) 3,043,559 --------------- Total 3,066,627 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $40,822,899) $38,151,939 ------------------------------------------------------------------------------------- MONEY MARKET FUND (12.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 5,472,962(d) $5,472,962 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $5,472,962) $5,472,962 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $46,295,861)(e) $43,624,901 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the value of foreign securities represented 15.4% of net assets. (d) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (e) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $46,296,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $2,054,000 Unrealized depreciation (4,725,000) ----------------------------------------------------------- Net unrealized depreciation $(2,671,000) -----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 -------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL -------------------------------------------------------------------------------------- Equity Securities Common Stocks $38,151,939(a) $-- $-- $38,151,939 -------------------------------------------------------------------------------------- Total Equity Securities 38,151,939 -- -- 38,151,939 -------------------------------------------------------------------------------------- Other Affiliated Money Market Fund 5,472,962(b) -- -- 5,472,962 -------------------------------------------------------------------------------------- Total Other 5,472,962 -- -- 5,472,962 -------------------------------------------------------------------------------------- Total $43,624,901 $-- $-- $43,624,901 --------------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $40,822,899) $ 38,151,939 Affiliated money market fund (identified cost $5,472,962) 5,472,962 ------------------------------------------------------------------------------- Total investments in securities (identified cost $46,295,861) 43,624,901 Foreign currency holdings (identified cost $277,174) 280,498 Capital shares receivable 51,047 Dividends and accrued interest receivable 6,888 Receivable for investment securities sold 184,680 ------------------------------------------------------------------------------- Total assets 44,148,014 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 29,200 Payable for investment securities purchased 1,188,129 Accrued investment management services fees 25,644 Accrued distribution fees 4,008 Accrued transfer agency fees 2,182 Accrued administrative services fees 2,183 Other accrued expenses 40,052 ------------------------------------------------------------------------------- Total liabilities 1,291,398 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 42,856,616 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 2,710 Additional paid-in capital 65,230,617 Net operating loss (168,989) Accumulated net realized gain (loss) (19,540,086) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,667,636) ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 42,856,616 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $23,022,177 1,439,314 $16.00 Class 2 $19,834,439 1,270,348 $15.61 ----------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 53,652 Interest 4,418 Income distributions from affiliated money market fund 1,475 ------------------------------------------------------------------------------ Total income 59,545 ------------------------------------------------------------------------------ Expenses: Investment management services fees 127,092 Distribution fees -- Class 2 16,566 Transfer agency fees Class 1 7,779 Class 2 3,562 Administrative services fees 3,502 Compensation of board members 594 Custodian fees 20,865 Printing and postage 18,276 Professional fees 25,765 Other 3,722 ------------------------------------------------------------------------------ Total net expenses 227,723 ------------------------------------------------------------------------------ Investment income (loss) -- net (168,178) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (2,198,706) Foreign currency transactions (1,774) ------------------------------------------------------------------------------ Net realized gain (loss) on investments (2,200,480) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 10,768,326 ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 8,567,846 ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 8,399,668 ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (168,178) $ (382,458) Net realized gain (loss) on investments (2,200,480) (3,689,499) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 10,768,326 (15,112,469) -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 8,399,668 (19,184,426) -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 94,836 1,342,451 Class 2 shares 9,264,790 4,018,842 Payments for redemptions Class 1 shares (2,293,990) (7,143,629) Class 2 shares (2,684,500) (5,959,598) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 4,381,136 (7,741,934) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 12,780,804 (26,926,360) Net assets at beginning of period 30,075,812 57,002,172 -------------------------------------------------------------------------------------------------- Net assets at end of period $42,856,616 $ 30,075,812 -------------------------------------------------------------------------------------------------- Net operating loss $ (168,989) $ (811) --------------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS 1 PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $12.54 $19.66 $17.04 $13.93 $12.92 $11.62 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.06) (.13) (.11) (.08) (.10) (.02) Net gains (losses) (both realized and unrealized) 3.52 (6.99) 2.73 3.19 1.11 1.32 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 3.46 (7.12) 2.62 3.11 1.01 1.30 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $16.00 $12.54 $19.66 $17.04 $13.93 $12.92 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $23 $20 $38 $42 $47 $59 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.23%(d) 1.15% 1.10% 1.05% 1.10% 1.00% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.89%)(d) (.78%) (.59%) (.54%) (.77%) (.15%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 129% 199% 181% 133% 128% ----------------------------------------------------------------------------------------------------------------- Total return(e) 27.59%(f) (36.22%) 15.37% 22.33% 7.82% 11.19% -----------------------------------------------------------------------------------------------------------------
CLASS 2 PER SHARE INCOME AND CAPITAL CHANGES(a)
Fiscal period ended Dec. 31, 2009(g) 2008 2007 2006 2005 2004 Net asset value, beginning of period $12.26 $19.27 $16.74 $13.72 $12.76 $11.51 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.08) (.17) (.15) (.12) (.13) (.05) Net gains (losses) (both realized and unrealized) 3.43 (6.84) 2.68 3.14 1.09 1.30 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 3.35 (7.01) 2.53 3.02 .96 1.25 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $15.61 $12.26 $19.27 $16.74 $13.72 $12.76 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $20 $10 $19 $16 $12 $12 ----------------------------------------------------------------------------------------------------------------- Total expenses(c) 1.46%(d) 1.40% 1.35% 1.30% 1.35% 1.25% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.11%)(d) (1.03%) (.84%) (.79%) (1.02%) (.40%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 68% 129% 199% 181% 133% 128% ----------------------------------------------------------------------------------------------------------------- Total return(e) 27.32%(f) (36.38%) 15.11% 22.01% 7.52% 10.86% -----------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (f) Not annualized. (g) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Communications and Information Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Fund has 150 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in securities of companies operating in the communications, information and related industries. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. Shares are also offered through certain qualified pension or retirement plans. You invest by purchasing a variable annuity contract or life insurance policy or through a qualified pension or retirement plan and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/ -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager), as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At June 30, 2009, foreign currency holdings were entirely comprised of Taiwan dollars. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a foreign currency contract fluctuates with changes in foreign currency exchange rates. Foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the foreign currency contract is closed. The risks of foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount reflected in the Statement of Assets and Liabilities. At June 30, 2009, the Fund had no outstanding forward foreign currency contracts. OPTION TRANSACTIONS The Fund may buy and write options traded on any U.S. or foreign exchange or in the over-the-counter (OTC) market to produce incremental earnings, protect gains, and facilitate buying and selling of securities for investments. The Fund may also buy and sell put and call options and write covered call options on portfolio securities. Options are contracts which entitle the holder to purchase or sell securities or other financial instruments at a specified price, or in the case of index options, to receive or pay the difference between the index value and the strike price of the index option. Completion of transactions for options traded in the OTC market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain OTC options trades. Cash collateral held or posted by the Fund for such option trades must be -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- returned to the counterparty or the Fund upon closure, exercise or expiration of the contract. Option contracts purchased are recorded as investments and options contracts written are recorded as liabilities of the Fund. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The Fund's maximum payout in the case of written put option contracts represents the maximum potential amount of future payments (undiscounted) that the Fund could be required to make as a guarantor for written put options. For OTC options contracts, the transaction is also subject to counterparty credit risk. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained upon the exercise of the put options by holders of the option contracts or proceeds received upon entering into the contracts. At June 30, 2009, and for the six months then ended, the Fund had no outstanding written or purchased option contracts. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.705% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.75% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.74% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $99. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $22,837,819 and $22,293,063, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 ---------------------------------------------------------------------- CLASS 1 ---------------------------------------------------------------------- Sold 6,573 78,101 Redeemed (161,210) (437,386) ---------------------------------------------------------------------- Net increase (decrease) (154,637) (359,285) ---------------------------------------------------------------------- CLASS 2 ---------------------------------------------------------------------- Sold 643,445 232,317 Redeemed (195,910) (374,650) ---------------------------------------------------------------------- Net increase (decrease) 447,535 (142,333) ----------------------------------------------------------------------
7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $8,540,506 and $3,067,544, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- other temporary or emergency purposes. The credit facility became effective June 18, 2009, replacing a prior credit facility. The credit facility agreement, which is a collective agreement between the Fund and certain other funds in the RiverSource Family of Funds, severally and not jointly, permits collective borrowings up to $475 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $175 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $650 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each participating fund based on its borrowings at a rate equal to the federal funds rate plus 0.75%. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.06% per annum. Under the prior credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings during the six months ended June 30, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, foreign currency transactions, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $15,573,286 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2010 2011 2016 $7,829,523 $5,578,202 $2,165,561
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1, 2008, and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $1,077,310 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota. In response to defendants' motion to dismiss the complaint, the Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals on August 8, 2007. On April 8, 2009, the Eighth Circuit -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2009 SEMIANNUAL REPORT SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9951 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN LARGE-CAP VALUE PORTFOLIO SELIGMAN LARGE-CAP VALUE PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Large-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 13 Statement of Operations............ 14 Statements of Changes in Net Assets........................... 15 Financial Highlights............... 16 Notes to Financial Statements...... 17 Proxy Voting....................... 26 Change in Independent Registered Public Accounting Firm........... 27
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Large-Cap Value Portfolio Class 1 shares gained 8.34% for the six- month period ended June 30, 2009. > The Fund significantly outperformed its benchmark, the Russell 1000(R) Value Index, which declined 2.87% during the same six-month period. > The Fund also significantly outperformed its peer group, as represented by the Lipper Large-Cap Value Funds Average, which rose 0.94% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- Seligman Large Cap Value Portfolio Class 1 +8.34% -23.68% -6.94% +0.34% -0.12% ------------------------------------------------------------------------- Russell 1000 Value Index(1) (unmanaged) -2.87% -29.03% -11.11% -2.13% -0.15% ------------------------------------------------------------------------- S&P 500 Index(2) (unmanaged) +3.16% -26.21% -8.22% -2.24% -2.22% ------------------------------------------------------------------------- Lipper Large-Cap Value Funds Average(3) +0.94% -26.94% -9.95% -2.39% -0.62% ------------------------------------------------------------------------- Lipper Multi-Cap Value Funds Average(4) +4.51% -26.87% -10.73% -2.45% +1.26% -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administrative fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses. It is not possible to invest directly in an average or index. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (1) The Russell 1000 Value Index, an unmanaged index, measures the performance of those stocks in the Russell 1000 Index with lower price-to-book ratios and lower forecasted growth values. The index reflects reinvestment of all distributions and changes in market prices. (2) The Standard & Poor's 500 Composite Stock Price Index (S&P 500 Index), an unmanaged index of common stocks, is frequently used as a general measure of market performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Large-Cap Value Funds Average is an average of funds that, by portfolio practice, invest at least 75% of their equity assets in companies with market capitalizations (on a three-year weighted basis) above Lipper's U.S. Diversified Equity large-cap floor. Large-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P 500 Index. The average reflects reinvestment of all distributions and changes in market prices. (4) The Lipper Multi-Cap Value Funds Average is an average of funds that, by portfolio practice, invest in a variety of market capitalization ranges without concentrating 75% of their equity assets in any one market capitalization range over an extended period of time above Lipper's U.S. Diversified Equity large-cap floor. Multi-cap value funds typically have a below average price-to-earnings ratio, price-to-book ratio, and three-year sales-per-share growth value relative to the S&P SuperComposite 1500 Index. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. SECTOR DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Consumer Discretionary 9.1% ------------------------------------------------ Consumer Staples 10.4% ------------------------------------------------ Energy 8.4% ------------------------------------------------ Financials 31.2% ------------------------------------------------ Health Care 11.4% ------------------------------------------------ Industrials 16.2% ------------------------------------------------ Information Technology 3.2% ------------------------------------------------ Materials 4.4% ------------------------------------------------ Utilities 5.0% ------------------------------------------------ Other(2) 0.7% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeds 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. The sectors identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. A portfolio with fewer holdings, such as Seligman Large-Cap Value Portfolio, may be subject to greater volatility than a portfolio with a greater number of holdings. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Bank of America 5.9% ------------------------------------------------ AES 5.0% ------------------------------------------------ JPMorgan Chase & Co 4.6% ------------------------------------------------ Bristol-Myers Squibb 4.4% ------------------------------------------------ Tyson Foods Cl A 4.1% ------------------------------------------------ General Dynamics 3.9% ------------------------------------------------ Morgan Stanley 3.7% ------------------------------------------------ Gap 3.5% ------------------------------------------------ Marathon Oil 3.2% ------------------------------------------------ MetLife 3.2% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expense of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,083.40 $7.80(d) $7.85(d) ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,017.31 $7.55(d) $7.60(d) ------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ACQUIRED FUND ANNUALIZED FEES AND NET FUND EXPENSE RATIO EXPENSES EXPENSES ---------------------------------------------------------------------------- Class 1 1.51% .01% 1.52% ----------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Expenses are equal to the annualized expense ratio for each class plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (c) Based on the actual return of +8.34% for Class 1 shares for the six months ended June 30, 2009. (d) RiverSource Investments, LLC (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2010, unless sooner terminated at the discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 1.42% for Class 1 shares. Any amounts waived will not be reimbursed by the Fund. This change was effective May 11, 2009. Had this change been in place for the entire six month period ended June 30, 2009, the actual expenses paid would have been $7.34; the hypothetical expenses paid would have been $7.10. Additionally, had this change been in place for the entire six month period ended June 30, 2009, the actual direct and indirect expenses paid would have been $7.39; the hypothetical direct and indirect expenses paid would have been $7.15. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (100.1%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (9.3%) General Dynamics 1,300 $72,007 Honeywell Intl 1,500 47,100 United Technologies 1,000 51,960 --------------- Total 171,067 ------------------------------------------------------------------------------------- CAPITAL MARKETS (6.9%) Bank of New York Mellon 1,999 58,591 Morgan Stanley 2,400 68,424 --------------- Total 127,015 ------------------------------------------------------------------------------------- CHEMICALS (4.4%) EI du Pont de Nemours & Co 2,200 56,364 Praxair 350 24,875 --------------- Total 81,239 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.9%) US Bancorp 3,000 53,760 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (3.2%) Juniper Networks 2,500(b) 59,000 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (10.6%) Bank of America 8,300 109,560 JPMorgan Chase & Co 2,500 85,275 --------------- Total 194,835 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.8%) Costco Wholesale 600 27,420 Wal-Mart Stores 500 24,220 --------------- Total 51,640 ------------------------------------------------------------------------------------- FOOD PRODUCTS (4.1%) Tyson Foods Cl A 6,000 75,660 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (4.2%) Baxter Intl 800 42,368 Medtronic 1,000 34,890 --------------- Total 77,258 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.0%) Humana 1,700(b) 54,842 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (5.0%) AES 8,000(b) 92,880 ------------------------------------------------------------------------------------- INSURANCE (11.0%) MetLife 2,000 60,019 Prudential Financial 1,500 55,830 Travelers Companies 1,000 41,040 Unum Group 3,000 47,580 --------------- Total 204,469 ------------------------------------------------------------------------------------- MACHINERY (2.3%) Caterpillar 1,300 42,952 ------------------------------------------------------------------------------------- MULTILINE RETAIL (2.6%) JC Penney 1,700 48,807 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (8.5%) Chevron 500 33,125 Marathon Oil 2,000 60,260 Valero Energy 1,400 23,646 Williams Companies 2,500 39,025 --------------- Total 156,056 ------------------------------------------------------------------------------------- PHARMACEUTICALS (4.4%) Bristol-Myers Squibb 4,000 81,240 ------------------------------------------------------------------------------------- ROAD & RAIL (4.8%) CSX 1,500 51,945 Union Pacific 700 36,442 --------------- Total 88,387 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (6.5%) Gap 4,000 65,600 Lowe's Companies 2,800 54,348 --------------- Total 119,948 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TOBACCO (3.6%) Altria Group 1,400 $22,946 Philip Morris Intl 1,000 43,620 --------------- Total 66,566 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,992,977) $1,847,621 ------------------------------------------------------------------------------------- MONEY MARKET FUND (0.7%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 13,329(c) $13,329 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $13,329) $13,329 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,006,306)(d) $1,860,950 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Affiliated Money Market Fund -- See Note 6 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. (d) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $2,006,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $212,000 Unrealized depreciation (357,000) ---------------------------------------------------------- Net unrealized depreciation $(145,000) ----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements - Valuation of securities. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Equity Securities Common Stocks $1,847,621(a) $-- $-- $1,847,621 ---------------------------------------------------------------------------------- Total Equity Securities 1,847,621 -- -- 1,847,621 ---------------------------------------------------------------------------------- Other Affiliated Money Market Fund 13,329(b) -- -- 13,329 ---------------------------------------------------------------------------------- Total Other 13,329 -- -- 13,329 ---------------------------------------------------------------------------------- Total $1,860,950 $-- $-- $1,860,950 ----------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $1,992,977) $1,847,621 Affiliated money market fund (identified cost $13,329) 13,329 ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,006,306) 1,860,950 Dividends and accrued interest receivable 2,034 ----------------------------------------------------------------------------- Total assets 1,862,984 ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 69 Accrued investment management services fees 1,258 Accrued transfer agency fees 100 Accrued administrative services fees 100 Other accrued expenses 15,484 ----------------------------------------------------------------------------- Total liabilities 17,011 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $1,845,973 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 195 Additional paid-in capital 1,829,336 Undistributed net investment income 32,499 Accumulated net realized gain (loss) 129,299 Unrealized appreciation (depreciation) on investments (145,356) ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $1,845,973 ----------------------------------------------------------------------------- Shares outstanding 194,648 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 9.48 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 21,267 Income distributions from affiliated money market fund 13 ---------------------------------------------------------------------- Total income 21,280 ---------------------------------------------------------------------- Expenses: Investment management services fees 6,728 Transfer agency fees 165 Administrative services fees 165 Compensation of board members 28 Custodian fees 1,679 Printing and postage 2,958 Professional fees 6,139 Other 427 ---------------------------------------------------------------------- Total expenses 18,289 Expenses waived/reimbursed by the Investment Manager and its affiliates (5,331) ---------------------------------------------------------------------- Total net expenses 12,958 ---------------------------------------------------------------------- Investment income (loss) -- net 8,322 ---------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on investments (88,015) Net change in unrealized appreciation (depreciation) on investments 206,894 ---------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 118,879 ---------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $127,201 ----------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 8,322 $ 25,093 Net realized gain (loss) on investments (88,015) 274,071 Net change in unrealized appreciation (depreciation) on investments 206,894 (1,556,116) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 127,201 (1,256,952) --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income -- (22,736) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales of shares 57,345 284,580 Net asset value of shares issued for reinvestment of distributions -- 22,736 Payments for redemptions of shares (258,637) (964,871) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (201,292) (657,555) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (74,091) (1,937,243) Net assets at beginning of period 1,920,064 3,857,307 --------------------------------------------------------------------------------------------- Net assets at end of period $1,845,973 $ 1,920,064 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 32,499 $ 24,177 ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS 1 PER SHARE INCOME AND CAPITAL CHANGES(A)
FISCAL PERIOD ENDED DEC. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $8.75 $14.29 $13.15 $11.67 $10.65 $9.27 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) .02 .11 .07 .08 .07 .09 Net gains (losses) (both realized and unrealized) .71 (5.55) 1.17 1.50 1.06 1.41 ----------------------------------------------------------------------------------------------------------------- Total from investment operations .73 (5.44) 1.24 1.58 1.13 1.50 ----------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- (.10) (.10) (.10) (.11) (.12) ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.48 $8.75 $14.29 $13.15 $11.67 $10.65 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $4 $5 $5 $5 ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c) 2.14%(d) 1.95% 1.42% 1.32% 1.34% 1.26% ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c),(e) 1.51%(d) 1.54% 1.42% 1.32% 1.34% 1.26% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) .97%(d) .87% .51% .67% .65% .89% ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 35% 18% 11% 14% 27% 15% ----------------------------------------------------------------------------------------------------------------- Total return(f) 8.34%(g) (38.03%) 9.43% 13.57% 10.63% 16.25% -----------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized. (h) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Large-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund generally invests at least 80% of its net assets in the common stock of "value" companies with large market capitalization ($4 billion or more) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments have the same rights, and are generally identical in all respects except that each class bears its separate class specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. As of June 30, 2009 there are no Class 2 shares outstanding. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/ -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- dealers, coupon, maturity, quality, type of issue, trading characteristics, and other yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortization cost is an approximation of market value. Investments in money market funds are valued at net asset value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.755% to 0.565% annually as the Fund's assets increase. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.80% to 0.60% annually as the Fund's assets increased. The management fee for the six months ended June 30, 2009 was 0.79% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's net assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $8. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses of the Fund's Class 1 shares (excluding fees and expenses of acquired funds*), were 1.51% of the class average daily net assets. Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.62% per annum of Class 1 average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.42% of Class 1 average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $588,159 and $768,717, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- Sold 6,952 24,141 Reinvested distributions -- 2,622 Redeemed (31,671) (77,350) -------------------------------------------------------------------- Net increase (decrease) (24,719) (50,587) --------------------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 6. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $79,126 and $65,797, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 7. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1, 2008 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 2008, the Fund had a post-October loss of $151 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 9. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transaction that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 10. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. ( now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- LARGE-CAP VALUE PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 SELIGMAN LARGE-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9969 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN CASH MANAGEMENT PORTFOLIO SELIGMAN CASH MANAGEMENT PORTFOLIO SEEKS TO PRESERVE CAPITAL AND TO MAXIMIZE LIQUIDITY AND CURRENT INCOME. Seligman Cash Management Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 5 Portfolio of Investments........... 7 Statement of Assets and Liabilities...................... 10 Statement of Operations............ 11 Statements of Changes in Net Assets........................... 12 Financial Highlights............... 13 Notes to Financial Statements...... 14 Proxy Voting....................... 22 Change in Independent Registered Public Accounting Firm........... 23
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Cash Management Portfolio gained 0.04% for the six-month period ended June 30, 2009. > The Fund's annualized simple yield was 0.01% and its annualized compound yield was 0.01% for the seven-day period ended June 30, 2009. Short-term yields may be higher or lower than the figures shown. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- Seligman Cash Management Portfolio +0.04% +0.42% +2.70% +2.58% +2.73% -------------------------------------------------------------------------
* Not annualized. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administrative fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The Fund is neither insured nor guaranteed by the Federal Deposit Insurance Corporation (FDIC) or any other government agency. Although the Fund seeks to preserve the value of your investment at $1 per share, it is possible to lose money by investing in the Fund. Yields will fluctuate. The seven-day current yield more closely reflects the current earnings of the Fund than the total return. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
DURATION SHORT INT. LONG x HIGH MEDIUM QUALITY LOW
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. PORTFOLIO COMPOSITION (at June 30, 2009; % of portfolio assets) -------------------------------------------------------------------
U.S. Government Agencies 69.1% ------------------------------------------------ Other(1) 30.9% ------------------------------------------------
(1) Cash & Cash Equivalents. 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. Although the Fund seeks to preserve the value of your investment at $1.00 per share, it is possible to lose money by investing in the Fund. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received by the Fund in good order or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; and other Fund expenses. The example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expense which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expense of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
DIRECT AND DIRECT INDIRECT BEGINNING ENDING EXPENSES EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING PAID DURING JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(a) THE PERIOD(b) ------------------------------------------------------------------------------------------ Actual(c) $1,000 $1,000.40 $1.14 $1.19 ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,023.65 $1.15 $1.20 ------------------------------------------------------------------------------------------
ANNUALIZED EXPENSE RATIOS
FUND'S ANNUALIZED ACQUIRED FUND FEES AND EXPENSE RATIO EXPENSES NET FUND EXPENSES ---------------------------------------------------------------------------------- .23% .01% .24% ----------------------------------------------------------------------------------
(a) Expenses are equal to the Fund's annualized expense ratio as indirected above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Expenses are equal to the Fund"s annualized expense ratio plus the acquired fund fees and expenses, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (c) Based on the actual return of +0.04% for the six months ended June 30, 2009. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES U.S. GOVERNMENT AGENCIES (69.3%)
AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) Federal Farm Credit Bank Disc Nts 08-28-09 0.17% $2,000,000 $1,999,452 Federal Home Loan Bank Disc Nts 07-01-09 0.01 1,300,000 1,300,000 Federal Home Loan Mtge Corp Disc Nts 07-13-09 0.16 500,000 499,972 Federal Natl Mtge Assn Disc Nts 07-22-09 0.15 1,500,000 1,499,869 --------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost: $5,299,293) $5,299,293 ---------------------------------------------------------------------------
MONEY MARKET FUND (31.0%) SHARES VALUE(a) JPMorgan US Govt Money Market Fund 2,372,208 $2,372,208 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $2,372,208) $2,372,208 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $7,671,501)(b) $7,671,501 =====================================================================================
NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Also represents the cost of securities for federal income tax purposes at June 30, 2009. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Short-term securities are valued using amortized cost, as permitted under Rule 2a-7 of the Investment Company Act of 1940, as amended. Generally, amortized cost approximates the current fair value of these securities, but because the value is not obtained from a quoted price in an active market, such securities are reflected as Level 2. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ----------------------------------------------------------------------------------- Investments in Securities U.S. Government Agencies $-- $5,299,293 $-- $5,299,293 Money Market Fund 2,372,208 -- -- 2,372,208 ----------------------------------------------------------------------------------- Total $2,372,208 $5,299,293 $-- $7,671,501 -----------------------------------------------------------------------------------
HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (ii) The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $5,299,293) $5,299,293 Money market fund (identified cost $2,372,208) 2,372,208 ----------------------------------------------------------------------------- Total investments in securities (identified cost $7,671,501) 7,671,501 ----------------------------------------------------------------------------- LIABILITIES Dividends payable to shareholders 2 Capital shares payable 10,601 Accrued investment management services fees 2,405 Accrued transfer agency fees 1,654 Accrued administrative services fees 406 Other accrued expenses 8,187 ----------------------------------------------------------------------------- Total liabilities 23,255 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $7,648,246 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 7,651 Additional paid-in capital 7,640,595 ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $7,648,246 ----------------------------------------------------------------------------- Shares outstanding 7,651,054 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 1.00 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Interest 12,023 --------------------------------------------------------------------------- Expenses: Investment management services fees 15,344 Transfer agency fees 676 Administrative services fees 676 Compensation of board members 131 Custodian fees 7,438 Printing and postage 6,751 Professional fees 8,569 Other 1,823 --------------------------------------------------------------------------- Total expenses 41,408 Expenses waived/reimbursed by the Investment Manager and its affiliates (32,161) --------------------------------------------------------------------------- Total net expenses 9,247 --------------------------------------------------------------------------- Investment income (loss) -- net 2,776 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 2,776 ---------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 2,776 $ 133,899 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (2,776) (133,899) Net realized gain -- (1,086) --------------------------------------------------------------------------------------------- Total distributions (2,776) (134,985) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS AT CONSTANT $1 NET ASSET VALUE Proceeds from sales of shares 250,852 2,271,950 Net asset value of shares issued for reinvestment of distributions 2,773 134,985 Payments for redemptions of shares (815,072) (4,101,764) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (561,447) (1,694,829) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (561,447) (1,695,915) Net assets at beginning of period 8,209,693 9,905,608 --------------------------------------------------------------------------------------------- Net assets at end of period $7,648,246 $ 8,209,693 ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- PER SHARE INCOME AND CAPITAL CHANGES(A)
Fiscal period ended Dec. 31, 2009(i) 2008 2007 2006 2005 2004 Net asset value, beginning of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) .00(c) .01 .04 .04 .02 .01 ----------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.00)(c) (.01) (.04) (.04) (.02) (.01) Dividends from net realized gain (loss) -- (.00)(c) (.00)(c) -- -- -- ----------------------------------------------------------------------------------------------------------- Total distributions (.00)(c) (.01) (.04) (.04) (.02) (.01) ----------------------------------------------------------------------------------------------------------- Net asset value, end of period $1.00 $1.00 $1.00 $1.00 $1.00 $1.00 ----------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $8 $8 $10 $12 $15 $2 ----------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(d) 1.05%(e) .82% .83% .71% .73% 1.14% ----------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(f) .23%(e) .61% .70% .70% .70% .70% ----------------------------------------------------------------------------------------------------------- Net investment income (loss) .07%(e) 1.47% 4.30% 4.13% 2.71% .56% ----------------------------------------------------------------------------------------------------------- Total return(g) .04%(h) 1.45% 4.38% 4.24% 2.41% .62% -----------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) Rounds to zero. (d) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of acquired funds which it invests. Such indirect expenses are not included in the above reported expense ratios. (e) Adjusted to an annual basis. (f) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (g) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (h) Not annualized. (i) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Cash Management Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The Fund invests in U.S. dollar-denominated high-quality money market instruments. Such instruments include obligations of the U.S. Treasury, its agencies or instrumentalities, obligations of domestic and foreign banks (such as certificates of deposit and fixed time deposits), commercial paper and short-term corporate debt securities, and repurchase agreements with respect to these types of instruments. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES Pursuant to Rule 2a-7 of the 1940 Act, all securities are valued daily at amortized cost, which approximates market value. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to shareholders. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Dividends from net investment income are declared daily and reinvested monthly, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Interest income, including amortization of premium and discount, is recognized daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, RiverSource Investments, LLC (the Investment Manager) determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to 0.355% of the Fund's average daily net assets. Prior to May 11, 2009, the Investment Manager received a fee equal to 0.40% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.39% of the Fund's average daily net assets. The reduction in the investment management services fee on May 11, 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% annually as the Fund's net assets increase. For the period from -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- May 11, 2009 to June 30, 2009, the fee was 0.02% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $36. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES The Funds have a Transfer Agency and Servicing agreement with RiverSource Service Corporation. The fee under this agreement is uniform for each of the Funds at an annual rate of 0.06% of each Fund's average daily net assets. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses (excluding fees and expenses of acquired funds*) such that net expenses were 0.23% of the Fund's average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses will not exceed 0.70% of the Fund's average daily net assets. In addition, from time to time, the Investment Manager and its affiliates may limit the expenses of the Fund for the purpose of increasing the yield. This -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- expense limitation policy may be revised or terminated at any time without notice. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and unaffiliated pooled investment vehicles (including mutual funds and exchange-traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred directly by the Fund will vary. TEMPORARY MONEY MARKET FUND GUARANTY PROGRAM On Oct. 6, 2008, the Fund applied to participate in the initial term of the U.S. Department of Treasury's Temporary Guarantee Program for Money Market Funds (the Program), through Dec. 18, 2008 (the Initial Term), after obtaining the approval of the Board, including a majority of the independent trustees. On Dec. 2, 2008, the Board approved the Fund's participation in an extension of the Program through April 30, 2009 (the First Extended Term). On April 8, 2009, the Board approved the Fund's participation in an extension of the Program through Sept. 19, 2009 (the Second Extended Term). The Fund filed the extension notice with the U.S. Department of Treasury on April 13, 2009 to participate in the Second Extended Term of the Program. The Program covers shareholders of each participating money market fund for amounts they held in such funds as of the close of business on Sept. 19, 2008. Any increase in the number of shares of that fund held by a shareholder after the close of business on Sept. 19, 2008 will not be guaranteed. Any purchase of shares of a participating money market fund after the close of business on Sept. 19, 2008 will not be guaranteed. If shares of a participating fund held by a shareholder as of the close of business on Sept. 19, 2008 are sold before the guarantee is called upon, then the guarantee will only cover the lesser of (i) the number of fund shares held by the shareholder as of the close of business on Sept. 19, 2008, or (ii) the number of fund shares held by the shareholder on the date the guarantee is called upon. A participating fund shareholder who sells all of his or her shares after Sept. 19, 2008 (and before the guarantee is called upon) will no longer be covered by the guarantee, even if the shareholder subsequently reinvests in the fund or in another fund that is participating in the Program. Under the terms of the Program, the guarantee is called upon with respect to the Fund if the Board of the Fund makes a determination to liquidate the Fund. For shares covered by the guarantee, any difference between the amount a shareholder received in connection with the liquidation and $1.00 per share (a guarantee payment) will be covered by the U.S. Department of Treasury under the Program, subject to the overall amount available to all funds participating in the Program. Guarantee payments under the Program will not exceed the amount -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- available in the Program (at inception of the Program, approximately $50 billion was available to support guarantee payments). During the six months ended June 30, 2009, the Fund paid upfront fees to the U.S. Department of Treasury to participate in the Program. For the initial three-month term of the Program that expired on Dec. 18, 2008, the fee incurred by the Fund was 0.015% of its net asset value as of the close of business Sept. 19, 2008. The fee to participate in the First Extended Term of the Program through April 30, 2009 required an additional payment in the amount of 0.022% of its net asset value as of Sept. 19, 2008. The fee to participate in the Second Extended Term required an additional payment in the amount of 0.015% of its net asset value as of Sept. 19, 2008. The fees are being amortized over the period of the participation in the Program and are included as a component of other expenses in the Fund's Statement of Operations. The cost to participate will be borne by the Fund without regard to any expense limitation currently in effect, if any. However, to the extent the Investment Manager voluntarily limits the expenses of a fund for the purposes of supporting its yield, the cost to participate in the Second Extended Term may be absorbed by the Investment Manager. The Program will expire after the close of business on Sept. 18, 2009. 4. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. 5. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 6. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. ( now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- CASH MANAGEMENT PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 SELIGMAN CASH MANAGEMENT PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9965 A (8/09)
Semiannual Report (SELIGMAN LOGO) SELIGMAN PORTFOLIOS SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2009 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO SEEKS LONG-TERM CAPITAL APPRECIATION. Seligman Global Technology Portfolio (the Fund) is a series of Seligman Portfolios, Inc. Please remember that you may not buy (nor will you own) shares of the Fund directly. You invest by buying a variable annuity contract or variable life insurance policy and allocating your purchase payments to the variable subaccount or variable account (the accounts) that invests in the Fund. TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 15 Statement of Operations............ 16 Statements of Changes in Net Assets........................... 17 Financial Highlights............... 18 Notes to Financial Statements...... 20 Proxy Voting....................... 31 Change in Independent Registered Public Accounting Firm........... 31
RIVERSOURCE FAMILY OF FUNDS RiverSource Family of Funds includes funds branded "RiverSource," "RiverSource Partners," "Seligman" and "Threadneedle." These funds share the same Board of Directors/Trustees and officers. -------------------------------------------------------------------------------- 2 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT YOUR FUND AT A GLANCE --------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Global Technology Portfolio Class 1 shares gained 26.20% for the six- month period ended June 30, 2009. > The Fund outperformed its benchmark, the MSCI World IT Index, which gained 20.81% during the same six-month period. > The Fund underperformed its peer group, as represented by the Lipper Global Science & Technology Funds Average, which rose 30.13% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2009) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/00 ------------------------------------------------------------------------------------- Seligman Global Technology Portfolio Class 1 +26.20% -17.19% +0.34% +2.72% +1.02% N/A ------------------------------------------------------------------------------------- Class 2 +26.10% -17.40% +0.15% +2.53% N/A -6.18% ------------------------------------------------------------------------------------- MSCI World IT Index(1) (unmanaged) +20.81% -22.98% -4.43% -2.47% -6.56% -1.67% ------------------------------------------------------------------------------------- MSCI World Index(2) (unmanaged) +6.79% -29.01% -7.48% +0.57% -0.37% -11.67% ------------------------------------------------------------------------------------- Lipper Global Science & Technology Funds Average(3) +30.13% -21.14% -3.97% -1.12% -2.70% -8.90% -------------------------------------------------------------------------------------
*Not annualized. **For classes with less than 10 years performance. The performance information shown represents past performance and is not a guarantee of future results. The investment return and principal value of your investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The Fund's returns reflect the effect of fee waivers/reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the subaccount or the annuity or life insurance contract, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or higher than the performance information shown. You may obtain -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- performance information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com or calling 1(800) 221-2450. The performance of the indices does not reflect the effect of expenses. It is not possible to invest directly in an average or index. (1) The Morgan Stanley Capital International (MSCI) World Information Technology (IT) Index is a free float-adjusted market capitalization index designed to measure information technology stock performance in the global developed equity markets. The index reflects reinvestment of all distributions and changes in market prices. (2) The MSCI World Index is a free float-adjusted market capitalization index that is designed to measure global developed equity performance. The index reflects reinvestment of all distributions and changes in market prices. (3) The Lipper Global Science & Technology Funds Average is an average of funds that invest primarily in the equity securities of domestic and foreign companies engaged in science and technology. The average reflects reinvestment of all distributions and changes in market prices. -------------------------------------------------------------------------------- 4 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- STYLE MATRIX --------------------------------------------------------------------------------
STYLE VALUE BLEND GROWTH X LARGE MEDIUM SIZE SMALL
Shading within the style matrix approximates areas in which the Fund is designed to generally invest. The style matrix can be a valuable tool for constructing and monitoring your portfolio. It provides a frame of reference for distinguishing the types of stocks or bonds owned by a mutual fund, and may serve as a guideline for helping you build a portfolio. Investment products, including shares of mutual funds, are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value. COUNTRY DIVERSIFICATION(1) (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Canada 4.1% ------------------------------------------------ China 0.8% ------------------------------------------------ Guernsey 6.1% ------------------------------------------------ Israel 7.9% ------------------------------------------------ Japan 2.5% ------------------------------------------------ Luxembourg 0.3% ------------------------------------------------ Netherlands 0.9% ------------------------------------------------ Norway 1.5% ------------------------------------------------ Taiwan 3.6% ------------------------------------------------ United Kingdom 2.9% ------------------------------------------------ United States 66.0%* ------------------------------------------------ Other(2) 3.4% ------------------------------------------------
* Includes companies that derive at least 50% of their revenue from business outside the U.S. If these companies were excluded, the amount shown would have been less than 60%. (1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan) as of June 30, 2009. The Fund's composition is subject to change. (2) Cash & Cash Equivalents. There are specific risks associated with global investing, such as currency fluctuations, foreign taxation, differences in financial reporting practices, and rapid changes in political and economic conditions. Investing in one economic sector, such as technology, may be subject to greater price fluctuations than a portfolio of diversified investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2009; % of portfolio assets) ---------------------------------------------------------------------
Check Point Software Technologies (Israel) 6.4% ------------------------------------------------ Amdocs (Guernsey) 6.1% ------------------------------------------------ Synopsys (United States) 6.1% ------------------------------------------------ Symantec (United States) 5.2% ------------------------------------------------ NetApp (United States) 4.8% ------------------------------------------------ QUALCOMM (United States) 4.5% ------------------------------------------------ Apple (United States) 4.4% ------------------------------------------------ McAfee (United States) 4.4% ------------------------------------------------ Cisco Systems (United States) 4.1% ------------------------------------------------ BMC Software (United States) 4.1% ------------------------------------------------
Excludes cash & cash equivalents. For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- 6 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT FUND EXPENSES EXAMPLE ---------------------------------------------------------- (UNAUDITED) You may not buy (nor will you own) shares of the Fund directly. You invest by buying an annuity contract or life insurance policy and allocating your purchase payments to the subaccount that invests in the Fund. Your purchase price will be the next NAV calculated after your request is received in good order by the Fund or an authorized insurance company. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees and other expenses; distribution and service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds that underlie various annuity contracts and/or life insurance policies. In addition to the ongoing expenses which the Fund bears directly, the Fund's shareholders indirectly bear the ongoing expenses of any funds in which the Fund invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). The Fund's indirect expense from investing in the acquired funds is based on the Fund's pro rata portion of the ongoing expenses charged by acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. The example is based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2009. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading titled "Expenses paid during the period" to estimate the expenses you paid on your account during this period. HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund's actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect expenses that apply to the subaccount or the contract. Therefore, the second line of the table is useful in comparing ongoing costs of the Fund only, and will not help you determine the relative total costs of owning different funds underlying various annuity contracts and/or life insurance policies. In addition, if the expenses that apply to the subaccount or the contract were included, your costs would have been higher.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JAN. 1, 2009 JUNE 30, 2009 THE PERIOD(A) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,262.00 $10.66 1.90% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.37 $ 9.49 1.90% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,261.00 $12.05 2.15% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,014.13 $10.74 2.15% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for each class as indicated above, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). (b) Based on the actual return for the six months ended June 30, 2009: +26.20% for Class 1 and +26.10% for Class 2. -------------------------------------------------------------------------------- 8 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2009 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (96.0%) ISSUER SHARES VALUE(a) CANADA (4.1%) Open Text 5,100(b,c) $185,742 ------------------------------------------------------------------------------------- CHINA (0.8%) Longtop Financial Technologies ADR 1,000(b,c) 24,560 VanceInfo Technologies ADR 700(b,c) 10,339 --------------- Total 34,899 ------------------------------------------------------------------------------------- GUERNSEY (6.1%) Amdocs 12,900(b,c) 276,705 ------------------------------------------------------------------------------------- ISRAEL (7.9%) Check Point Software Technologies 12,211(b,c) 286,592 NICE Systems ADR 3,100(b,c) 71,517 --------------- Total 358,109 ------------------------------------------------------------------------------------- JAPAN (2.5%) Hirose Electric 200(c) 21,343 Murata Mfg 900(c) 38,421 Nidec 500(c) 30,443 TDK 500(c) 23,478 --------------- Total 113,685 ------------------------------------------------------------------------------------- LUXEMBOURG (0.2%) Millicom Intl Cellular 200(c) 11,252 ------------------------------------------------------------------------------------- NETHERLANDS (0.9%) Koninklijke (Royal) KPN 2,824(c) 38,964 ------------------------------------------------------------------------------------- NORWAY (1.5%) Tandberg 3,900(c) 65,843 ------------------------------------------------------------------------------------- TAIWAN (3.5%) HTC 9,000(c) 126,499 Unimicron Technology 44,000(c) 33,575 --------------- Total 160,074 ------------------------------------------------------------------------------------- UNITED KINGDOM (2.9%) BT Group 15,200(c) 25,464 Micro Focus Intl 15,915(c) 98,268 TelecityGroup 1,800(b,c) 8,836 --------------- Total 132,568 ------------------------------------------------------------------------------------- UNITED STATES (65.6%) Apple 1,400(b) 199,402 Aspen Technology 6,041(b) 51,560 BMC Software 5,500(b) 185,845 Cisco Systems 10,000(b) 186,400 DigitalGlobe 142(b) 2,726 eBay 1,800(b) 30,834 Electronics for Imaging 3,200(b) 34,112 EMC 11,900(b) 155,890 Fidelity Natl Information Services 2,600 51,896 Fiserv 400(b) 18,280 Hewlett-Packard 4,800 185,520 IBM 700 73,094 Intel 1,400 23,170 LogMein 138(b) 2,208 Magma Design Automation 3,000(b) 4,380 Maxim Integrated Products 200 3,138 McAfee 4,700(b) 198,293 Mentor Graphics 10,395(b) 56,861 Microsoft 7,000 166,390 NetApp 11,000(b) 216,920 Netezza 3,600(b) 29,952 Oracle 1,100 23,562 Parametric Technology 7,300(b) 85,337 QUALCOMM 4,500 203,400 Qwest Communications Intl 7,500 31,125 Riverbed Technology 2,700(b) 62,613 SonicWALL 9,045(b) 49,567 Symantec 15,100(b) 234,956 Synopsys 14,000(b) 273,140
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) UNITED STATES (CONT.) Xilinx 300 $6,138 Yahoo! 8,300(b) 129,978 --------------- Total 2,976,687 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $4,586,410) $4,354,528 ------------------------------------------------------------------------------------- MONEY MARKET FUND (3.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.30% 154,241(d) $154,241 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $154,241) $154,241 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $4,740,651)(e) $4,508,769 =====================================================================================
SUMMARY OF INVESTMENTS IN SECURITIES BY INDUSTRY The following table represents the portfolio investments of the Fund by industry classifications as a percentage of total net assets at June 30, 2009:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE ----------------------------------------------------------------------- Aerospace & Defense 0.1% $2,726 Communications Equipment 11.4 518,256 Computers & Peripherals 22.5 1,021,389 Diversified Telecommunication Services 2.1 95,553 Electronic Equipment, Instruments & Components 3.2 147,260 Internet Software & Services 9.0 407,165 IT Services 7.6 346,881 Semiconductors & Semiconductor Equipment 0.7 32,446 Software 39.1 1,771,600 Wireless Telecommunication Services 0.2 11,252 Other(1) 3.4 154,241 ----------------------------------------------------------------------- Total $4,508,769 -----------------------------------------------------------------------
(1) Cash & Cash Equivalents. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2009, the value of foreign securities represented 30.4% of net assets. (d) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2009. -------------------------------------------------------------------------------- 10 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) At June 30, 2009, the cost of securities for federal income tax purposes was approximately $4,741,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $231,000 Unrealized depreciation (463,000) ---------------------------------------------------------- Net unrealized depreciation $(232,000) ----------------------------------------------------------
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by and is the exclusive property of Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Statement of Financial Accounting Standards No. 157 (SFAS 157) requires disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. SFAS 157 establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. When a valuation uses multiple inputs from varying levels of the hierarchy, the hierarchy level is determined based on the lowest level input or inputs that are significant to the fair value measurement in its entirety. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing -------------------------------------------------------------------------------- 12 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) prices reflect fair value at the close of the NYSE or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2009:
FAIR VALUE AT JUNE 30, 2009 ------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION IDENTICAL ASSETS INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------- Equity Securities Common Stocks $3,843,394(a) $511,134(b) $-- $4,354,528 ---------------------------------------------------------------------------------- Total Equity Securities 3,843,394 511,134 -- 4,354,528 ---------------------------------------------------------------------------------- Other Affiliated Money Market Fund 154,241(c) -- -- 154,241 ---------------------------------------------------------------------------------- Total Other 154,241 -- -- 154,241 ---------------------------------------------------------------------------------- Total $3,997,635 $511,134 $-- $4,508,769 ----------------------------------------------------------------------------------
(a) All industry classifications are identified in the Portfolio of Investments. (b) Indicates certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. All industry classifications are identified in the Portfolio of Investments. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2009. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 1-800-SEC-0330); and (iv) The Fund's complete schedule of portfolio holdings, as filed on Form N-Q, can be obtained without charge, upon request, by calling the RiverSource Family of Funds at 1(800) 221-2450. -------------------------------------------------------------------------------- 14 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2009 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers (identified cost $4,586,410) $ 4,354,528 Affiliated money market fund (identified cost $154,241) 154,241 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $4,740,651) 4,508,769 Foreign currency holdings (identified cost $66) 67 Capital shares receivable 10,783 Dividends and accrued interest receivable 398 Receivable for investment securities sold 63,748 Reclaims receivable 422 -------------------------------------------------------------------------------------- Total assets 4,584,187 -------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 71 Payable for investment securities purchased 31,266 Accrued investment management services fees 3,812 Accrued distribution fees 301 Accrued transfer agency fees 241 Accrued administrative services fees 321 Other accrued expenses 13,329 -------------------------------------------------------------------------------------- Total liabilities 49,341 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 4,534,846 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 327 Additional paid-in capital 15,434,238 Net operating loss (34,254) Accumulated net realized gain (loss) (10,633,429) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (232,036) -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 4,534,846 --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $3,195,095 229,524 $13.92 Class 2 $1,339,751 97,633 $13.72 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 15 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2009 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 7,360 Interest 21 Income distributions from affiliated money market fund 102 Less foreign taxes withheld (221) ------------------------------------------------------------------------ Total income 7,262 ------------------------------------------------------------------------ Expenses: Investment management services fees 20,430 Distribution fees -- Class 2 1,544 Transfer agency fees Class 1 4,495 Class 2 623 Administrative services fees 525 Compensation of board members 67 Custodian fees 31,616 Printing and postage 10,302 Professional fees 38,283 Other 665 ------------------------------------------------------------------------ Total expenses 108,550 Expenses waived/reimbursed by the Investment Manager and its affiliates (67,557) ------------------------------------------------------------------------ Total net expenses 40,993 ------------------------------------------------------------------------ Investment income (loss) -- net (33,731) ------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions (424,646) Foreign currency transactions (1,811) ------------------------------------------------------------------------ Net realized gain (loss) on investments (426,457) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,434,523 ------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies 1,008,066 ------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ 974,335 ------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (33,731) $ (88,590) Net realized gain (loss) on investments (426,457) (890,975) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 1,434,523 (2,027,498) --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 974,335 (3,007,063) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 43,754 124,499 Class 2 shares 175,769 799,399 Payments for redemptions Class 1 shares (292,022) (990,797) Class 2 shares (279,826) (1,555,793) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (352,325) (1,622,692) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 622,010 (4,629,755) Net assets at beginning of period 3,912,836 8,542,591 --------------------------------------------------------------------------------------------- Net assets at end of period $4,534,846 $ 3,912,836 --------------------------------------------------------------------------------------------- Excess of distributions over net investment income $ (34,254) $ (523) ---------------------------------------------------------------------------------------------
Certain line items from the prior year have been renamed to conform to the current year presentation. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- CLASS 1 PER SHARE INCOME AND CAPITAL CHANGES(A)
Fiscal period ended Dec. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $11.03 $18.46 $15.99 $13.56 $12.54 $12.06 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.04) (.21) (.25) (.20) (.19) (.13) Net gains (losses) (both realized and unrealized) 2.93 (7.22) 2.72 2.63 1.21 .61 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 2.89 (7.43) 2.47 2.43 1.02 .48 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.92 $11.03 $18.46 $15.99 $13.56 $12.54 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $6 $6 $7 $8 ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c) 5.14%(d) 3.54% 3.04% 2.57% 2.49% 2.39% ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c),(e) 1.90%(d) 1.90% 1.90% 1.90% 1.90% 1.90% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.55%)(d) (1.38%) (1.44%) (1.37%) (1.53%) (1.10%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 75% 161% 198% 205% 155% 147% ----------------------------------------------------------------------------------------------------------------- Total return(f) 26.20%(g) (40.25%) 15.45% 17.92% 8.13% 3.98% -----------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- CLASS 2 PER SHARE INCOME AND CAPITAL CHANGES(A)
Fiscal period ended Dec. 31, 2009(h) 2008 2007 2006 2005 2004 Net asset value, beginning of period $10.88 $18.25 $15.83 $13.45 $12.46 $12.00 ----------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss)(b) (.04) (.24) (.28) (.22) (.21) (.15) Net gains (losses) (both realized and unrealized) 2.88 (7.13) 2.70 2.60 1.20 .61 ----------------------------------------------------------------------------------------------------------------- Total from investment operations 2.84 (7.37) 2.42 2.38 .99 .46 ----------------------------------------------------------------------------------------------------------------- Net asset value, end of period $13.72 $10.88 $18.25 $15.83 $13.45 $12.46 ----------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $1 $3 $2 $2 $2 ----------------------------------------------------------------------------------------------------------------- Gross expenses prior to expense waiver/reimbursement(c) 5.45%(d) 3.71% 3.19% 2.72% 2.64% 2.54% ----------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c),(e) 2.15%(d) 2.07% 2.05% 2.05% 2.05% 2.05% ----------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.80%)(d) (1.55%) (1.59%) (1.52%) (1.68%) (1.25%) ----------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 75% 161% 198% 205% 155% 147% ----------------------------------------------------------------------------------------------------------------- Total return(f) 26.10%(g) (40.38%) 15.29% 17.69% 7.95% 3.83% -----------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) For a share outstanding throughout the period. Rounded to the nearest cent. (b) Per share amounts have been calculated using the average shares outstanding method. (c) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the above reported expense ratios. (d) Adjusted to an annual basis. (e) The Investment Manager and its affiliates have agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (f) Total return does not reflect payment of the expenses that apply to the variable accounts or any contract charges. (g) Not annualized. (h) Six months ended June 30, 2009 (Unaudited). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2009) 1. ORGANIZATION Seligman Global Technology Portfolio (the Fund) is a series of Seligman Portfolios, Inc. and is registered under the Investment Company Act of 1940, as amended (the 1940 Act) as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in equity securities of U.S. and non-U.S. companies with business operations in technology and technology-related industries. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES Preparing financial statements that conform to U.S. generally accepted accounting principles requires management to make estimates (e.g., on assets, liabilities and contingent assets and liabilities) that could differ from actual results. VALUATION OF SECURITIES All securities are valued at the close of business of the New York Stock Exchange (NYSE). Securities traded on national securities exchanges or included in national market systems are valued at the last quoted sales price. Debt securities are generally traded in the over-the-counter market and are valued by an independent pricing service using an evaluated bid. When market quotes are not readily available, the pricing service, in determining fair values of debt securities, takes into consideration such factors as current quotations by broker/dealers, coupon, maturity, quality, type of issue, trading characteristics, and other -------------------------------------------------------------------------------- 20 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- yield and risk factors it deems relevant in determining valuations. Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. The procedures adopted by the Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of RiverSource Investments, LLC (RiverSource Investments or the Investment Manager) as administrator to the Fund, will fair value foreign securities pursuant to procedures adopted by the Board, including utilizing a third party pricing service to determine these fair values. These procedures take into account multiple factors, including movements in the U.S. securities markets, to determine a good faith estimate that reasonably reflects the current market conditions as of the close of the NYSE. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61st day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortized cost is an approximation of market value. Investments in money market funds are valued at net asset value. FOREIGN CURRENCY TRANSLATIONS Securities and other assets and liabilities denominated in foreign currencies are translated daily into U.S. dollars. Foreign currency amounts related to the purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. At June 30, 2009, foreign currency holdings consisted of multiple denominations. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all the tax returns filed for the last three years. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. -------------------------------------------------------------------------------- 22 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a foreign currency contract fluctuates with changes in foreign currency exchange rates. Foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the foreign currency contract is closed. The risks of foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount reflected in the Statement of Assets and Liabilities. At June 30, 2009, and for the six months then ended, the Fund had no outstanding forward foreign currency contracts. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. Effective May 11, 2009, the management fee is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.87% annually as the Fund's assets increase. Prior to May 11, 2009, the Investment Manager received a fee equal to a percentage of the Fund's average daily net assets that declined from 1.00% to 0.90% of the Fund's average daily net assets. The management fee for the six months ended June 30, 2009 was 0.98% of the Fund's average daily net assets. The reduction in the investment management services fee schedule on May 11, -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 2009 is related to the elimination of the administrative portion of the management fee that is now being charged separately to the Fund through the Administrative Services Agreement with Ameriprise Financial. See Administrative services fees below for more information. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, effective May 11, 2009, the Fund pays Ameriprise Financial a fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% annually as the Fund's assets increase. For the period from May 11, 2009 to June 30, 2009, the fee was 0.03% of the Fund's average daily net assets for the six months ended June 30, 2009. Prior to May 11, 2009, Ameriprise Financial administered certain aspects of the Fund's business and other affairs for no additional fee. The fees payable under the Administrative Services Agreement beginning on May 11, 2009 are offset by corresponding decreases in the investment management fees charged to the Fund and the elimination of separate fees that were previously payable to State Street Bank and Trust Company, in its capacity as the Fund's prior administrative agent. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited administrative services to the Fund and the Board. For the six months ended June 30, 2009, other expenses paid to this company were $15. COMPENSATION OF BOARD MEMBERS Under a Deferred Compensation Plan (the Plan), the board members who are not "interested persons" of the Fund under the 1940 Act may defer receipt of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of the Fund or other funds in the RiverSource Family of Funds. The Fund's liability for these amounts is adjusted for market value changes and remains in the funds until distributed in accordance with the Plan. TRANSFER AGENCY FEES Under a Transfer Agency and Servicing agreement, RiverSource Service Corporation (the Transfer Agent) maintains shareholder accounts and records. Effective May 11, 2009, the Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. -------------------------------------------------------------------------------- 24 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- DISTRIBUTION FEES The Fund has an agreement with RiverSource Fund Distributors, Inc. (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays the Distributor a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2009, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were as follows: Class 1............................................. 1.90% Class 2............................................. 2.15
Under an agreement that was effective until May 10, 2009, the Investment Manager contractually agreed to waive certain fees and reimburse certain expenses such that the "other expenses" (those expenses other than management fees, 12b-1 fees, interest on borrowings, and extraordinary expenses, including litigation expenses), would not exceed 0.90% per annum of the class' average daily net assets. Effective May 11, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and expenses until April 30, 2010, unless sooner terminated at the discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1............................................. 1.90% Class 2............................................. 2.15
For the period from May 11, 2009 through June 30, 2009, the waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class 1........................................... $1,244 Class 2........................................... 3,690
The management fees waived/reimbursed at the Fund level were $62,623. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales or maturities of securities (other than short-term obligations) aggregated $2,931,150 and $3,185,622, respectively, for the six months ended June 30, 2009. Realized gains and losses are determined on an identified cost basis. 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated are as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2009 DEC. 31, 2008 -------------------------------------------------------------------- CLASS 1 -------------------------------------------------------------------- Sold 3,374 7,507 Redeemed (23,628) (63,517) -------------------------------------------------------------------- Net increase (decrease) (20,254) (56,010) -------------------------------------------------------------------- CLASS 2 -------------------------------------------------------------------- Sold 14,220 47,638 Redeemed (23,092) (99,986) -------------------------------------------------------------------- Net increase (decrease) (8,872) (52,348) --------------------------------------------------------------------
7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of the funds in the RiverSource Family of Funds and other institutional clients of RiverSource Investments. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $798,962 and $644,721, respectively, for the six months ended June 30, 2009. The income distributions received with respect to the Fund's investment in RiverSource Short-Term Cash Fund can be found in the Statement of Operations and the Fund's invested balance in RiverSource Short-Term Cash Fund at June 30, 2009, can be found in the Portfolio of Investments. 8. BANK BORROWINGS Under a credit facility which was effective until June 17, 2009, the Fund participated in a joint $200 million committed line of credit that was shared by substantially all funds in the Seligman Group of Investment Companies. The Board had limited the Fund's borrowings to 10% of its net assets. Borrowings pursuant to the credit facility were subject to interest at a rate equal to the overnight federal funds rate plus 0.50%. The Fund incurred a commitment fee of -------------------------------------------------------------------------------- 26 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 0.12% per annum on its share of the unused portion of the credit facility. The credit facility may have been drawn upon only for temporary purposes and was subject to certain other customary restrictions. The Fund had no borrowings for the period from Jan. 1, 2009 through June 17, 2009. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, foreign currency transactions, post-October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains (losses) was recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $9,815,724 at Dec. 31, 2008, that if not offset by capital gains will expire as follows:
2009 2010 2011 2016 $4,220,678 $4,941,506 $108,762 $544,778
Because the measurement periods for a regulated investment company's income are different for excise tax purposes verses income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses and net currency losses realized between Nov. 1 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2008, the Fund had a post-October loss of $296,659 that is treated for income tax purposes as occurring on Jan. 1, 2009. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through Aug. 20, 2009, the date of issuance of the Fund's financial statements. There -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 11. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investing in foreign securities may include certain risks and considerations not typically associated with investing in U.S. securities, such as fluctuating currency values and changing local and regional economic, political and social conditions, which may result in greater market volatility. In addition, certain foreign securities may not be as liquid as U.S. securities. Investing in emerging markets may accentuate these risks. 12. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court, asking the U.S. Supreme Court to stay the District Court proceedings while the U.S. Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise -------------------------------------------------------------------------------- 28 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource Funds' Boards of Directors/Trustees. On November 7, 2008, RiverSource Investments, LLC, a subsidiary of Ameriprise Financial, Inc., acquired J. & W. Seligman & Co. Incorporated (Seligman). In late 2003, Seligman conducted an extensive internal review concerning mutual fund trading practices. Seligman's review, which covered the period 2001-2003, noted one arrangement that permitted frequent trading in certain open-end registered investment companies managed by Seligman (the Seligman Funds); this arrangement was in the process of being closed down by Seligman before September 2003. Seligman identified three other arrangements that permitted frequent trading, all of which had been terminated by September 2002. In January 2004, Seligman, on a voluntary basis, publicly disclosed these four arrangements to its clients and to shareholders of the Seligman Funds. Seligman also provided information concerning mutual fund trading practices to the SEC and the Office of the Attorney General of the State of New York (NYAG). In September 2006, the NYAG commenced a civil action in New York State Supreme Court against Seligman, Seligman Advisors, Inc. (now known as RiverSource Fund Distributors, Inc.), Seligman Data Corp. and Brian T. Zino (collectively, the Seligman Parties), alleging, in substance, that the Seligman Parties permitted various persons to engage in frequent trading and, as a result, the prospectus disclosure used by the registered investment companies then managed by Seligman was and had been misleading. The NYAG included other related claims and also claimed that the fees charged by Seligman to the Seligman Funds were excessive. On March 13, 2009, without admitting or denying any violations of law or wrongdoing, the Seligman Parties entered into a stipulation of settlement with the NYAG and settled the claims made by the NYAG. Under the terms of the settlement, Seligman paid $11.3 million to four -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Seligman Funds. This settlement resolved all outstanding matters between the Seligman Parties and the NYAG. In addition to the foregoing matter, the New York staff of the SEC indicated in September 2005 that it was considering recommending to the Commissioners of the SEC the instituting of a formal action against Seligman and Seligman Advisors, Inc. relating to frequent trading in the Seligman Funds. Seligman responded to the staff in October 2005 that it believed that any action would be both inappropriate and unnecessary, especially in light of the fact that Seligman had previously resolved the underlying issue with the Independent Directors of the Seligman Funds and made recompense to the affected Seligman Funds. There have been no further developments with the SEC on this matter. Ameriprise Financial and certain of its affiliates have historically been involved in a number of legal, arbitration and regulatory proceedings, including routine litigation, class actions, and governmental actions, concerning matters arising in connection with the conduct of their business activities. Ameriprise Financial believes that the Funds are not currently the subject of, and that neither Ameriprise Financial nor any of its affiliates are the subject of, any pending legal, arbitration or regulatory proceedings that are likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds. Ameriprise Financial is required to make 10-Q, 10-K and, as necessary, 8-K filings with the Securities and Exchange Commission on legal and regulatory matters that relate to Ameriprise Financial and its affiliates. Copies of these filings may be obtained by accessing the SEC website at www.sec.gov. There can be no assurance that these matters, or the adverse publicity associated with them, will not result in increased fund redemptions, reduced sale of fund shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 30 SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT PROXY VOTING ------------------------------------------------------------------ The policy of the Board is to vote the proxies of the companies in which the Fund holds investments consistent with the procedures as stated in the Statement of Additional Information (SAI). You may obtain a copy of the SAI without charge by calling the RiverSource Family of Funds at 1(800) 221-2450; contacting your financial intermediary; visiting seligman.com/funds; or searching the website of the Securities and Exchange Commission (SEC) at http://www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities is filed with the SEC by August 31 for the most recent 12-month period ending June 30 of that year, and is available without charge by visiting seligman.com/funds; or searching the website of the SEC at www.sec.gov. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ----------------------- On March 11, 2009, Ernst & Young LLP was selected as the Fund's independent registered public accounting firm for the 2009 fiscal year. A majority of the Fund's Board of Directors, including a majority of the Independent Directors, approved the appointment of Ernst & Young LLP effective March 18, 2009. The predecessor independent registered public accounting firm's reports on the Fund's financial statements for the year ended Dec. 31, 2008 and the year ended Dec. 31, 2007 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through March 11, 2009 there were no disagreements between the Fund and the predecessor independent registered public accounting firm on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures, which such disagreements, if not resolved to the satisfaction of the predecessor independent registered public accounting firm, would have caused them to make reference to the subject matter of the disagreement in connection with their reports on the financial statements for such fiscal periods. -------------------------------------------------------------------------------- SELIGMAN PORTFOLIOS -- GLOBAL TECHNOLOGY PORTFOLIO -- 2009 SEMIANNUAL REPORT 31 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 SELIGMAN.COM This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are part of the RiverSource Family of Funds, and are distributed by RiverSource Fund Distributors, Inc., Member FINRA, and managed by RiverSource Investments, LLC. RiverSource is part of Ameriprise Financial, Inc. Seligman is an offering brand of RiverSource Investments. (SELIGMAN LOGO) (C)2009 RiverSource Investments, LLC. SL-9952 A (8/09)
Item 2. Code of Ethics. Not applicable for semi-annual reports. Item 3. Audit Committee Financial Expert. Not applicable for semi-annual reports. Item 4. Principal Accountant Fees and Services. Not applicable for semi-annual reports. Item 5. Audit Committee of Listed Registrants. Not applicable. Item 6. The complete schedule of investments is included in Item 1 of this Form N-CSR. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchase of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. Not applicable. Item 10. Submission of matters to a vote of security holders. Not applicable. Item 11. Controls and Procedures. (a) Based upon their evaluation of the registrant's disclosure controls and procedures as conducted within 90 days of the filing date of this Form N-CSR, the registrant's Principal Financial Officer and Principal Executive Officer have concluded that those disclosure controls and procedures provide reasonable assurance that the material information required to be disclosed by the registrant on this report is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. (b) There were no changes in the registrant's internal controls over financial reporting that occurred during the registrant's last fiscal half-year (the registrant's second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Not applicable for semi-annual reports. (a)(2) Separate certification for the Registrant's principal executive officer and principal financial officer, as required by Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are attached as EX.99.CERT. (a)(3) Not applicable. (b) A certification by the Registrant's principal executive officer and principal financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(b) under the Investment Company Act of 1940, is attached as EX.99.906 CERT. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. (Registrant) Seligman Portfolios, Inc. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date September 2, 2009 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ Patrick T. Bannigan ---------------------------------- Patrick T. Bannigan President and Principal Executive Officer Date September 2, 2009 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date September 2, 2009