N-CSRS 1 c59124nvcsrs.txt FORM 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: December 31 Date of reporting period: June 30, 2010 Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN CAPITAL PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE 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...... 21 Approval of Investment Management Services Agreement............... 31 Proxy Voting....................... 34
-------------------------------------------------------------------------------- 2 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Capital Portfolio (the Fund) Class 1 shares decreased 3.94% for the six months ended June 30, 2010. > The Fund underperformed its benchmark, the Russell Midcap(R) Growth Index, which fell 3.31% during the six-month period. > The Fund also underperformed its peer group, as represented by the Lipper Mid- Cap Growth Funds Index, which declined 3.28% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 8/30/00 -------------------------------------------------------------------------------------------- Seligman Capital Portfolio Class 1 -3.94% +20.30% -9.06% +0.11% -3.15% N/A -------------------------------------------------------------------------------------------- Class 2 -4.03% +19.96% -9.30% -0.16% N/A -4.22% -------------------------------------------------------------------------------------------- Russell Midcap Growth Index(1) (unmanaged) -3.31% +21.30% -7.53% +1.37% -1.99% +2.53% -------------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Index(2) (unmanaged) -3.28% +21.13% -6.51% +2.85% -2.21% -2.80% -------------------------------------------------------------------------------------------- Lipper Mid-Cap Growth Funds Average(3) (unmanaged) -3.19% +20.72% -8.05% +1.06% -1.01% -1.44% --------------------------------------------------------------------------------------------
* 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/expense 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 variable account, annuity contract or life insurance policy, 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (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 Index (the Lipper Index) includes the 30 largest mid-cap growth funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Mid-Cap Growth Funds Average (the Lipper 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 Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. SECTOR BREAKDOWN(1) (at June 30, 2010) --------------------------------------------------------------------- Consumer Discretionary 15.2% ------------------------------------------------ Consumer Staples 5.7% ------------------------------------------------ Energy 5.4% ------------------------------------------------ Financials 8.6% ------------------------------------------------ Health Care 13.8% ------------------------------------------------ Industrials 13.8% ------------------------------------------------ Information Technology 19.9% ------------------------------------------------ Materials 4.6% ------------------------------------------------ Telecommunication Services 2.8% ------------------------------------------------ Utilities 1.5% ------------------------------------------------ Other(2) 8.7% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. -------------------------------------------------------------------------------- 4 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- (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 CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS(1) (at June 30, 2010) --------------------------------------------------------------------- Cognizant Technology Solutions Corp., Class A 3.8% ------------------------------------------------ Dollar General Corp. 2.5% ------------------------------------------------ SAVVIS, Inc. 2.2% ------------------------------------------------ Alliance Data Systems Corp. 2.1% ------------------------------------------------ CSX Corp. 1.9% ------------------------------------------------ Blue Coat Systems, Inc. 1.9% ------------------------------------------------ Agnico-Eagle Mines Ltd. 1.8% ------------------------------------------------ Atlas Energy, Inc. 1.8% ------------------------------------------------ Lorillard, Inc. 1.8% ------------------------------------------------ Equinix, Inc. 1.7% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. Investments in mid-capitalization companies often involve greater risks and potential volatility than investments in larger, more established companies. -------------------------------------------------------------------------------- 6 SELIGMAN CAPITAL PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees; distribution and service (Rule 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 960.60 $5.30(c) 1.09% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.39 $5.46(c) 1.09% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 959.70 $6.51(c) 1.34% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.15 $6.71(c) 1.34% ------------------------------------------------------------------------------------------
(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, 2010: -3.94% for Class 1 and -4.03% for Class 2. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 0.99% for Class 1 and 1.24% for Class 2. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place for the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.81 for Class 1 and $6.03 for Class 2; the hypothetical expenses paid would have been $4.96 for Class 1 and $6.21 for Class 2. -------------------------------------------------------------------------------- 8 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (91.7%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.4%) Goodrich Corp. 1,140 $75,525 ITT Corp. 820 36,834 Precision Castparts Corp. 630 64,840 --------------- Total 177,199 ------------------------------------------------------------------------------------- AIR FREIGHT & LOGISTICS (1.3%) CH Robinson Worldwide, Inc. 1,720 95,735 ------------------------------------------------------------------------------------- AIRLINES (0.9%) Delta Air Lines, Inc. 5,990(b) 70,383 ------------------------------------------------------------------------------------- AUTO COMPONENTS (1.9%) BorgWarner, Inc. 2,590(b,d) 96,711 Cooper Tire & Rubber Co. 2,160(d) 42,120 --------------- Total 138,831 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (2.5%) Alexion Pharmaceuticals, Inc. 1,230(b) 62,963 BioMarin Pharmaceutical, Inc. 2,510(b,d) 47,590 Dendreon Corp. 1,170(b) 37,826 Human Genome Sciences, Inc. 1,660(b) 37,616 --------------- Total 185,995 ------------------------------------------------------------------------------------- CAPITAL MARKETS (2.8%) Affiliated Managers Group, Inc. 1,400(b,d) 85,078 Greenhill & Co., Inc. 710(d) 43,402 Invesco Ltd. 2,390 40,224 Janus Capital Group, Inc. 4,700(d) 41,736 --------------- Total 210,440 ------------------------------------------------------------------------------------- CHEMICALS (1.4%) Celanese Corp., Series A 2,580 64,268 Ecolab, Inc. 830 37,275 --------------- Total 101,543 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.5%) Avery Dennison Corp. 1,130 36,307 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (3.3%) Blue Coat Systems, Inc. 6,310(b,d) 128,913 F5 Networks, Inc. 1,370(b) 93,941 JDS Uniphase Corp. 2,380(b) 23,419 --------------- Total 246,273 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (1.2%) Foster Wheeler AG 4,280(b,c,d) 90,137 ------------------------------------------------------------------------------------- CONSUMER FINANCE (2.1%) Capital One Financial Corp. 2,360 95,108 Discover Financial Services 4,530 63,329 --------------- Total 158,437 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (0.6%) Grand Canyon Education, Inc. 1,980(b,d) 46,391 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (1.3%) IntercontinentalExchange, Inc. 450(b) 50,864 MSCI, Inc., Class A 1,650(b) 45,210 --------------- Total 96,074 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (1.0%) Qwest Communications International, Inc. 14,050 73,763 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (1.2%) ITC Holdings Corp. 1,700(d) 89,947 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (2.7%) Cameron International Corp. 2,570(b) 83,576 CARBO Ceramics, Inc. 1,040(d) 75,078 Noble Corp. 1,370(b,c) 42,347 --------------- Total 201,001 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) FOOD & STAPLES RETAILING (0.8%) The Kroger Co. 2,980 $58,676 ------------------------------------------------------------------------------------- FOOD PRODUCTS (0.6%) Dole Food Co., Inc. 4,175(b,d) 43,545 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.8%) Edwards Lifesciences Corp. 1,400(b,d) 78,428 Intuitive Surgical, Inc. 180(b,d) 56,812 --------------- Total 135,240 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.2%) Brookdale Senior Living, Inc. 2,940(b,d) 44,100 Express Scripts, Inc. 1,880(b) 88,397 Laboratory Corp. of America Holdings 1,400(b,d) 105,489 Mednax, Inc. 1,280(b) 71,181 --------------- Total 309,167 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (1.0%) Cerner Corp. 960(b,d) 72,854 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.6%) Bally Technologies, Inc. 1,430(b,d) 46,317 Las Vegas Sands Corp. 1,540(b) 34,096 Royal Caribbean Cruises Ltd. 1,650(b,d) 37,571 --------------- Total 117,984 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (2.4%) Lennar Corp., Class A 3,580 49,798 Meritage Homes Corp. 2,040(b) 33,211 NVR, Inc. 60(b,d) 39,302 Tempur-Pedic International, Inc. 1,740(b) 53,505 --------------- Total 175,816 ------------------------------------------------------------------------------------- HOUSEHOLD PRODUCTS (1.1%) Clorox Co. 1,370 85,159 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (0.6%) McDermott International, Inc. 2,120(b) 45,919 ------------------------------------------------------------------------------------- INSURANCE (1.5%) Aflac, Inc. 1,680 71,686 Principal Financial Group, Inc. 1,689 39,590 --------------- Total 111,276 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.6%) priceline.com, Inc. 240(b) 42,370 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (4.2%) Baidu, Inc., ADR 630(b,c) 42,890 Equinix, Inc. 1,410(b,d) 114,520 SAVVIS, Inc. 10,206(b) 150,539 --------------- Total 307,949 ------------------------------------------------------------------------------------- IT SERVICES (5.4%) Alliance Data Systems Corp. 2,390(b,d) 142,253 Cognizant Technology Solutions Corp., Class A 5,170(b) 258,809 --------------- Total 401,062 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (3.1%) Furiex Pharmaceuticals, Inc. 191(b) 1,941 Illumina, Inc. 1,530(b,d) 66,601 Life Technologies Corp. 2,160(b) 102,059 Pharmaceutical Product Development, Inc. 2,300 58,443 --------------- Total 229,044 ------------------------------------------------------------------------------------- MACHINERY (3.6%) Cummins, Inc. 1,240(d) 80,761 Joy Global, Inc. 2,280 114,206 Oshkosh Corp. 2,220(b) 69,175 --------------- Total 264,142 ------------------------------------------------------------------------------------- MEDIA (1.6%) CBS Corp., Class B 5,070 65,555 Time Warner Cable, Inc. 1,000 52,080 --------------- Total 117,635 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) METALS & MINING (3.3%) Agnico-Eagle Mines Ltd. 2,020(c) $122,776 Cliffs Natural Resources, Inc. 1,340 63,194 United States Steel Corp. 1,460(d) 56,283 --------------- Total 242,253 ------------------------------------------------------------------------------------- MULTILINE RETAIL (3.7%) Big Lots, Inc. 3,280(b,d) 105,255 Dollar General Corp. 6,153(b,d) 169,515 --------------- Total 274,770 ------------------------------------------------------------------------------------- MULTI-UTILITIES (0.3%) Public Service Enterprise Group, Inc. 700 21,931 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (2.7%) Atlas Energy, Inc. 4,510(b,d) 122,086 Massey Energy Co. 1,390 38,017 Southwestern Energy Co. 1,110(b) 42,890 --------------- Total 202,993 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (1.5%) Avon Products, Inc. 4,300 113,950 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.3%) Perrigo Co. 950(d) 56,117 Watson Pharmaceuticals, Inc. 1,030(b) 41,787 --------------- Total 97,904 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.8%) Digital Realty Trust, Inc. 1,040(d) 59,987 ------------------------------------------------------------------------------------- ROAD & RAIL (3.4%) CSX Corp. 2,630 130,527 Dollar Thrifty Automotive Group, Inc. 1,790(b) 76,272 JB Hunt Transport Services, Inc. 1,310 42,798 --------------- Total 249,597 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (3.0%) Marvell Technology Group Ltd. 4,280(b,c) 67,453 Micron Technology, Inc. 8,740(b,d) 74,203 Microsemi Corp. 5,350(b,d) 78,270 --------------- Total 219,926 ------------------------------------------------------------------------------------- SOFTWARE (4.2%) Activision Blizzard, Inc. 5,930 62,206 Blackboard, Inc. 1,250(b,d) 46,663 Citrix Systems, Inc. 1,870(b) 78,969 Pegasystems, Inc. 1,290(d) 41,422 Rovi Corp. 2,072(b,d) 78,550 --------------- Total 307,810 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (1.8%) American Eagle Outfitters, Inc. 3,060(d) 35,955 Dick's Sporting Goods, Inc. 4,040(b,d) 100,556 --------------- Total 136,511 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (1.1%) Lululemon Athletica, Inc. 2,190(b,c,d) 81,512 ------------------------------------------------------------------------------------- TOBACCO (1.6%) Lorillard, Inc. 1,680 120,926 ------------------------------------------------------------------------------------- WIRELESS TELECOMMUNICATION SERVICES (1.8%) NII Holdings, Inc. 2,880(b) 93,658 SBA Communications Corp., Class A 1,140(b,d) 38,771 --------------- Total 132,429 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $6,397,880) $6,798,793 ------------------------------------------------------------------------------------- MONEY MARKET FUND (8.7%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 644,766(e) $644,766 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $644,766) $644,766 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (27.8%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(F) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $2,062,627 0.030% $2,062,626 $2,062,626 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $2,062,626) $2,062,626 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $9,105,272)(g) $9,506,185 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2010, the value of foreign securities, excluding short-term securities, represented 6.03% of net assets. (d) At June 30, 2010, security was partially or fully on loan. See Note 6 to the financial statements. (e) Affiliated Money Market Fund - See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (f) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. -------------------------------------------------------------------------------- 12 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ------------------------------------------------------------ Fannie Mae Pool $368,103 Government National Mortgage Association 1,735,775 ------------------------------------------------------------ Total market value of collateral securities $2,103,878 ------------------------------------------------------------
(g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $9,105,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $815,000 Unrealized depreciation (414,000) --------------------------------------------------------- Net unrealized appreciation $401,000 ---------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 14 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
Fair value at June 30, 2010 ---------------------------------------------------------------- Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets(b) inputs inputs Total ---------------------------------------------------------------------------------------------- Equity Securities Common Stocks $6,798,793 $-- $-- $6,798,793 ---------------------------------------------------------------------------------------------- Total Equity Securities 6,798,793 -- -- 6,798,793 ---------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 644,766 -- -- 644,766 Investments of Cash Collateral Received for Securities on Loan -- 2,062,626 -- 2,062,626 ---------------------------------------------------------------------------------------------- Total Other 644,766 2,062,626 -- 2,707,392 ---------------------------------------------------------------------------------------------- Total $7,443,559 $2,062,626 $-- $9,506,185 ----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. 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 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 800.221.2450. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $6,397,880) $ 6,798,793 Affiliated money market fund (identified cost $644,766) 644,766 Investments of cash collateral received for securities on loan (identified cost $2,062,626) 2,062,626 ------------------------------------------------------------------------------------- Total investments in securities (identified cost $9,105,272) 9,506,185 Capital shares receivable 37 Dividends and accrued interest receivable 1,568 Receivable for investment securities sold 78,953 ------------------------------------------------------------------------------------- Total assets 9,586,743 ------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 4,875 Payable for investment securities purchased 82,809 Payable upon return of securities loaned 2,062,626 Accrued investment management services fees 2,532 Accrued distribution fees 1,174 Accrued transfer agency fees 438 Accrued administrative services fees 428 Other accrued expenses 19,907 ------------------------------------------------------------------------------------- Total liabilities 2,174,789 ------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 7,411,954 ------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 594 Additional paid-in capital 15,795,055 Accumulated net investment loss (30,975) Accumulated net realized gain (loss) (8,753,633) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 400,913 ------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 7,411,954 ------------------------------------------------------------------------------------- *Value of securities on loan $ 1,984,172 -------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $2,519,305 198,764 $12.67 Class 2 $4,892,649 395,201 $12.38 ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 24,203 Interest 434 Income distributions from affiliated money market fund 591 Income from securities lending -- net 1,174 Foreign taxes withheld (239) ------------------------------------------------------------------------------ Total income 26,163 ------------------------------------------------------------------------------ Expenses: Investment management services fees 14,213 Distribution fees -- Class 2 6,504 Transfer agency fees Class 1 847 Class 2 1,573 Administrative services fees 2,402 Compensation of board members 129 Custodian fees 4,590 Printing and postage 8,600 Professional fees 9,692 Other 1,677 ------------------------------------------------------------------------------ Total expenses 50,227 ------------------------------------------------------------------------------ Investment income (loss) -- net (24,064) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions 711,060 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,002,391) ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies (291,331) ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $ (315,395) ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (24,064) $ (50,635) Net realized gain (loss) on investments 711,060 (112,012) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (1,002,391) 2,820,116 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (315,395) 2,657,469 --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 113,965 41,379 Class 2 shares 473,668 760,536 Payments for redemptions Class 1 shares (285,089) (506,596) Class 2 shares (298,097) (1,009,101) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 4,447 (713,782) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (310,948) 1,943,687 Net assets at beginning of period 7,722,902 5,779,215 --------------------------------------------------------------------------------------------- Net assets at end of period $ 7,411,954 $ 7,722,902 --------------------------------------------------------------------------------------------- Accumulated net investment loss $ (30,975) $ (6,911) ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $13.19 $8.87 $17.03 $14.62 $13.78 $12.25 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.07) (.10) (.14) (.05) (.06) Net gains (losses) (both realized and unrealized) (.49) 4.39 (8.06) 2.55 .89 1.59 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.52) 4.32 (8.16) 2.41 .84 1.53 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.67 $13.19 $8.87 $17.03 $14.62 $13.78 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (3.94%) 48.70% (47.92%) 16.48% 6.10% 12.49% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Total expenses 1.09%(b) 1.43% 1.32% 1.18% 1.05% 1.03% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.44%)(b) (.63%) (.71%) (.83%) (.33%) (.50%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $3 $2 $5 $6 $8 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 61% 144% 240% 196% 203% 174% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 2 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $12.90 $8.69 $16.74 $14.40 $13.61 $12.13 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.05) (.09) (.13) (.18) (.08) (.09) Net gains (losses) (both realized and unrealized) (.47) 4.30 (7.92) 2.52 .87 1.57 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.52) 4.21 (8.05) 2.34 .79 1.48 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $12.38 $12.90 $8.69 $16.74 $14.40 $13.61 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (4.03%) 48.45% (48.09%) 16.25% 5.80% 12.20% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Total expenses 1.34%(b) 1.63% 1.57% 1.43% 1.30% 1.28% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.69%)(b) (.85%) (.96%) (1.08%) (.58%) (.75%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $5 $5 $3 $5 $5 $5 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 61% 144% 240% 196% 203% 174% --------------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Capital Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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 contracts and life insurance policies offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- market in which such securities are normally traded. The procedures adopted by the Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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 -------------------------------------------------------------------------------- 22 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. 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 -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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. The management fee is an annual fee that is equal to 0.355% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, other expenses paid to this company were $3. 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 RiverSource, Seligman and Threadneedle 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. -------------------------------------------------------------------------------- 24 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TRANSFER AGENCY FEES The Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as 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 The Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 0.99% Class 2.............................................. 1.24
For the six months ended June 30, 2010, the waiver was not invoked since the Fund's expenses were below the cap amount. * In addition to the fees and expenses which each Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $4,478,938 and $4,721,714, respectively, for the six months ended June 30, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 8,191 3,383 Redeemed (21,250) (49,615) ---------------------------------------------------------------------- Net increase (decrease) (13,059) (46,232) ---------------------------------------------------------------------- CLASS 2 Sold 35,255 74,072 Redeemed (22,019) (93,782) ---------------------------------------------------------------------- Net increase (decrease) 13,236 (19,710) ----------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $1,984,172 were on loan, secured by cash collateral of $2,062,626 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. -------------------------------------------------------------------------------- 26 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $1,174 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $2,264,341 and $2,044,807, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 8. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of passive foreign investment company (PFIC) holdings, investments in partnerships, post-October losses and losses deferred due to wash sales. For federal income tax purposes, the Fund had a capital loss carry-over of $9,244,901 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2016 2017 $6,090,929 $1,961,725 $1,192,247
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $43,563 that is treated for income tax purposes as occurring on Jan. 1, 2010. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 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 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, other than as noted below. The Board of Directors of Seligman Capital Portfolio has approved in principle the proposed merger of the Fund into Columbia Mid Cap Growth Fund, Variable Series. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned -------------------------------------------------------------------------------- 28 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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. -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's new expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. The Board also reviewed a -------------------------------------------------------------------------------- 32 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- detailed report illustrating the performance and track record of the new portfolio manager expected to assume responsibilities for the Fund upon the close of the Columbia Transaction. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the -------------------------------------------------------------------------------- SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board observed that the Fund has yet to achieve any appreciable scale to benefit from reduced fees. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- 34 SELIGMAN CAPITAL PORTFOLIO -- 2010 SEMIANNUAL REPORT SELIGMAN CAPITAL PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9950 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN COMMON STOCK PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 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 Approval of Investment Management Services Agreement............... 31 Proxy Voting....................... 34
-------------------------------------------------------------------------------- 2 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Common Stock Portfolio (the Fund) shares decreased 6.49% for the six months ended June 30, 2010. > The Fund outperformed its benchmark, the Standard & Poor's 500 Index (S&P 500 Index), which fell 6.65% during the six-month period. > The Fund also outperformed its peer group, as represented by the Lipper Large- Cap Core Funds Index, which declined 7.65% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------- Seligman Common Stock Portfolio -6.49% +13.99% -17.24% -5.84% -5.08% ----------------------------------------------------------------------------- S&P 500 Index(1) (unmanaged) -6.65% +14.43% -9.81% -0.79% -1.59% ----------------------------------------------------------------------------- Lipper Large-Cap Core Funds Index(2) (unmanaged) -7.65% +12.33% -9.56% -0.78% -2.17% ----------------------------------------------------------------------------- Lipper Large-Cap Core Funds Average(3) (unmanaged) -7.86% +12.11% -10.01% -1.11% -1.21% -----------------------------------------------------------------------------
* 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/expense 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 variable account, annuity contract or life insurance policy, 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (1) The 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. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- (2) The Lipper Large-Cap Core Funds Index (the Lipper Index) includes the 30 largest large-cap core funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Large-Cap Core Funds Average (the Lipper 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 Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. -------------------------------------------------------------------------------- 4 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SECTOR BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
Consumer Discretionary 9.1% ------------------------------------------------ Consumer Staples 10.9% ------------------------------------------------ Energy 11.5% ------------------------------------------------ Financials 17.0% ------------------------------------------------ Health Care 13.0% ------------------------------------------------ Industrials 10.2% ------------------------------------------------ Information Technology 18.2% ------------------------------------------------ Materials 2.7% ------------------------------------------------ Telecommunication Services 4.1% ------------------------------------------------ Utilities 2.7% ------------------------------------------------ Other(2) 0.6% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). 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. TOP TEN HOLDINGS(1) (at June 30, 2010) ---------------------------------------------------------------------
Apple, Inc. 4.9% ------------------------------------------------ Chevron Corp. 3.9% ------------------------------------------------ Bank of America Corp. 3.8% ------------------------------------------------ ConocoPhillips 3.3% ------------------------------------------------ Microsoft Corp. 3.3% ------------------------------------------------ IBM Corp. 3.3% ------------------------------------------------ AT&T, Inc. 2.5% ------------------------------------------------ General Electric Co. 2.4% ------------------------------------------------ Pfizer, Inc. 2.2% ------------------------------------------------ Merck & Co., Inc. 2.2% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for the class. 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 actual expense ratio for the class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- 6 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 935.10 $5.52(c) 1.15% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.09 $5.76(c) 1.15% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the 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 of -6.49% for the six months ended June 30, 2010. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.91%. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.37 and the hypothetical expenses paid would have been $4.56. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (99.4%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (3.8%) General Dynamics Corp. 248 $14,523 Lockheed Martin Corp. 158(f) 11,771 Northrop Grumman Corp. 65(f) 3,539 Raytheon Co. 803 38,857 United Technologies Corp. 328 21,290 --------------- Total 89,980 ------------------------------------------------------------------------------------- BEVERAGES (3.0%) PepsiCo, Inc. 334 20,357 The Coca-Cola Co. 1,026 51,423 --------------- Total 71,780 ------------------------------------------------------------------------------------- CAPITAL MARKETS (1.7%) Franklin Resources, Inc. 105(f) 9,050 The Goldman Sachs Group, Inc. 240 31,505 --------------- Total 40,555 ------------------------------------------------------------------------------------- CHEMICALS (0.3%) The Dow Chemical Co. 296 7,021 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (2.3%) Fifth Third Bancorp 1,095 13,458 PNC Financial Services Group, Inc. 587 33,166 SunTrust Banks, Inc. 251(f) 5,848 Wells Fargo & Co. 42 1,075 --------------- Total 53,547 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (0.7%) Pitney Bowes, Inc. 500(f) 10,980 RR Donnelley & Sons Co. 309 5,058 --------------- Total 16,038 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (0.9%) Cisco Systems, Inc. 583(b) 12,424 Motorola, Inc. 1,212(b) 7,902 --------------- Total 20,326 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (7.9%) Apple, Inc. 464(b) 116,710 Dell, Inc. 1,318(b,f) 15,895 NetApp, Inc. 411(b,f) 15,334 Teradata Corp. 1,200(b) 36,576 Western Digital Corp. 63(b) 1,900 --------------- Total 186,415 ------------------------------------------------------------------------------------- CONSUMER FINANCE (1.5%) American Express Co. 535 21,240 Capital One Financial Corp. 113(f) 4,554 Discover Financial Services 691 9,660 --------------- Total 35,454 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (4.8%) Bank of America Corp. 6,287 90,344 Citigroup, Inc. 6,004(b) 22,575 --------------- Total 112,919 ------------------------------------------------------------------------------------- DIVERSIFIED TELECOMMUNICATION SERVICES (4.1%) AT&T, Inc. 2,450 59,266 Verizon Communications, Inc. 1,314 36,818 --------------- Total 96,084 ------------------------------------------------------------------------------------- ELECTRIC UTILITIES (2.7%) Entergy Corp. 180 12,892 Exelon Corp. 166 6,303 FirstEnergy Corp. 160(f) 5,637 Pinnacle West Capital Corp. 1,080 39,268 --------------- Total 64,100 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (1.0%) Agilent Technologies, Inc. 398(b) 11,315 Corning, Inc. 545 8,802 Tyco Electronics Ltd. 127(c) 3,223 --------------- Total 23,340 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) ENERGY EQUIPMENT & SERVICES (0.4%) Ensco PLC, ADR 113(c,f) $4,439 Nabors Industries Ltd. 124(b,c,f) 2,185 National Oilwell Varco, Inc. 104(f) 3,439 --------------- Total 10,063 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (2.0%) Walgreen Co. 251 6,702 Wal-Mart Stores, Inc. 825 39,657 --------------- Total 46,359 ------------------------------------------------------------------------------------- FOOD PRODUCTS (3.3%) Campbell Soup Co. 50(f) 1,792 General Mills, Inc. 254 9,022 Hormel Foods Corp. 730(f) 29,550 The Hershey Co. 810(f) 38,823 --------------- Total 79,187 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.3%) Becton Dickinson and Co. 54(f) 3,651 CareFusion Corp. 88(b) 1,998 Intuitive Surgical, Inc. 43(b,f) 13,572 Medtronic, Inc. 238 8,632 Stryker Corp. 68(f) 3,404 --------------- Total 31,257 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.8%) Aetna, Inc. 110 2,902 Cardinal Health, Inc. 95 3,193 CIGNA Corp. 491 15,250 McKesson Corp. 122 8,194 UnitedHealth Group, Inc. 1,596 45,327 WellPoint, Inc. 322(b) 15,755 --------------- Total 90,621 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (1.5%) McDonald's Corp. 525 34,582 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.3%) Stanley Black & Decker, Inc. 122 6,164 Whirlpool Corp. 15 1,317 --------------- Total 7,481 ------------------------------------------------------------------------------------- INDUSTRIAL CONGLOMERATES (3.2%) 3M Co. 231 18,247 General Electric Co. 4,007 57,781 --------------- Total 76,028 ------------------------------------------------------------------------------------- INSURANCE (6.3%) Aflac, Inc. 362 15,447 Chubb Corp. 307 15,353 Hartford Financial Services Group, Inc. 662 14,650 Principal Financial Group, Inc. 476(f) 11,157 The Allstate Corp. 1,474 42,349 The Progressive Corp. 845 15,818 The Travelers Companies, Inc. 573 28,220 Torchmark Corp. 134(f) 6,634 --------------- Total 149,628 ------------------------------------------------------------------------------------- INTERNET & CATALOG RETAIL (0.5%) priceline.com, Inc. 68(b,f) 12,005 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (0.1%) eBay, Inc. 172(b) 3,373 ------------------------------------------------------------------------------------- IT SERVICES (4.6%) Automatic Data Processing, Inc. 149 5,999 Cognizant Technology Solutions Corp., Class A 511(b) 25,581 IBM Corp. 623 76,927 --------------- Total 108,507 ------------------------------------------------------------------------------------- MACHINERY (0.3%) Illinois Tool Works, Inc. 93(f) 3,839 Ingersoll-Rand PLC 69(c,f) 2,380 --------------- Total 6,219 ------------------------------------------------------------------------------------- MEDIA (2.5%) CBS Corp., Class B 921 11,909 News Corp., Class A 1,544 18,466 The Walt Disney Co. 922 29,043 --------------- Total 59,418 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) METALS & MINING (1.8%) Alcoa, Inc. 256(f) $2,575 Freeport-McMoRan Copper & Gold, Inc. 538 31,813 United States Steel Corp. 226(f) 8,712 --------------- Total 43,100 ------------------------------------------------------------------------------------- MULTILINE RETAIL (1.9%) Family Dollar Stores, Inc. 960 36,182 Macy's, Inc. 104 1,862 Nordstrom, Inc. 206 6,631 --------------- Total 44,675 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (11.0%) Chevron Corp. 1,352 91,746 ConocoPhillips 1,582 77,660 Exxon Mobil Corp. 666 38,009 Hess Corp. 74 3,725 Marathon Oil Corp. 179 5,565 Murphy Oil Corp. 181 8,969 Occidental Petroleum Corp. 216 16,664 Valero Energy Corp. 1,128 20,281 --------------- Total 262,619 ------------------------------------------------------------------------------------- PAPER & FOREST PRODUCTS (0.6%) International Paper Co. 598(f) 13,533 ------------------------------------------------------------------------------------- PHARMACEUTICALS (7.8%) Abbott Laboratories 671 31,389 Forest Laboratories, Inc. 352(b) 9,655 Johnson & Johnson 693 40,929 Merck & Co., Inc. 1,503 52,560 Pfizer, Inc. 3,691 52,634 --------------- Total 187,167 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (1.5%) Dun & Bradstreet Corp. 530 35,574 ------------------------------------------------------------------------------------- REAL ESTATE INVESTMENT TRUSTS (REITS) (0.5%) Simon Property Group, Inc. 138 11,144 ------------------------------------------------------------------------------------- ROAD & RAIL (0.7%) CSX Corp. 102 5,062 Norfolk Southern Corp. 223 11,830 --------------- Total 16,892 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (0.3%) Micron Technology, Inc. 904(b,f) 7,675 ------------------------------------------------------------------------------------- SOFTWARE (3.5%) Intuit, Inc. 80(b) 2,782 Microsoft Corp. 3,360 77,314 Salesforce.com, Inc. 20(b,f) 1,716 --------------- Total 81,812 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (2.1%) Best Buy Co., Inc. 290(f) 9,819 GameStop Corp., Class A 1,020(b,f) 19,166 Home Depot, Inc. 431 12,098 Ltd. Brands, Inc. 365 8,056 --------------- Total 49,139 ------------------------------------------------------------------------------------- TEXTILES, APPAREL & LUXURY GOODS (0.4%) Nike, Inc., Class B 137(f) 9,254 ------------------------------------------------------------------------------------- TOBACCO (2.5%) Altria Group, Inc. 1,030 20,641 Lorillard, Inc. 550 39,589 --------------- Total 60,230 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,389,524) $2,355,101 -------------------------------------------------------------------------------------
MONEY MARKET FUND (0.6%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 13,360(d) $13,360 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $13,360) $13,360 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (11.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(e) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $265,723 0.030% $265,723 $265,723 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $265,723) $265,723 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,668,607)(g) $2,634,184 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. For long-term debt securities, item identified is in default as to payment of interest and/or principal. (c) Foreign security values are stated in U.S. dollars. At June 30, 2010, the value of foreign securities, excluding short-term securities, represented 0.52% of net assets. (d) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Pool $47,422 Government National Mortgage Association 223,615 ----------------------------------------------------------- Total market value of collateral securities $271,037 -----------------------------------------------------------
(f) At June 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $2,669,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $147,000 Unrealized depreciation (182,000) ---------------------------------------------------------- Net unrealized depreciation $(35,000) ----------------------------------------------------------
-------------------------------------------------------------------------------- 12 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
FAIR VALUE AT JUNE 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS(b) INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------------------- Equity Securities Common Stocks $2,355,101 $-- $-- $2,355,101 ---------------------------------------------------------------------------------------------- Total Equity Securities 2,355,101 -- -- 2,355,101 ---------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 13,360 -- -- 13,360 Investments of Cash Collateral Received for Securities on Loan -- 265,723 -- 265,723 ---------------------------------------------------------------------------------------------- Total Other 13,360 265,723 -- 279,083 ---------------------------------------------------------------------------------------------- Total $2,368,461 $265,723 $-- $2,634,184 ----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. 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 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 800.221.2450. -------------------------------------------------------------------------------- 14 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $2,389,524) $ 2,355,101 Affiliated money market fund (identified cost $13,360) 13,360 Investments of cash collateral received for securities on loan (identified cost $265,723) 265,723 ------------------------------------------------------------------------------------- Total investments in securities (identified cost $2,668,607) 2,634,184 Dividends and accrued interest receivable 3,008 Receivable from Investment Manager 4,537 Other receivables 9,462 ------------------------------------------------------------------------------------- Total assets 2,651,191 ------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 51 Payable upon return of securities loaned 265,723 Accrued investment management services fees 811 Accrued transfer agency fees 140 Accrued administrative services fees 137 Other accrued expenses 15,406 ------------------------------------------------------------------------------------- Total liabilities 282,268 ------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 2,368,923 ------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 353 Additional paid-in capital 5,795,183 Undistributed net investment income 25,526 Accumulated net realized gain (loss) (3,417,716) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (34,423) ------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 2,368,923 ------------------------------------------------------------------------------------- Shares outstanding 353,318 ------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 6.70 ------------------------------------------------------------------------------------- *Value of securities on loan $ 257,088 -------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 26,873 Interest 13,891 Income distributions from affiliated money market fund 39 Income from securities lending -- net 68 ----------------------------------------------------------------------- Total income 40,871 ----------------------------------------------------------------------- Expenses: Investment management services fees 4,728 Transfer agency fees 805 Administrative services fees 799 Compensation of board members 43 Custodian fees 3,620 Printing and postage 6,501 Professional fees 9,652 Other 1,794 ----------------------------------------------------------------------- Total expenses 27,942 Expenses waived/reimbursed by the Investment Manager and its affiliates (12,661) ----------------------------------------------------------------------- Total net expenses 15,281 ----------------------------------------------------------------------- Investment income (loss) -- net 25,590 ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions 58,502 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (249,126) ----------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (190,624) ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(165,034) -----------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 25,590 $ 28,967 Net realized gain (loss) on investments 58,502 (132,313) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (249,126) 571,126 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (165,034) 467,780 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (28,202) (100,000) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales 59,571 37,584 Reinvestment of distributions at net asset value 28,202 100,000 Payments for redemptions (274,886) (403,209) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (187,113) (265,625) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (380,349) 102,155 Net assets at beginning of period 2,749,272 2,647,117 --------------------------------------------------------------------------------------------- Net assets at end of period $2,368,923 $2,749,272 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 25,526 $ 28,138 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $7.25 $6.23 $12.19 $12.56 $10.87 $10.84 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .07 .07 .24 .34 .14 .10 Net gains (losses) (both realized and unrealized) (.54) 1.22 (5.73) (.54) 1.70 .12 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.47) 1.29 (5.49) (.20) 1.84 .22 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.08) (.27) (.47) (.17) (.15) (.19) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.70 $7.25 $6.23 $12.19 $12.56 $10.87 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (6.49%) 20.72% (45.07%) (1.60%) 16.92% 2.03% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 2.10%(b) 2.09% 1.26% 1.12% .90% .86% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.15%(b) 1.33% 1.26% 1.12% .90% .86% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 1.92%(b) 1.16% 2.45% 2.64% 1.14% .95% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $3 $3 $6 $8 $8 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 46% 77% 131% 117% 96% 70% --------------------------------------------------------------------------------------------------------------------------------
(a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. (c) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Common Stock Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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 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. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. 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 from the primary exchange. 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. Short-term securities maturing in more than 60 days from the valuation date are valued at the market price or approximate market value based on current interest rates. Typically, those maturing in 60 days or less that originally had maturities of more than 60 days at acquisition date are valued at amortized cost using the market value on the 61(st) day before maturity. Short-term securities maturing in 60 days or less at acquisition date are valued at amortized cost. Amortization 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. -------------------------------------------------------------------------------- 20 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. ILLIQUID SECURITIES At June 30, 2010, 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, 2010 was $9,462 representing 0.40% of net assets. Certain illiquid securities may be valued, in good faith, by management at fair value according to procedures approved by the Board. According to Board guidelines, certain unregistered securities are determined to be liquid and are not included within the 15% limitation specified above. Assets are liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the value at which the asset is valued by the Fund. GUARANTEES AND INDEMNIFICATIONS Under the Fund's organizational documents, its officers and directors are indemnified against certain liabilities arising out of the performance of their duties to the Fund. In addition, certain of the Fund's contracts with its service providers contain general indemnification clauses. The Fund's maximum exposure under these arrangements is unknown since the amount of any future claims that may be made against the Fund cannot be determined and the Fund has no historical basis for predicting the likelihood of any such claims. FEDERAL TAXES The Fund's policy is to comply with Subchapter M of the Internal Revenue Code that applies to regulated investment companies and to distribute substantially all of its taxable income (which includes net short-term capital gains) to the subaccounts. No provision for income or excise taxes is thus required. Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. Generally, the tax authorities can examine all tax returns filed for the last three years. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. 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 -------------------------------------------------------------------------------- 22 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- index options, to receive or pay the difference between the index value and the strike price of the index option. Completion of transactions for options traded in the OTC market depends upon the performance of the other party. Cash collateral may be collected or posted by the Fund to secure certain OTC options trades. Cash collateral held or posted by the Fund for such option trades must be returned to the counterparty or the Fund upon closure, exercise or expiration of the contract. Option contracts purchased are recorded as investments and options contracts written are recorded as liabilities of the Fund. Option contracts are valued daily at the closing prices on their primary exchanges and unrealized appreciation or depreciation is recorded. Option contracts, including OTC option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE. The Fund will realize a gain or loss when the option transaction expires or is exercised. When options on debt securities or futures are exercised, the Fund will realize a gain or loss. When other options are exercised, the proceeds on sales for a written call option, the purchase cost for a written put option or the cost of a security for a purchased put or call option is adjusted by the amount of premium received or paid. The risk in buying an option is that the Fund pays a premium whether or not the option is exercised. The Fund also has the additional risk of being unable to enter into a closing transaction if a liquid secondary market does not exist. The risk in writing a call option is that the Fund gives up the opportunity for profit if the market price of the security increases. The risk in writing a put option is that the Fund may incur a loss if the market price of the security decreases and the option is exercised. The Fund's maximum payout in the case of written put option contracts represents the maximum potential amount of future payments (undiscounted) that the Fund could be required to make as a guarantor for written put options. 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. For OTC option contracts, the transaction is also subject to counterparty credit risk. At June 30, 2010, and for the six months then ended, the Fund had no written or purchased options. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. The management -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- fee is an annual fee that is equal to 0.355% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, other expenses paid to this company were $1. 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 1.15% for Class 1. The waived/reimbursed fees and expenses for the transfer agency fees at the class level were $6 for Class 1. The management fees and other Fund level expenses waived/reimbursed were $12,655. -------------------------------------------------------------------------------- 24 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed 1.26% of Class 1 average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.91% of 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,204,249 and $1,371,377, respectively, for the six months ended June 30, 2010. 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 were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 7,910 5,553 Reinvested distributions 4,160 13,661 Redeemed (37,831) (65,041) ---------------------------------------------------------------------- Net increase (decrease) (25,761) (45,827) ----------------------------------------------------------------------
7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $257,088 were on loan, secured by cash collateral of $265,723 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $68 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $209,293 and $246,027, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- 26 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 9. LEHMAN BROTHERS HOLDINGS INC. EQUITY-LINKED NOTES The Fund holds investments in two equity-linked notes (notes) for which Lehman Brothers Holdings Inc. (Lehman Brothers) is the counterparty. The notes (with an aggregate principal amount of $66,000) defaulted as of their respective maturity dates, Sept. 14, 2008 and Oct. 2, 2008. Lehman Brothers filed a Chapter 11 bankruptcy petition on Sept. 15, 2008, and as such, it is likely that the Fund will receive less than the maturity value of the notes, pending the outcome of the bankruptcy proceedings. Based on the bankruptcy proceedings, the Fund recorded receivables aggregating $6,386 based on the estimated amounts recoverable for the notes and recognized realized losses of $59,614. The estimates of the amounts recoverable for the notes are periodically adjusted by the Investment Manager based on the observable trading price of Lehman Brothers senior notes, which provide an indication of amounts recoverable through the bankruptcy proceedings. Any changes to the receivable balances resulting from such adjustments are recorded as a component of interest income in the Statement of Operations. At June 30, 2010, the value of the receivable balances were $9,462, which represented 0.40% of the Fund's net assets. The receivable balances for the notes are reported as other receivables in the Statement of Assets and Liabilities. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of options contracts, re- characterization of real estate investment trust (REIT) distributions, post- October losses and losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $3,443,755 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $519,960 $366,561 $632,912 $1,924,322
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $17,330 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through 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, other than as noted below. The Board has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. The redemption of all shares of the Fund took place on Aug. 13, 2010. 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 -------------------------------------------------------------------------------- 28 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance reflected the interrelationship of market -------------------------------------------------------------------------------- 32 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- conditions with the particular investment strategies employed by the portfolio management team. Further, the Board noted measures taken to address the Fund's performance, including the anticipated change in portfolio managers for the Fund. In this regard, the Board reviewed a detailed report illustrating the performance and track record of the new portfolio manager expected to assume responsibilities for the Fund upon the close of the Columbia Transaction. Further, the Board noted that it has approved liquidation of the Fund. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment -------------------------------------------------------------------------------- SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board observed that the Fund has yet to achieve any appreciable scale to benefit from reduced fees. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- 34 SELIGMAN COMMON STOCK PORTFOLIO -- 2010 SEMIANNUAL REPORT SELIGMAN COMMON STOCK PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9966 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 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 Approval of Investment Management Services Agreement............... 30 Proxy Voting....................... 33
-------------------------------------------------------------------------------- 2 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Communications and Information Portfolio (the Fund) Class 1 shares decreased 8.58% for the six months ended June 30, 2010. > The Fund outperformed its benchmark, the S&P North American Technology Sector Index, which fell 10.39%. > The Fund underperformed its peer group, as represented by the Lipper Science & Technology Funds Index, which declined 7.52% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------- Seligman Communications and Information Portfolio Class 1 -8.58% +14.63% -0.84% +8.01% -0.68% ------------------------------------------------------------------------- Class 2 -8.65% +14.35% -1.08% +7.75% -0.94% ------------------------------------------------------------------------- S&P North American Technology Sector Index(1) (unmanaged) -10.39% +15.84% -4.26% +3.06% -8.11% ------------------------------------------------------------------------- Lipper Science & Technology Funds Index(2) (unmanaged) -7.52% +17.25% -4.76% +2.50% -8.45% ------------------------------------------------------------------------- Lipper Science & Technology Funds Average(3) (unmanaged) -7.95% +17.88% -5.50% +2.21% -8.42% -------------------------------------------------------------------------
* 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/expense 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 variable account, annuity contract or life insurance policy, including any administration fees or sales charges. If reflected, returns would be lower than those shown. Current performance may be lower or -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (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 Lipper Science & Technology Funds Index (the Lipper Index) includes the 30 largest science and technology funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Science & Technology Funds Average (the Lipper Average) is an average of funds that invest at least 65% of their equity portfolios in science and technology stocks. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. SECTOR BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
Consumer Discretionary 0.4% ------------------------------------------------ Health Care 5.2% ------------------------------------------------ Industrials 2.4% ------------------------------------------------ Information Technology 84.1% ------------------------------------------------ Other(2) 7.9% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). 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 COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at June 30, 2010) ---------------------------------------------------------------------
Synopsys, Inc. 6.7% ------------------------------------------------ Apple, Inc. 6.6% ------------------------------------------------ BMC Software, Inc. 5.5% ------------------------------------------------ Check Point Software Technologies Ltd. 5.3% ------------------------------------------------ Symantec Corp. 5.0% ------------------------------------------------ Amdocs Ltd. 4.9% ------------------------------------------------ Microsoft Corp. 4.8% ------------------------------------------------ Parametric Technology Corp. 4.1% ------------------------------------------------ Cisco Systems, Inc. 3.7% ------------------------------------------------ Google, Inc., Class A 3.5% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations, government regulation, and limited liquidity as compared to other investments. In addition, investments in one economic sector, such as technology, may result in greater price fluctuations than owning a portfolio of diversified investments. Investments in small- and mid-capitalization companies involve greater risks and potential volatility than investments in larger, more established companies. See the Fund's prospectus for information on these and other risks associated with the Fund. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees; distribution and service (Rule 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- 6 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 or 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.
BEGINNING ENDING EXPENSES ACCOUNT VALUE ACCOUNT VALUE PAID DURING ANNUALIZED JAN. 1, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 914.20 $4.75(c) 1.00% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.84 $5.01(c) 1.00% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 913.50 $5.93(c) 1.25% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.60 $6.26(c) 1.25% ------------------------------------------------------------------------------------------
(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, 2010: -8.58% for Class 1 and -8.65% for Class 2. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 0.99% for Class 1 and 1.24% for Class 2. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place for the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.70 for Class 1 and $5.88 for Class 2; the hypothetical expenses paid would have been $4.96 for Class 1 and $6.21 for Class 2. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------ JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (91.6%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (2.0%) General Dynamics Corp. 17,600 $1,030,656 ------------------------------------------------------------------------------------- BIOTECHNOLOGY (0.7%) Gilead Sciences, Inc. 10,400(b) 356,512 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (6.0%) Cisco Systems, Inc. 84,000(b) 1,790,040 Nortel Networks Corp. 16(b,c) 1 QUALCOMM, Inc. 42,000 1,379,280 --------------- Total 3,169,321 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (12.3%) Apple, Inc. 12,600(b) 3,169,278 Electronics for Imaging, Inc. 66,200(b,d) 645,450 EMC Corp. 38,900(b) 711,870 Hewlett-Packard Co. 35,200 1,523,456 NetApp, Inc. 11,967(b,d) 446,489 --------------- Total 6,496,543 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (0.4%) Sensata Technologies Holding NV 13,035(b,c) 208,430 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (0.8%) Avnet, Inc. 17,800(b) 429,158 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (2.2%) Boston Scientific Corp. 49,800(b,d) 288,840 St. Jude Medical, Inc. 24,100(b) 869,769 --------------- Total 1,158,609 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (6.7%) Google, Inc., Class A 3,800(b) 1,690,810 Open Text Corp. 38,171(b,c) 1,432,939 VeriSign, Inc. 16,300(b,d) 432,765 --------------- Total 3,556,514 ------------------------------------------------------------------------------------- IT SERVICES (7.8%) Amdocs Ltd. 88,500(b,c) 2,376,225 Cognizant Technology Solutions Corp., Class A 2,400(b) 120,144 IBM Corp. 9,100 1,123,668 Lender Processing Services, Inc. 10,500 328,755 Rolta India Ltd. 41,800(c) 149,581 --------------- Total 4,098,373 ------------------------------------------------------------------------------------- LIFE SCIENCES TOOLS & SERVICES (1.1%) Life Technologies Corp. 12,262(b,d) 579,380 ------------------------------------------------------------------------------------- MEDIA (0.4%) Virgin Media, Inc. 12,000(d) 200,280 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS (1.1%) Xerox Corp. 73,100 587,724 ------------------------------------------------------------------------------------- PHARMACEUTICALS (1.3%) Abbott Laboratories 14,100 659,598 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (11.5%) Amkor Technology, Inc. 82,427(b,d) 454,173 Analog Devices, Inc. 30,290 843,879 ASML Holding NV 13,000(c,d) 357,110 Avago Technologies Ltd. 3,500(b,c,d) 73,710 KLA-Tencor Corp. 26,600 741,608 Lam Research Corp. 6,700(b) 255,002 Marvell Technology Group Ltd. 47,959(b,c) 755,834 Micron Technology, Inc. 29,300(b,d) 248,757 National Semiconductor Corp. 48,330 650,522 Novellus Systems, Inc. 55,000(b,d) 1,394,800 ON Semiconductor Corp. 18,200(b) 116,116 STMicroelectronics NV 22,100(c,d) 174,811 --------------- Total 6,066,322 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) SOFTWARE (37.3%) Activision Blizzard, Inc. 50,200 $526,598 Adobe Systems, Inc. 21,400(b) 565,602 Aspen Technology, Inc. 35,000(b,d) 381,150 BMC Software, Inc. 76,200(b) 2,638,806 BroadSoft, Inc. 4,930(b) 42,152 Check Point Software Technologies Ltd. 86,965(b,c) 2,563,728 JDA Software Group, Inc. 10,200(b) 224,196 Mentor Graphics Corp. 100,194(b,d) 886,717 Micro Focus International PLC 15,400(c) 96,734 Microsoft Corp. 100,300 2,307,903 Nuance Communications, Inc. 104,000(b,d) 1,554,800 Oracle Corp. 12,500 268,250 Parametric Technology Corp. 127,900(b,d) 2,004,193 Symantec Corp. 173,823(b) 2,412,663 Synopsys, Inc. 156,000(b) 3,255,719 --------------- Total 19,729,211 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $51,034,142) $48,326,631 ------------------------------------------------------------------------------------- MONEY MARKET FUND (7.8%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 4,122,407(f) $4,122,407 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $4,122,407) $4,122,407 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (14.3%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(E) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $7,517,981 0.030% $7,517,975 $7,517,975 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $7,517,975) $7,517,975 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $62,674,524)(g) $59,967,013 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2010, the value of foreign securities, excluding short-term securities, represented 15.52% of net assets. (d) At June 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (e) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Pool $1,341,683 Government National Mortgage Association 6,326,652 ----------------------------------------------------------- Total market value of collateral securities $7,668,335 -----------------------------------------------------------
(f) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $62,675,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $3,085,000 Unrealized depreciation (5,793,000) ----------------------------------------------------------- Net unrealized depreciation $(2,708,000) -----------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
FAIR VALUE AT JUNE 30, 2010 -------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS INPUTS(B) INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks IT Services $3,948,792 $149,581 $-- $4,098,373 Software 19,632,477 96,734 -- 19,729,211 All Other Industries 24,499,047 -- -- 24,499,047 -------------------------------------------------------------------------------------------- Total Equity Securities 48,080,316 246,315 -- 48,326,631 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 4,122,407 -- -- 4,122,407 Investments of Cash Collateral Received for Securities on Loan -- 7,517,975 -- 7,517,975 -------------------------------------------------------------------------------------------- Total Other 4,122,407 7,517,975 -- 11,640,382 -------------------------------------------------------------------------------------------- Total $52,202,723 $7,764,290 $-- $59,967,013 --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (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. There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. 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 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 800.221.2450. -------------------------------------------------------------------------------- 12 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $51,034,142) $ 48,326,631 Affiliated money market fund (identified cost $4,122,407) 4,122,407 Investments of cash collateral received for securities on loan (identified cost $7,517,975) 7,517,975 -------------------------------------------------------------------------------------- Total investments in securities (identified cost $62,674,524) 59,967,013 Capital shares receivable 14,652 Dividends and accrued interest receivable 18,623 Receivable for investment securities sold 415,756 -------------------------------------------------------------------------------------- Total assets 60,416,044 -------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 11,972 Payable for investment securities purchased 53,635 Payable upon return of securities loaned 7,517,975 Accrued investment management services fees 35,328 Accrued distribution fees 7,094 Accrued transfer agency fees 3,078 Accrued administrative services fees 3,006 Other accrued expenses 28,988 -------------------------------------------------------------------------------------- Total liabilities 7,661,076 -------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 52,754,968 -------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 2,922 Additional paid-in capital 68,655,330 Accumulated net investment loss (130,552) Accumulated net realized gain (loss) (13,065,221) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (2,707,511) -------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 52,754,968 -------------------------------------------------------------------------------------- *Value of securities on loan $ 7,151,254 --------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $22,577,519 1,231,402 $18.33 Class 2 $30,177,449 1,690,347 $17.85 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 164,577 Interest 21,450 Income distributions from affiliated money market fund 3,865 Income from securities lending -- net 2,167 Foreign taxes withheld (120) ------------------------------------------------------------------------------ Total income 191,939 ------------------------------------------------------------------------------ Expenses: Investment management services fees 198,805 Distributions fees -- Class 2 38,703 Transfer agency fees Class 1 7,686 Class 2 9,359 Administrative services fees 16,919 Compensation of board members 911 Custodian fees 8,930 Printing and postage 11,638 Professional fees 19,152 Other 9,275 ------------------------------------------------------------------------------ Total expenses 321,378 ------------------------------------------------------------------------------ Investment income (loss) -- net (129,439) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 3,032,586 Foreign currency transactions (1,243) ------------------------------------------------------------------------------ Net realized gain (loss) on investments 3,031,343 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,897,155) ------------------------------------------------------------------------------ Net gain (loss) on investments and foreign currencies (4,865,812) ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(4,995,251) ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (129,439) $ (327,654) Net realized gain (loss) on investments 3,031,343 1,244,730 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (7,897,155) 18,625,606 -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (4,995,251) 19,542,682 -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 120,649 292,196 Class 2 shares 8,669,624 17,154,202 Payments for redemptions Class 1 shares (2,095,472) (4,542,598) Class 2 shares (5,021,635) (6,445,241) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 1,673,166 6,458,559 -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (3,322,085) 26,001,241 Net assets at beginning of period 56,077,053 30,075,812 -------------------------------------------------------------------------------------------------- Net assets at end of period $52,754,968 $56,077,053 -------------------------------------------------------------------------------------------------- Accumulated net investment loss $ (130,552) $ (1,113) --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $20.05 $12.54 $19.66 $17.04 $13.93 $12.92 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.11) (.13) (.11) (.08) (.10) Net gains (losses) (both realized and unrealized) (1.69) 7.62 (6.99) 2.73 3.19 1.11 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.72) 7.51 (7.12) 2.62 3.11 1.01 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $18.33 $20.05 $12.54 $19.66 $17.04 $13.93 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (8.58%) 59.89% (36.22%) 15.37% 22.33% 7.82% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.00%(b) 1.10% 1.15% 1.10% 1.05% 1.10% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.33%)(b) (.68%) (.78%) (.59%) (.54%) (.77%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $23 $27 $20 $38 $42 $47 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 147% 129% 199% 181% 133% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 16 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 2 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $19.54 $12.26 $19.27 $16.74 $13.72 $12.76 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.05) (.14) (.17) (.15) (.12) (.13) Net gains (losses) (both realized and unrealized) (1.64) 7.42 (6.84) 2.68 3.14 1.09 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.69) 7.28 (7.01) 2.53 3.02 .96 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $17.85 $19.54 $12.26 $19.27 $16.74 $13.72 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (8.65%) 59.38% (36.38%) 15.11% 22.01% 7.52% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Total expenses 1.25%(b) 1.31% 1.40% 1.35% 1.30% 1.35% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.56%)(b) (.87%) (1.03%) (.84%) (.79%) (1.02%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $30 $29 $10 $19 $16 $12 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 58% 147% 129% 199% 181% 133% --------------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Communications and Information Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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. - Class 1 shares are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. - Class 2 shares are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies and qualified pension or retirement plans. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. Shares are also offered through certain qualified pension or retirement plans. You invest by purchasing a variable annuity contract or life insurance policy or through a qualified pension or retirement plan and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. Debt securities are generally traded in the over-the-counter -------------------------------------------------------------------------------- 18 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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 the 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 -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- purchase or sale of securities and income and expenses are translated at the exchange rate on the transaction date. The effect of changes in foreign exchange rates on realized and unrealized security gains or losses is reflected as a component of such gains or losses. In the Statement of Operations, net realized gains or losses from foreign currency transactions, if any, may arise from sales of foreign currency, closed forward contracts, exchange gains or losses realized between the trade date and settlement date on securities transactions, and other translation gains or losses on dividends, interest income and foreign withholding taxes. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. -------------------------------------------------------------------------------- 20 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- DIVIDENDS Distributions to the subaccounts are recorded at the close of business on the record date and are payable on the first business day following the record date. Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date 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. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At June 30, 2010, the Fund had no outstanding forward foreign currency contracts. EFFECTS OF DERIVATIVE TRANSACTIONS ON THE FINANCIAL STATEMENTS The following tables are intended to provide additional information about the effect of derivatives on the financial statements of the Fund including: the fair value of derivatives by risk category and the location of those fair values in the Statement of Assets and Liabilities; the impact of derivative transactions on the Fund's operations over the period including realized gains or losses and unrealized gains or losses. The derivative schedules following the Portfolio of Investments present additional information regarding derivative instruments outstanding at the end of the period, if any. FAIR VALUES OF DERIVATIVE INSTRUMENTS AT JUNE 30, 2010 At June 30, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------------- Foreign exchange contracts $(2,198) ----------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ---------------------------------------------------------------------- FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ---------------------------------------------------------------------- Foreign exchange contracts $-- ----------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At June 30, 2010, the Fund had no outstanding forward foreign currency contracts. The average gross notional amount of forward foreign currency contracts opened, and subsequently closed, was $58,700 for the six months ended June 30, 2010. -------------------------------------------------------------------------------- 22 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held or sold. The management fee is an annual fee that is equal to 0.705% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, other expenses paid to this company were $21. 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES The Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 0.99% Class 2.............................................. 1.24
For the six months ended June 30, 2010, the waiver was not invoked since the Fund's expenses were below the cap amount. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $30,642,171 and $30,335,463, respectively, for the six months ended June 30, 2010. 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 were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 6,099 17,383 Redeemed (104,281) (281,750) ---------------------------------------------------------------------- Net increase (decrease) (98,182) (264,367) ---------------------------------------------------------------------- CLASS 2 Sold 442,826 1,096,161 Redeemed (257,961) (413,492) ---------------------------------------------------------------------- Net increase (decrease) 184,865 682,669 ----------------------------------------------------------------------
-------------------------------------------------------------------------------- 24 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $7,151,254 were on loan, secured by cash collateral of $7,517,975 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $2,167 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- RiverSource Short-Term Cash Fund aggregated $16,666,974 and $16,057,376, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 9. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. The Fund had no borrowings during the six months ended June 30, 2010. 10. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of losses deferred due to wash sales. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Fund. -------------------------------------------------------------------------------- 26 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- For federal income tax purposes, the Fund had a capital loss carry-over of $15,686,110 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $7,829,524 $5,578,202 $2,165,560 $112,824
It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 11. RISKS RELATING TO CERTAIN INVESTMENTS CONCENTRATION RISK The Fund concentrates its investments in companies in the communications, information and related industries. The market prices of these stocks tend to exhibit a greater degree of market risk. Therefore, the Fund's net asset value may fluctuate more than a fund that invests in a wider range of industries. 12. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through 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, other than as noted below. The Board of Directors of Seligman Communications and Information Portfolio has approved in principle the proposed merger of the Fund into Seligman Global Technology Portfolio. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. 13. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 -------------------------------------------------------------------------------- 28 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's proposed revised expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- 30 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer -------------------------------------------------------------------------------- 32 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board observed that the Fund has yet to achieve any appreciable scale to benefit from reduced fees. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 SELIGMAN COMMUNICATIONS AND INFORMATION PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9951 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 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 Approval of Investment Management Services Agreement............... 33 Proxy Voting....................... 36
-------------------------------------------------------------------------------- 2 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Global Technology Portfolio (the Fund) Class 1 shares decreased 7.98% for the six months ended June 30, 2010. > The Fund outperformed its benchmark, the Morgan Stanley Capital International (MSCI) World IT Index, which fell 9.79% during the same period. > The broad global equity market, represented by the MSCI World Index, lost 9.56% for the same time frame. > The Fund underperformed its peer group, as represented by the Lipper Global Science & Technology Funds Index, which declined 5.83% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------- Seligman Global Technology Portfolio Class 1 -7.98% +18.32% -2.35% +6.61% -3.31% ----------------------------------------------------------------------------- Class 2 -8.22% +17.93% -2.60% +6.39% -3.48% ----------------------------------------------------------------------------- MSCI World IT Index(1) (unmanaged) -9.79% +13.25% -6.55% +1.75% -8.81% ----------------------------------------------------------------------------- MSCI World Index(2) (unmanaged) -9.56% +10.77% -10.94% +0.61% -0.53% ----------------------------------------------------------------------------- Lipper Global Science & Technology Funds Index(3) (unmanaged) -5.83% +22.41% -3.22% +4.23% N/A ----------------------------------------------------------------------------- Lipper Global Science & Technology Funds Average(4) (unmanaged) -6.95% +20.30% -4.56% +3.78% -8.86% -----------------------------------------------------------------------------
* 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/expense 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 variable account, annuity contract or life insurance policy, 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 -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- information current to the most recent month-end by contacting your financial intermediary, by visiting seligman.com (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (1) The MSCI World 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 Index (the Lipper Index) includes the 10 largest global science and technology funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper Global Science & Technology Funds Average (the Lipper Average) is an average of funds that invest primarily in the equity securities of domestic and foreign companies engaged in science and technology. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. SECTOR BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
Consumer Discretionary 1.2% ------------------------------------------------ Health Care 0.6% ------------------------------------------------ Industrials 1.8% ------------------------------------------------ Information Technology 91.5% ------------------------------------------------ Other(2) 4.9% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. 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 The McGraw-Hill Companies, Inc. -------------------------------------------------------------------------------- 4 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at June 30, 2010) ---------------------------------------------------------------------
Apple, Inc. 6.1% ------------------------------------------------ Synopsys, Inc. 5.2% ------------------------------------------------ Check Point Software Technologies Ltd. 5.1% ------------------------------------------------ Amdocs Ltd. 5.1% ------------------------------------------------ Parametric Technology Corp. 3.9% ------------------------------------------------ Symantec Corp. 3.8% ------------------------------------------------ Microsoft Corp. 3.7% ------------------------------------------------ BMC Software, Inc 3.4% ------------------------------------------------ Hewlett-Packard Co. 2.9% ------------------------------------------------ Nuance Communications, Inc. 2.7% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. International investing involves increased risk and volatility due to potential political and economic instability, currency fluctuations, and differences in financial reporting and accounting standards and oversight. Risks are particularly significant in emerging markets. The products of technology companies may be subject to severe competition and rapid obsolescence, and technology stocks may be subject to greater price fluctuations, government regulation, and limited liquidity as compared to other investments. In addition, the Fund is a narrowly-focused sector fund and it may exhibit higher volatility than funds with broader investment objectives. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees; distribution and service (Rule 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- 6 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 920.20 $7.67(c) 1.61% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.81 $8.05(c) 1.61% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 917.80 $9.08(c) 1.91% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,015.32 $9.54(c) 1.91% ------------------------------------------------------------------------------------------
(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, 2010: -7.98% for Class 1 and -8.22% for Class 2. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 0.99% for Class 1 and 1.24% for Class 2. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place for the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.71 for Class 1 and $5.90 for Class 2; the hypothetical expenses paid would have been $4.96 for Class 1 and $6.21 for Class 2. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------ JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (95.8%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (0.7%) General Dynamics Corp. 600 $35,136 ------------------------------------------------------------------------------------- APPLICATION SOFTWARE (21.5%) Adobe Systems, Inc. 700(b) 18,501 AsiaInfo Holdings, Inc. 2,660(b,c,d) 58,148 Aspen Technology, Inc. 5,241(b,d) 57,074 BroadSoft, Inc. 460(b) 3,933 JDA Software Group, Inc. 3,000(b) 65,940 Longtop Financial Technologies Ltd., ADR 1,600(b,c,d) 51,840 Mentor Graphics Corp. 7,995(b) 70,756 Micro Focus International PLC 14,215(c) 89,291 Misys PLC 8,500(b,c) 29,422 NICE Systems Ltd., ADR 1,500(b,c) 38,235 Nuance Communications, Inc. 8,000(b,d) 119,600 Parametric Technology Corp. 11,200(b,d) 175,504 Synopsys, Inc. 11,300(b) 235,831 --------------- Total 1,014,075 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.0%) Cisco Systems, Inc. 4,300(b) 91,633 QUALCOMM, Inc. 2,900 95,236 --------------- Total 186,869 ------------------------------------------------------------------------------------- COMPUTERS & PERIPHERALS (12.6%) Apple, Inc. 1,100(b) 276,683 Electronics for Imaging, Inc. 3,200(b) 31,200 EMC Corp. 2,100(b) 38,430 Hewlett-Packard Co. 3,000 129,840 NetApp, Inc. 1,893(b) 70,628 Toshiba Corp. 9,000(b,c) 44,600 --------------- Total 591,381 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (1.1%) Nidec Corp. 400(c) 33,500 Sensata Technologies Holding NV 1,087(b,c) 17,381 --------------- Total 50,881 ------------------------------------------------------------------------------------- ELECTRONIC EQUIPMENT, INSTRUMENTS & COMPONENTS (3.1%) AU Optronics Corp. 11,000(c) 9,745 AU Optronics Corp., ADR 1,400(c,d) 12,432 Avnet, Inc. 1,400(b) 33,754 Kyocera Corp. 400(c) 32,395 Tripod Technology Corp. 4,000(c) 14,798 Unimicron Technology Corp. 20,000(c) 29,126 Young Fast Optoelectronics Co., Ltd. 2,000(c) 15,112 --------------- Total 147,362 ------------------------------------------------------------------------------------- HOME ENTERTAINMENT SOFTWARE (0.6%) Activision Blizzard, Inc. 2,600 27,274 ------------------------------------------------------------------------------------- HOUSEHOLD DURABLES (0.7%) Sharp Corp. 3,000(c) 31,658 ------------------------------------------------------------------------------------- INTERNET SOFTWARE & SERVICES (7.0%) Baidu, Inc., ADR 500(b,c) 34,040 Equinix, Inc. 100(b,d) 8,122 Google, Inc., Class A 200(b) 88,990 Open Text Corp. 3,000(b,c) 112,620 Sina Corp. 1,000(b,c,d) 35,260 Telecity Group PLC 4,400(b,c) 26,204 VeriSign, Inc. 1,000(b,d) 26,550 --------------- Total 331,786 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) IT SERVICES (10.1%) Alliance Data Systems Corp. 700(b,d) $41,664 Amdocs Ltd. 8,500(b,c) 228,225 hiSoft Technology International Ltd., ADR 4,000(b,c) 41,600 IBM Corp. 700 86,436 Rolta India Ltd. 21,100(c) 75,506 --------------- Total 473,431 ------------------------------------------------------------------------------------- MEDIA (0.5%) Kabel Deutschland Holding AG 800(b,c) 22,889 ------------------------------------------------------------------------------------- OFFICE ELECTRONICS (2.1%) Canon, Inc. 1,000(c) 37,284 Konica Minolta Holdings, Inc. 1,500(c) 14,436 Xerox Corp. 5,800 46,632 --------------- Total 98,352 ------------------------------------------------------------------------------------- PHARMACEUTICALS (0.6%) Abbott Laboratories 600 28,068 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (14.1%) Advanced Semiconductor Engineering, Inc., ADR 9,000(c,d) 35,190 Amkor Technology, Inc. 2,400(b,d) 13,224 Analog Devices, Inc. 2,380 66,307 ASML Holding NV 1,100(c) 30,217 Avago Technologies Ltd. 538(b,c) 11,330 CSR PLC 4,176(b,c) 23,368 KLA-Tencor Corp. 1,300 36,244 Lam Research Corp. 1,000(b) 38,060 Marvell Technology Group Ltd. 3,400(b,c) 53,584 National Semiconductor Corp. 3,541 47,662 Novellus Systems, Inc. 2,700(b) 68,472 ON Semiconductor Corp. 14,200(b) 90,596 Samsung Electronics Co., Ltd. 29(c) 18,195 STMicroelectronics NV 10,800(c) 85,428 Sumco Corp. 2,900(b,c,d) 48,084 --------------- Total 665,961 ------------------------------------------------------------------------------------- SYSTEMS SOFTWARE (17.1%) 3i Infotech Ltd. 14,400(c) 18,522 BMC Software, Inc. 4,400(b) 152,372 Check Point Software Technologies Ltd. 7,847(b,c) 231,330 Microsoft Corp. 7,200 165,672 Oracle Corp. 1,100 23,606 Symantec Corp. 12,200(b) 169,336 Websense, Inc. 2,321(b) 43,867 --------------- Total 804,705 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $4,610,933) $4,509,828 ------------------------------------------------------------------------------------- MONEY MARKET FUND (4.9%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 233,017(e) $233,017 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $233,017) $233,017 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (12.0%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(f) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $565,471 0.030% $565,471 $565,471 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $565,471) $565,471 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $5,409,421)(g) $5,308,316 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ SUMMARY OF INVESTMENTS IN SECURITIES BY COUNTRY The following table represents the portfolio investments of the Fund by country as a percentage of net assets at June 30, 2010.
PERCENTAGE OF COUNTRY NET ASSETS ----------------------------------------------------------------- Bermuda 1.1% Canada 2.4 China 4.7 Germany 0.6 Guernsey 4.9 India 2.0 Israel 5.7 Japan 5.1 Netherlands 1.0 Singapore 0.2 South Korea 0.4 Switzerland 1.8 Taiwan 2.4 United Kingdom 3.6 ----------------------------------------------------------------- Total Foreign Securities* 35.9% ----------------------------------------------------------------- United States 76.8% -----------------------------------------------------------------
* Amount shown does not include companies based in the U.S. that derive at least 50% of their revenues from business outside the U.S. or have at least 50% of their assets outside the U.S. If such companies were included, Total Foreign Securities would be greater than 40%. The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) Foreign security values are stated in U.S. dollars. At June 30, 2010, the value of foreign securities, excluding short-term securities, represented 35.90% of net assets. (d) At June 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. -------------------------------------------------------------------------------- 10 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Pool $100,915 Government National Mortgage Association 475,865 ----------------------------------------------------------- Total market value of collateral securities $576,780 -----------------------------------------------------------
(g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $5,409,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $300,000 Unrealized depreciation (401,000) ---------------------------------------------------------- Net unrealized depreciation $(101,000) ----------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 12 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
FAIR VALUE AT JUNE 30, 2010 ------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS INPUTS(B) INPUTS TOTAL -------------------------------------------------------------------------------------------- Equity Securities Common Stocks Application Software $895,362 $118,713 $-- $1,014,075 Computers & Peripherals 546,781 44,600 -- 591,381 Electrical Equipment 17,381 33,500 -- 50,881 Electronic Equipment, Instruments & Components 46,186 101,176 -- 147,362 Household Durables 31,658 31,658 Internet Software & Services 305,582 26,204 -- 331,786 IT Services 397,925 75,506 -- 473,431 Office Electronics 83,916 14,436 -- 98,352 Semiconductors & Semiconductor Equipment 576,314 89,647 -- 665,961 Systems Software 786,183 18,522 -- 804,705 All Other Industries 300,236 -- -- 300,236 -------------------------------------------------------------------------------------------- Total Equity Securities 3,955,866 553,962 -- 4,509,828 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 233,017 -- -- 233,017 Investments of Cash Collateral Received for Securities on Loan -- 565,471 -- 565,471 -------------------------------------------------------------------------------------------- Total Other 233,017 565,471 -- 798,488 -------------------------------------------------------------------------------------------- Total $4,188,883 $1,119,433 $-- $5,308,316 --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) Includes certain securities trading outside the U.S whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------ FAIR VALUE MEASUREMENTS (CONTINUED) HOW TO FIND INFORMATION ABOUT THE FUND'S QUARTERLY PORTFOLIO HOLDINGS (i) The Fund files its complete schedule of portfolio holdings with the Securities and Exchange Commission (Commission) for the first and third quarters of each fiscal year on Form N-Q; (ii) The Fund's Forms N-Q are available on the Commission's website at http://www.sec.gov; (iii)The Fund's Forms N-Q may be reviewed and copied at the Commission's Public Reference Room in Washington, DC (information on the operations of the Public Reference Room may be obtained by calling 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 800.221.2450. -------------------------------------------------------------------------------- 14 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $4,610,933) $ 4,509,828 Affiliated money market fund (identified cost $233,017) 233,017 Investments of cash collateral received for securities on loan (identified cost $565,471) 565,471 ------------------------------------------------------------------------------------- Total investments in securities (identified cost $5,409,421) 5,308,316 Foreign currency holdings (identified cost $188) 190 Receivable from Investment Manager 13,716 Capital shares receivable 54 Dividends and accrued interest receivable 1,710 Receivable for investment securities sold 35,190 ------------------------------------------------------------------------------------- Total assets 5,359,176 ------------------------------------------------------------------------------------- LIABILITIES Disbursements in excess of cash 189 Capital shares payable 4,451 Payable for investment securities purchased 47,418 Payable upon return of securities loaned 565,471 Accrued investment management services fees 4,455 Accrued distribution fees 345 Accrued transfer agency fees 288 Accrued administrative services fees 375 Other accrued expenses 26,359 ------------------------------------------------------------------------------------- Total liabilities 649,351 ------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 4,709,825 ------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- .001 par value $ 287 Additional paid-in capital 10,315,267 Accumulated net investment loss (28,801) Accumulated net realized gain (loss) (5,475,908) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (101,020) ------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 4,709,825 ------------------------------------------------------------------------------------- *Value of securities on loan $ 543,381 -------------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $3,417,473 207,386 $16.48 Class 2 $1,292,352 79,839 $16.19 ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends $ 19,998 Interest 1,910 Income distributions from affiliated money market fund 192 Income from securities lending -- net 178 Foreign taxes withheld (557) ----------------------------------------------------------------------- Total income 21,721 ----------------------------------------------------------------------- Expenses: Investment management services fees 27,988 Distribution fees -- Class 2 2,553 Transfer agency fees Class 1 1,163 Class 2 617 Administrative services fees 2,357 Compensation of board members 97 Custodian fees 8,950 Printing and postage 10,453 Professional fees 25,373 Other 2,306 ----------------------------------------------------------------------- Total expenses 81,857 Expenses waived/reimbursed by the Investment Manager and its affiliates (31,470) ----------------------------------------------------------------------- Total net expenses 50,387 ----------------------------------------------------------------------- Investment income (loss) -- net (28,666) ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 499,482 Foreign currency transactions 1,673 ----------------------------------------------------------------------- Net realized gain (loss) on investments 501,155 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (900,599) ----------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (399,444) ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(428,110) -----------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS Investment income (loss) -- net $ (28,666) $ (73,474) Net realized gain (loss) on investments 501,155 7,247 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (900,599) 2,466,138 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (428,110) 2,399,911 --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 119,908 160,070 Class 2 shares 179,363 1,486,640 Payments for redemptions Class 1 shares (425,372) (485,495) Class 2 shares (1,128,132) (1,081,794) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (1,254,233) 79,421 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (1,682,343) 2,479,332 Net assets at beginning of period 6,392,168 3,912,836 --------------------------------------------------------------------------------------------- Net assets at end of period $ 4,709,825 $ 6,392,168 --------------------------------------------------------------------------------------------- Accumulated net investment loss $ (28,801) $ (135) ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS ---------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $17.91 $11.03 $18.46 $15.99 $13.56 $12.54 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.08) (.19) (.21) (.25) (.20) (.19) Net gains (losses) (both realized and unrealized) (1.35) 7.07 (7.22) 2.72 2.63 1.21 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.43) 6.88 (7.43) 2.47 2.43 1.02 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $16.48 $17.91 $11.03 $18.46 $15.99 $13.56 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (7.98%) 62.38% (40.25%) 15.45% 17.92% 8.13% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Gross expenses prior to expense waiver/reimbursement 2.72%(b) 3.86% 3.54% 3.04% 2.57% 2.49% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.61%(b) 1.90% 1.90% 1.90% 1.90% 1.90% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.86%)(b) (1.38%) (1.38%) (1.44%) (1.37%) (1.53%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $3 $4 $3 $6 $6 $7 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 153% 161% 198% 205% 155% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- 18 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
SIX MONTHS ENDED YEAR ENDED DEC. 31, CLASS 2 JUNE 30, 2010 ------------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $17.64 $10.88 $18.25 $15.83 $13.45 $12.46 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.10) (.23) (.24) (.28) (.22) (.21) Net gains (losses) (both realized and unrealized) (1.35) 6.99 (7.13) 2.70 2.60 1.20 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (1.45) 6.76 (7.37) 2.42 2.38 .99 -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $16.19 $17.64 $10.88 $18.25 $15.83 $13.45 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (8.22%) 62.13% (40.38%) 15.29% 17.69% 7.95% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Gross expenses prior to expense waiver/reimbursement 2.89%(b) 3.79% 3.71% 3.19% 2.72% 2.64% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.91%(b) 2.15% 2.07% 2.05% 2.05% 2.05% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (1.19%)(b) (1.60%) (1.55%) (1.59%) (1.52%) (1.68%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $2 $1 $3 $2 $2 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 50% 153% 161% 198% 205% 155% --------------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. (c) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Global Technology Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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 contracts and life insurance policies offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 -------------------------------------------------------------------------------- 20 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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 -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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, 2010, foreign currency holdings consisted of multiple denominations, primarily Japanese yen. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. 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. -------------------------------------------------------------------------------- 22 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Dividends from net investment income are declared and distributed annually, when available. Capital gain distributions, when available, will be made annually. However, an additional capital gain distribution may be made during the fiscal year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. At June 30, 2010, 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 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. The maximum payout amount may be offset by the subsequent sale, -------------------------------------------------------------------------------- 24 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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. For OTC options contracts, the transaction is also subject to counterparty credit risk. At June 30, 2010, and for the six months then ended, the Fund had no written or purchased options. 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, 2010 At June 30, 2010, the Fund had no outstanding derivatives. EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------ FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ------------------------------------------------------------------ Foreign exchange contracts $(2,110) ------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME ------------------------------------------------------------------------ FORWARD FOREIGN RISK EXPOSURE CATEGORY CURRENCY CONTRACTS ------------------------------------------------------------------ Foreign exchange contracts $-- ------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS At June 30, 2010, the Fund had no outstanding forward foreign currency contracts. The monthly average gross notional amount for these contracts was $38,000 for the six months ended June 30, 2010. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. The management -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- fee is an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.87% as the Fund's assets increase. The management fee for the six months ended June 30, 2010 was 0.95% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, other expenses paid to this company were $3. 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.) (the Distributor) for distribution services. Under a Plan and Agreement of Distribution pursuant to Rule 12b-1, the Fund pays a fee at an annual rate of up to 0.25% of the Fund's average daily net assets attributable to Class 2 shares. -------------------------------------------------------------------------------- 26 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, 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.............................................. 1.61% Class 2.............................................. 1.91
The waived/reimbursed fees and expenses for the transfer agency fees at the class level were as follows: Class 1............................................... $8 Class 2............................................... 4
The management fees and other Fund level expenses waived/reimbursed were $31,458. Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 1.90% Class 2.............................................. 2.15
Effective May 1, 2009, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 0.99% Class 2.............................................. 1.24
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,791,650 and $4,165,706, respectively, for the six months ended June 30, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 6,590 10,315 Redeemed (23,740) (35,557) ---------------------------------------------------------------------- Net increase (decrease) (17,150) (25,242) ---------------------------------------------------------------------- CLASS 2 Sold 9,986 99,079 Redeemed (64,562) (71,169) ---------------------------------------------------------------------- Net increase (decrease) (54,576) 27,910 ----------------------------------------------------------------------
7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $543,381 were on loan, secured by cash collateral of $565,471 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. -------------------------------------------------------------------------------- 28 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $178 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $2,432,030 and $2,350,551, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, post-October losses and losses deferred due to wash sales. For federal income tax purposes, the Fund had a capital loss carry-over of $5,915,187 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2011 2016 2017 $4,941,506 $108,762 $544,777 $320,142
For the year ended Dec. 31, 2009, $4,220,678 of capital loss carry-over expired unused. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 10. 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. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through the date of issuance of the Fund's financial statements. There were no events or transactions that occurred during the period that materially impacted the amounts or disclosures in the Fund's financial statements. 12. 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned -------------------------------------------------------------------------------- 30 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- shares or other adverse consequences to the Funds. Further, although we believe proceedings are not likely to have a material adverse effect on the Funds or the ability of Ameriprise Financial or its affiliates to perform under their contracts with the Funds, these proceedings are subject to uncertainties and, as such, we are unable to estimate the possible loss or range of loss that may result. An adverse outcome in one or more of these proceedings could result in adverse judgments, settlements, fines, penalties or other relief that could have a material adverse effect on the consolidated financial condition or results of operations of Ameriprise Financial. -------------------------------------------------------------------------------- 32 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. -------------------------------------------------------------------------------- 34 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer -------------------------------------------------------------------------------- SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT 35 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- 36 SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO -- 2010 SEMIANNUAL REPORT SELIGMAN GLOBAL TECHNOLOGY PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9952 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 18 Statement of Operations............ 19 Statements of Changes in Net Assets........................... 20 Financial Highlights............... 21 Notes to Financial Statements...... 22 Approval of Investment Management Services Agreement............... 34 Proxy Voting....................... 37
-------------------------------------------------------------------------------- 2 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman International Growth Portfolio (the Fund) shares decreased 9.07% for the six months ended June 30, 2010. > The Fund out performed its benchmark, the Morgan Stanley Capital International (MSCI) EAFE Growth Index, which fell 10.48% during the same period. > The Fund also outperformed the MSCI EAFE Index, which lost 12.93% during the same time frame. > The Fund underperformed its peer group, as represented by the Lipper International Multi-Cap Growth Funds Index, which declined 8.74% during the same time frame. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ------------------------------------------------------------------------------ Seligman International Growth Portfolio -9.07% +7.12% -19.22% -3.94% -3.51% ------------------------------------------------------------------------------ MSCI EAFE Growth Index(1) (unmanaged) -10.48% +8.95% -11.36% +2.04% -1.28% ------------------------------------------------------------------------------ MSCI EAFE Index(2) (unmanaged) -12.93% +6.38% -12.94% +1.35% +0.59% ------------------------------------------------------------------------------ Lipper International Multi-Cap Growth Funds Index(3) (unmanaged) -8.74% +12.99% -9.62% +4.31% +0.13% ------------------------------------------------------------------------------ Lipper International Multi-Cap Growth Funds Average(4) (unmanaged) -9.24% +11.85% -11.53% +2.63% -0.38% ------------------------------------------------------------------------------
* 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/expense 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 variable account, annuity contract or life insurance policy, 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 -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- intermediary, by visiting seligman.com (through Septemeber 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (1) The MSCI EAFE Growth Index, an unmanaged index, is compiled from a composite of securities markets in Europe, Australasia and the Far East. The 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 Index (the Lipper Index) includes the 10 largest international multi-cap growth funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper International Multi-Cap Growth Funds Average (the Lipper 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 Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. -------------------------------------------------------------------------------- 4 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- COUNTRY BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
Australia 2.0% ------------------------------------------------ Belgium 0.6% ------------------------------------------------ Bermuda 1.6% ------------------------------------------------ Canada 8.1% ------------------------------------------------ China 1.7% ------------------------------------------------ Denmark 2.1% ------------------------------------------------ France 12.9% ------------------------------------------------ Germany 5.1% ------------------------------------------------ Hong Kong 2.5% ------------------------------------------------ Ireland 1.1% ------------------------------------------------ Israel 1.7% ------------------------------------------------ Japan 13.8% ------------------------------------------------ Mexico 1.5% ------------------------------------------------ Netherlands 5.4% ------------------------------------------------ Singapore 1.3% ------------------------------------------------ South Korea 1.3% ------------------------------------------------ Spain 1.2% ------------------------------------------------ Sweden 1.5% ------------------------------------------------ Switzerland 9.7% ------------------------------------------------ United Kingdom 21.5% ------------------------------------------------ Other(2) 3.4% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- TOP TEN HOLDINGS (at June 30, 2010) ---------------------------------------------------------------------
ARM Holdings PLC (United Kingdom) 3.2% ------------------------------------------------ Kuehne & Nagel International AG (Switzerland) 3.0% ------------------------------------------------ Safran SA (France) 2.5% ------------------------------------------------ Barrick Gold Corp. (Canada) 2.3% ------------------------------------------------ QIAGEN NV (Netherlands) 2.2% ------------------------------------------------ Nestle SA (Switzerland) 2.1% ------------------------------------------------ Cie Generale d'Optique Essilor International SA (France) 2.1% ------------------------------------------------ Toll Holdings Ltd. (Australia) 2.0% ------------------------------------------------ Rio Tinto PLC (United Kingdom) 2.0% ------------------------------------------------ Standard Chartered PLC (United Kingdom) 2.0% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are 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 INTERNATIONAL GROWTH PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for the class. 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 actual expense ratio for the class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 909.30 $8.33(c) 1.76% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,016.07 $8.80(c) 1.76% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the 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 of -9.07% for the six months ended June 30, 2010. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 1.19%. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place the entire six month period ended June 30, 2010, the actual expenses paid would have been $5.63 and the hypothetical expenses paid would have been $5.96. -------------------------------------------------------------------------------- 8 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (97.8%)(c) ISSUER SHARES VALUE(a) AUSTRALIA (2.0%) Toll Holdings Ltd. 5,929 $26,983 ------------------------------------------------------------------------------------- BELGIUM (0.6%) Hansen Transmissions International NV 7,776(b) 8,594 ------------------------------------------------------------------------------------- BERMUDA (1.6%) Lancashire Holdings Ltd. 2,924 21,667 ------------------------------------------------------------------------------------- CANADA (8.2%) Barrick Gold Corp. 660 29,970 CAE, Inc. 1,730 15,000 Methanex Corp. 670 13,186 Potash Corp. of Saskatchewan, Inc. 220 18,973 SNC-Lavalin Group, Inc. 520 20,815 Teck Resources Ltd., Class B 410 12,128 --------------- Total 110,072 ------------------------------------------------------------------------------------- CHINA (1.7%) Ctrip.com International Ltd., ADR 610(b,d) 22,912 ------------------------------------------------------------------------------------- DENMARK (2.2%) DSV A/S 1,414 20,358 Vestas Wind Systems A/S 210(b,d) 8,739 --------------- Total 29,097 ------------------------------------------------------------------------------------- FRANCE (13.1%) Alcatel-Lucent 4,543(b,d) 11,568 Cie Generale d'Optique Essilor International SA 469 27,867 Danone 307 16,456 Neopost SA 193(d) 13,974 PPR 124 15,402 Publicis Groupe SA 520(d) 20,740 Safran SA 1,190 33,192 Schneider Electric SA 131 13,230 Vallourec SA 140(d) 24,135 --------------- Total 176,564 ------------------------------------------------------------------------------------- GERMANY (5.2%) Adidas AG 328 15,918 Bayer AG 209 11,652 Daimler AG 458(b) 23,174 Siemens AG 217 19,448 --------------- Total 70,192 ------------------------------------------------------------------------------------- HONG KONG (2.6%) Li & Fung Ltd. 5,010 22,417 Sun Hung Kai Properties Ltd. 890 12,173 --------------- Total 34,590 ------------------------------------------------------------------------------------- IRELAND (1.1%) Experian PLC 1,727 15,013 ------------------------------------------------------------------------------------- ISRAEL (1.8%) Teva Pharmaceutical Industries Ltd., ADR 460 23,915 ------------------------------------------------------------------------------------- JAPAN (14.0%) Bridgestone Corp. 1,060 16,768 Daiichi Sankyo Co., Ltd. 980 17,515 Eisai Co., Ltd. 420 13,941 Fast Retailing Co., Ltd. 90 13,624 Hino Motors Ltd. 5,170 25,501 Mitsubishi UFJ Financial Group, Inc. 2,940 13,355 Mitsui OSK Lines Ltd. 2,530 16,734 Panasonic Corp. 1,080 13,491 Rakuten, Inc. 22 15,902 Shin-Etsu Chemical Co., Ltd. 250 11,628 SoftBank Corp. 660(d) 17,512 Toshiba Corp. 2,530(b) 12,538 --------------- Total 188,509 ------------------------------------------------------------------------------------- MEXICO (1.5%) America Movil SAB de CV, Series L, ADR 430(d) 20,425 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) NETHERLANDS (5.5%) Koninklijke Philips Electronics NV 848 $25,320 QIAGEN NV 1,520(b) 29,374 Unilever NV 689 18,814 --------------- Total 73,508 ------------------------------------------------------------------------------------- SINGAPORE (1.3%) Oversea-Chinese Banking Corp., Ltd. 2,718(d) 17,119 ------------------------------------------------------------------------------------- SOUTH KOREA (1.3%) Samsung Electronics Co., Ltd. 29 18,195 ------------------------------------------------------------------------------------- SPAIN (1.2%) Red Electrica Corp. SA 441 15,788 ------------------------------------------------------------------------------------- SWEDEN (1.5%) Telefonaktiebolaget LM Ericsson, ADR 1,870 20,607 ------------------------------------------------------------------------------------- SWITZERLAND (9.8%) Kuehne & Nagel International AG 387 39,843 Nestle SA 587 28,308 Temenos Group AG 1,031(b,d) 24,824 UBS AG 1,070(b) 14,177 Xstrata PLC 1,917 25,092 --------------- Total 132,244 ------------------------------------------------------------------------------------- UNITED KINGDOM (21.6%) Admiral Group PLC 626 13,105 ARM Holdings PLC 10,332 42,746 AstraZeneca PLC 375 17,673 Barclays PLC 3,181 12,692 BG Group PLC 1,114 16,562 British Airways PLC 3,421(b) 9,935 Burberry Group PLC 1,758 19,846 Compass Group PLC 2,534 19,269 Imperial Tobacco Group PLC 873 24,382 J Sainsbury PLC 2,680 12,782 Reckitt Benckiser Group PLC 534 24,829 Rio Tinto PLC 612 26,865 Standard Chartered PLC 1,071 26,068 Thomas Cook Group PLC 4,690 12,409 Vodafone Group PLC 6,747 13,897 --------------- Total 293,060 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $1,377,950) $1,319,054 -------------------------------------------------------------------------------------
MONEY MARKET FUND (3.5%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 46,809(e) $46,809 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $46,809) $46,809 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (10.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(f) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $137,978 0.030% $137,978 $137,978 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $137,978) $137,978 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $1,562,737)(g) $1,503,841 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 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 net assets at June 30, 2010:
PERCENTAGE OF INDUSTRY NET ASSETS VALUE(a) ---------------------------------------------------------------------- Aerospace & Defense 3.6% $48,192 Air Freight & Logistics 2.0 26,983 Airlines 0.8 9,935 Auto Components 1.3 16,768 Automobiles 1.7 23,174 Capital Markets 1.1 14,177 Chemicals 3.2 43,787 Commercial Banks 5.2 69,234 Communications Equipment 2.4 32,175 Computers & Peripherals 0.9 12,538 Construction & Engineering 1.5 20,815 Distributors 1.7 22,417 Electric Utilities 1.2 15,788 Electrical Equipment 1.6 21,969 Food & Staples Retailing 0.9 12,782 Food Products 4.7 63,578 Health Care Equipment & Supplies 2.1 27,867 Hotels, Restaurants & Leisure 4.0 54,590 Household Durables 1.0 13,491 Household Products 1.9 24,829 Industrial Conglomerates 3.3 44,768 Insurance 2.6 34,772 Internet & Catalog Retail 1.2 15,902 Life Sciences Tools & Services 2.2 29,374 Machinery 4.3 58,230 Marine 4.2 56,577 Media 1.5 20,740 Metals & Mining 7.0 94,055 Multiline Retail 1.1 15,402 Office Electronics 1.0 13,974 Oil, Gas & Consumable Fuels 1.2 16,562 Pharmaceuticals 6.3 84,696 Professional Services 1.1 15,013 Real Estate Management & Development 0.9 12,173 Road & Rail 1.5 20,358 Semiconductors & Semiconductor Equipment 4.5 60,941 Software 1.8 24,824 Specialty Retail 1.0 13,624 Textiles, Apparel & Luxury Goods 2.7 35,764 Tobacco 1.8 24,382 Wireless Telecommunication Services 3.8 51,834 Other(1) 13.7 184,787 ---------------------------------------------------------------------- Total $1,503,841 ----------------------------------------------------------------------
(1) Cash & Cash Equivalents. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. INVESTMENTS IN DERIVATIVES FORWARD FOREIGN CURRENCY CONTRACTS OPEN AT JUNE 30, 2010
CURRENCY TO CURRENCY TO UNREALIZED UNREALIZED EXCHANGE DATE BE DELIVERED BE RECEIVED APPRECIATION DEPRECIATION ------------------------------------------------------------------------------------ July 13, 2010 14,140,000 151,655 $-- $(8,358) (JPY) (USD) ------------------------------------------------------------------------------------ Aug. 12, 2010 168,000 226,500 21,025 -- (EUR) (USD) ------------------------------------------------------------------------------------ Total $21,025 $(8,358) ------------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS ADR -- American Depositary Receipt EUR -- European Monetary Unit JPY -- Japanese Yen
(a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (C) Foreign security values are stated in U.S. dollars. (d) At June 30, 2010, security was partially or fully on loan. See Note 7 to the financial statements. (e) Affiliated Money Market Fund -- See Note 8 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (f) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ---------------------------------------------------------- Fannie Mae Pool $24,624 Government National Mortgage Association 116,114 ---------------------------------------------------------- Total market value of collateral securities $140,738 ----------------------------------------------------------
-------------------------------------------------------------------------------- 12 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $1,563,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $71,000 Unrealized depreciation (130,000) ---------------------------------------------------------- Net unrealized depreciation $(59,000) ----------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. -------------------------------------------------------------------------------- 14 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 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, 2010:
Fair value at June 30, 2010 ------------------------------------------------------------- Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets inputs(b) inputs Total -------------------------------------------------------------------------------------------- Equity Securities Common Stocks Aerospace & Defense $15,000 $33,192 $-- $48,192 Air Freight & Logistics -- 26,983 -- 26,983 Airlines -- 9,935 -- 9,935 Auto Components -- 16,768 -- 16,768 Automobiles -- 23,174 -- 23,174 Capital Markets -- 14,177 -- 14,177 Chemicals 32,159 11,628 -- 43,787 Commercial Banks -- 69,234 -- 69,234 Communications Equipment 20,607 11,568 -- 32,175 Computers & Peripherals -- 12,538 -- 12,538 Distributors -- 22,417 -- 22,417 Electric Utilities -- 15,788 -- 15,788 Electrical Equipment -- 21,969 -- 21,969 Food & Staples Retailing -- 12,782 -- 12,782 Food Products -- 63,578 -- 63,578 Health Care Equipment & Supplies -- 27,867 -- 27,867 Hotels, Restaurants & Leisure 22,912 31,678 -- 54,590 Household Durables -- 13,491 -- 13,491 Household Products -- 24,829 -- 24,829 Industrial Conglomerates -- 44,768 -- 44,768 Insurance -- 34,772 -- 34,772 Internet & Catalog Retail -- 15,902 -- 15,902 Life Sciences Tools & Services -- 29,374 -- 29,374 Machinery -- 58,230 -- 58,230 Marine -- 56,577 -- 56,577 Media -- 20,740 -- 20,740 Metals & Mining 42,098 51,957 -- 94,055
-------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED)
Fair value at June 30, 2010 ------------------------------------------------------------- Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets inputs(b) inputs Total -------------------------------------------------------------------------------------------- Multiline Retail $-- $15,402 $-- $15,402 Office Electronics -- 13,974 -- 13,974 Oil, Gas & Consumable Fuels -- 16,562 -- 16,562 Pharmaceuticals 23,915 60,781 -- 84,696 Professional Services -- 15,013 -- 15,013 Real Estate Management & Development -- 12,173 -- 12,173 Road & Rail -- 20,358 -- 20,358 Semiconductors & Semiconductor Equipment -- 60,941 -- 60,941 Software -- 24,824 -- 24,824 Specialty Retail -- 13,624 -- 13,624 Textiles, Apparel & Luxury Goods -- 35,764 -- 35,764 Tobacco -- 24,382 -- 24,382 Wireless Telecommunication Services 20,425 31,409 -- 51,834 All Other Industries 20,815 -- -- 20,815 -------------------------------------------------------------------------------------------- Total Equity Securities 197,931 1,121,123 -- 1,319,054 -------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 46,809 -- -- 46,809 Investments of Cash Collateral Received for Securities on Loan -- 137,978 -- 137,978 -------------------------------------------------------------------------------------------- Total Other 46,809 137,978 -- 184,787 -------------------------------------------------------------------------------------------- Investments in Securities 244,740 1,259,101 -- 1,503,841 Other Financial Instruments(d) -- 12,667 -- 12,667 -------------------------------------------------------------------------------------------- Total $244,740 $1,271,768 $-- $1,516,508 --------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) Includes certain securities trading outside the U.S. whose values were adjusted as a result of significant market movements following the close of local trading. Therefore, these investment securities were classified as Level 2 instead of Level 1. There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. (d) Other Financial Instruments are derivative instruments, which are valued at the unrealized appreciation (depreciation) on the instrument. Derivative descriptions are located in the Investments in Derivatives section of the Portfolio of Investments. -------------------------------------------------------------------------------- 16 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 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 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 800.221.2450. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 STATEMENT OF ASSETS AND LIABILITIES -------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $1,377,950) $ 1,319,054 Affiliated money market fund (identified cost $46,809) 46,809 Investments of cash collateral received for securities on loan (identified cost $137,978) 137,978 ------------------------------------------------------------------------------------- Total investments in securities (identified cost $1,562,737) 1,503,841 Cash 63 Foreign currency holdings (identified cost $440) 440 Dividends and accrued interest receivable 2,156 Receivable from Investment Manager 5,781 Reclaims receivable 3,465 Unrealized appreciation on forward foreign currency contracts 21,025 ------------------------------------------------------------------------------------- Total assets 1,536,771 ------------------------------------------------------------------------------------- LIABILITIES Capital shares payable 9,860 Payable for investment securities purchased 586 Payable upon return of securities loaned 137,978 Unrealized depreciation on forward foreign currency contracts 8,358 Accrued investment management services fees 1,217 Accrued transfer agency fees 77 Accrued administrative services fees 102 Other accrued expenses 29,896 ------------------------------------------------------------------------------------- Total liabilities 188,074 ------------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 1,348,697 ------------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 161 Additional paid-in capital 3,420,164 Undistributed net investment income 7,914 Accumulated net realized gain (loss) (2,033,442) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (46,100) ------------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 1,348,697 ------------------------------------------------------------------------------------- Shares outstanding 161,296 ------------------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 8.36 ------------------------------------------------------------------------------------- *Value of securities on loan $ 131,456 -------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 23,440 Interest 5 Income distributions from affiliated money market fund 37 Income from securities lending -- net 398 Foreign taxes withheld (1,847) ----------------------------------------------------------------------- Total income 22,033 ----------------------------------------------------------------------- Expenses: Investment management services fees 7,607 Transfer agency fees 482 Administrative services fees 641 Compensation of board members 27 Custodian fees 5,400 Printing and postage 8,436 Professional fees 17,235 Other 1,184 ----------------------------------------------------------------------- Total expenses 41,012 Expenses waived/reimbursed by the Investment Manager and its affiliates (26,931) ----------------------------------------------------------------------- Total net expenses 14,081 ----------------------------------------------------------------------- Investment income (loss) -- net 7,952 ----------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on: Security transactions 114,236 Foreign currency transactions 2,335 ----------------------------------------------------------------------- Net realized gain (loss) on investments 116,571 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (267,793) ----------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies (151,222) ----------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $(143,270) -----------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 7,952 $ (424) Net realized gain (loss) on investments 116,571 (12,922) Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies (267,793) 321,116 -------------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (143,270) 307,770 -------------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (960) -- -------------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales 69,905 233,648 Reinvestment of distributions at net asset value 960 -- Payments for redemptions (384,358) (308,441) -------------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (313,493) (74,793) -------------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (457,723) 232,977 Net assets at beginning of period 1,806,420 1,573,443 -------------------------------------------------------------------------------------------------- Net assets at end of period $1,348,697 $1,806,420 -------------------------------------------------------------------------------------------------- Undistributed net investment income $ 7,914 $ 922 --------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $9.20 $7.51 $17.64 $14.38 $11.66 $11.10 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .04 .00(a) (.03) (.02) (.07) (.03) Net gains (losses) (both realized and unrealized) (.87) 1.69 (10.10) 3.28 2.79 .59 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.83) 1.69 (10.13) 3.26 2.72 .56 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.01) -- -- -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.36 $9.20 $7.51 $17.64 $14.38 $11.66 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (9.07%) 22.50% (57.43%) 22.67% 23.33% 5.04% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(B) Gross expenses prior to expense waiver/reimbursement 5.12%(c) 8.11% 4.63% 4.02% 3.94% 5.05% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.76%(c) 2.00% 2.00% 2.00% 2.00% 2.00% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .99%(c) .01% (.22%) (.15%) (.54%) (.24%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $1 $2 $2 $5 $4 $4 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 82% 327% 365% 235% 166% 189% --------------------------------------------------------------------------------------------------------------------------------
(a) Rounds to less than $0.01 per share. (b) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) Annualized. (d) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman International Growth Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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 primarily in high-quality, large and mid- capitalization growth companies ($1 billion or more at the time of initial purchase by the Fund) that are considered leaders in their industries, emphasizing those industries that are growing on a global basis. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. 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 from the primary exchange. 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily -------------------------------------------------------------------------------- 22 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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 -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- taxes. At June 30, 2010, foreign currency holdings were entirely comprised of European monetary units. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 tax returns filed for the last three years. FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. 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 -------------------------------------------------------------------------------- 24 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- year in order to comply with the Internal Revenue Code, as applicable to regulated investment companies. OTHER Security transactions are accounted for on the date securities are purchased or sold. Dividend income is recognized on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities. Non-cash dividends included in dividend income, if any, are recorded at the fair market value of the security received. Interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. INVESTMENTS IN DERIVATIVES The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. Such derivative instruments may be used to maintain cash reserves while maintaining exposure to certain other assets, to offset anticipated declines in values of investments, to facilitate trading, to reduce transaction costs, and to pursue higher investment returns. The Fund may also use derivative instruments to mitigate certain investment risks, such as foreign currency exchange rate risk, interest rate risk, and credit risk. Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below. FORWARD FOREIGN CURRENCY CONTRACTS The Fund may enter into forward foreign currency contracts in connection with settling purchases or sales of securities, to hedge the currency exposure associated with some or all of the Fund's securities or as part of its investment strategy. A forward foreign currency contract is an agreement between two parties to buy and sell a currency at a set price on a future date. The market value of a forward foreign currency contract fluctuates with changes in foreign currency exchange rates. Forward foreign currency contracts are marked to market daily based upon foreign currency exchange rates from an independent pricing service and the change in value is recorded as unrealized appreciation or depreciation. The Fund will record a realized gain or loss when the forward foreign currency contract is closed. The risks of forward foreign currency contracts include movement in the values of the foreign currencies relative to the U.S. dollar (or other foreign currencies) and the possibility that the counterparty will not complete its contractual obligation, which may be in excess of the amount, if any, reflected in the Statement of Assets and Liabilities. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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, 2010
ASSET DERIVATIVES LIABILITY DERIVATIVES ------------------------------- ------------------------------------- STATEMENT OF ASSETS STATEMENT OF ASSETS RISK EXPOSURE AND LIABILITIES AND LIABILITIES CATEGORY LOCATION FAIR VALUE LOCATION FAIR VALUE ------------------------------------------------------------------------------------------- Unrealized Unrealized appreciation on depreciation on Foreign exchange forward foreign forward foreign contracts currency contracts $21,025 currency contracts $8,358 -------------------------------------------------------------------------------------------
EFFECT OF DERIVATIVE INSTRUMENTS IN THE STATEMENT OF OPERATIONS FOR THE SIX MONTHS ENDED JUNE 30, 2010
AMOUNT OF REALIZED GAIN (LOSS) ON DERIVATIVES RECOGNIZED IN INCOME -------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS -------------------------------------------------------------------- Foreign exchange contracts $96 --------------------------------------------------------------------
CHANGE IN UNREALIZED APPRECIATION (DEPRECIATION) ON DERIVATIVES RECOGNIZED IN INCOME -------------------------------------------------------------------- FORWARD FOREIGN CURRENCY RISK EXPOSURE CATEGORY CONTRACTS -------------------------------------------------------------------- Foreign exchange contracts $12,667 --------------------------------------------------------------------
VOLUME OF DERIVATIVE ACTIVITY FORWARD FOREIGN CURRENCY CONTRACTS The gross notional amount of contracts outstanding was approximately $378,000 at June 30, 2010. The monthly average gross notional amount for these contracts -------------------------------------------------------------------------------- 26 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- was $210,000 for the six months ended June 30, 2010. The fair value of such contracts at June 30, 2010 is set forth in the table above. 4. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager is responsible for the management of the Fund. Day-to-day portfolio management of the Fund is provided by the Fund's subadviser. See Subadvisory agreement below. The management fee is an annual fee that is equal to a percentage of the Fund's average daily net assets that declines from 0.95% to 0.86% as the Fund's net assets increase. The management fee for the six months ended June 30, 2010 was 0.95% of the Fund's average daily net assets. 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, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, there were no expenses incurred for these particular items. 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 RiverSource, Seligman and Threadneedle 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. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- TRANSFER AGENCY FEES The Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 1.76% for Class 1. The waived/reimbursed fees and expenses for the transfer agency fee at the class level were $2 for Class 1. The management fees and other Fund level expenses waived/reimbursed were $26,929. Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed 2.00% of Class 1 average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 1.19% of 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. 5. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,292,906 and $1,646,078, respectively, for the six months ended June 30, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- 28 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 6. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 7,628 26,863 Reinvested distributions 114 -- Redeemed (42,790) (40,094) ---------------------------------------------------------------------- Net increase (decrease) (35,048) (13,231) ----------------------------------------------------------------------
7. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $131,456 were on loan, secured by cash collateral of $137,978 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $398 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 8. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $586,648 and $547,411, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of foreign currency transactions, passive foreign investment company (PFIC) holdings, post-October losses, foreign tax credits 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 were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $2,056,911 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2010 2016 2017 $481,073 $1,325,858 $249,980
Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as -------------------------------------------------------------------------------- 30 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $77,687 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. RISKS RELATING TO CERTAIN INVESTMENTS FOREIGN/EMERGING MARKETS RISK Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Foreign securities in the Fund's portfolio subject the Fund to the risks associated with investing in the particular country, including the political, regulatory, economic, social and other conditions or events occurring in the country, as well as fluctuations in its currency and the risks associated with less developed custody and settlement practices. Investments in emerging markets present greater risk of loss than a typical foreign security investment. Because of the less developed markets and economics and less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers organized, domiciled or doing business in emerging markets. 11. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through 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, other than as noted below. The Board has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. The redemption of all shares of the Fund took place on Aug. 13, 2010. 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 -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal -------------------------------------------------------------------------------- 32 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). In addition, under the subadvisory agreement (the "Subadvisory Agreement") between Columbia Management and Wellington Management, LLP (the "Subadviser"), the Subadviser performs portfolio management and related services for the Fund. On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of each of the IMS Agreement and the Subadvisory Agreement (collectively, the "Advisory Agreements"). Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making these determinations. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including material relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the Advisory Agreements. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory and subadvisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the Advisory Agreements. Nature, Extent and Quality of Services Provided by Columbia Management and the Subadviser: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management and the -------------------------------------------------------------------------------- 34 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Subadviser, as well as their expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management, its affiliates and the Subadviser, and each entity's ability to carry out its responsibilities under the Advisory Agreements. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the Advisory Agreements (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the Advisory Agreements were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management, its affiliates and the Subadviser, were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the Advisory Agreements, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 35 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance reflected the interrelationship of market conditions with the particular investment strategies employed by the portfolio management team. Further, the Board noted that it has approved liquidation of the Fund. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under each of the Advisory Agreements. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. The Board further observed that the subadvisory fees paid under the Subadvisory Agreement are borne by the investment manager and not the Fund. Based on its review, the Board concluded that the fees paid under each of the Advisory Agreements were fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment -------------------------------------------------------------------------------- 36 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees and subadvisory fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of each of the Advisory Agreements for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- SELIGMAN INTERNATIONAL GROWTH PORTFOLIO -- 2010 SEMIANNUAL REPORT 37 SELIGMAN INTERNATIONAL GROWTH PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9967 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 7 Portfolio of Investments........... 9 Statement of Assets and Liabilities...................... 17 Statement of Operations............ 18 Statements of Changes in Net Assets........................... 19 Financial Highlights............... 20 Notes to Financial Statements...... 21 Approval of Investment Management Services Agreement............... 31 Proxy Voting....................... 34
-------------------------------------------------------------------------------- 2 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Investment Grade Fixed Income Portfolio (the Fund) gained 4.57% for the six months ended June 30, 2010. > The Fund underperformed its benchmark, the unmanaged Barclays Capital U.S. Aggregate Bond Index, which advanced 5.33% during the same time frame. > The Fund also underperformed its peer group, as represented by the Lipper Intermediate Investment-Grade Debt Funds Index, which rose 6.05% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS --------------------------------------------------------------------------- Seligman Investment Grade Fixed Income Portfolio +4.57% +7.87% +4.58% +3.42% +4.77% --------------------------------------------------------------------------- Barclays Capital U.S. Aggregate Bond Index(1) (unmanaged) +5.33% +9.50% +7.55% +5.54% +6.47% --------------------------------------------------------------------------- Lipper Intermediate Investment-Grade Debt Funds Index(2) (unmanaged) +6.05% +14.30% +6.53% +4.91% +6.02% --------------------------------------------------------------------------- Lipper Corporate Debt Funds BBB-Rated Average(3) (unmanaged) +6.01% +15.52% +5.67% +4.77% +6.08% ---------------------------------------------------------------------------
* 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/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (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 Lipper Intermediate Investment-Grade Debt Funds Index (the Lipper Index) includes the 30 largest investment grade funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (3) The Lipper Corporate Debt Funds BBB-Rated Average (the Lipper Average) is an average of funds that invest primarily in corporate and government debt issues rated in the top four grades. The Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. -------------------------------------------------------------------------------- 4 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- PORTFOLIO BREAKDOWN(1) (at June 30, 2010) --------------------------------------------------------------------- Asset-Backed 1.2% ------------------------------------------------ Consumer Discretionary 0.3% ------------------------------------------------ Consumer Staples 1.1% ------------------------------------------------ Energy 0.2% ------------------------------------------------ Financials 2.9% ------------------------------------------------ Foreign Government 0.5% ------------------------------------------------ Materials 0.3% ------------------------------------------------ Residential Mortgage-Backed 11.4% ------------------------------------------------ Telecommunication 4.2% ------------------------------------------------ U.S. Government Obligations & Agencies 40.3% ------------------------------------------------ Utilities 10.0% ------------------------------------------------ Other(2) 27.6% ------------------------------------------------
(1) Portfolio holdings include industry sectors that can be comprised of securities in several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). The Fund's composition is subject to change. (2) Cash & Cash Equivalents. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 5 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- QUALITY BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
AAA rating 71.2% ------------------------------------------------ AA rating 1.0% ------------------------------------------------ A rating 9.6% ------------------------------------------------ BBB rating 14.4% ------------------------------------------------ Non-investment grade 3.8% ------------------------------------------------
(1) Percentages indicated are based upon total fixed income securities (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). 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. Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) rates a security using an internal rating system when Moody's doesn't provide a rating. Ratings for 0.2% of the bond portfolio assets were determined through internal analysis. 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. -------------------------------------------------------------------------------- 6 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for the class. 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 actual expense ratio for the class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 FUND EXPENSES EXAMPLE (continued) ---------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $1,045.70 $4.21(c) .83% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,020.68 $4.16(c) .83% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the 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 of +4.57% for the six months ended June 30, 2010. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.79%. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.01 and the hypothetical expenses paid would have been $3.96. -------------------------------------------------------------------------------- 8 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
BONDS (77.8%) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) SUPRANATIONAL (0.5%)(C) Corp. Andina de Fomento 01-12-17 5.750% $10,000 $10,886 ------------------------------------------------------------------------------------- U.S. GOVERNMENT OBLIGATIONS & AGENCIES (43.3%) Federal Farm Credit Bank 02-07-13 3.400 40,000 42,387 Federal Home Loan Banks 05-20-11 2.625 45,000 45,870 05-27-11 0.625 10,000 10,003 10-19-11 1.250 15,000 15,029 11-17-17 5.000 10,000 11,411 Federal Home Loan Mortgage Corp. 12-15-11 1.125 5,000 5,041 07-15-14 5.000 5,000 5,634 02-09-15 2.875 5,000 5,209 Federal National Mortgage Association 08-12-10 3.250 10,000 10,035 11-05-12 1.600 10,000 10,037 11-19-12 4.750 10,000 10,899 11-20-14 2.625 15,000 15,503 07-28-15 2.375 5,000 5,052 U.S. Treasury 10-31-11 1.000 100,000 100,698 02-29-12 0.875 5,000 5,027 11-15-12 1.375 15,000 15,214 01-15-13 1.375 10,000 10,134 02-15-13 1.375 10,000(j) 10,130 05-15-13 1.375 42,000 42,512 01-31-15 2.250 75,100 76,972 06-30-15 1.875 75,000 75,287 03-31-16 2.375 30,000 30,443 08-31-16 3.000 19,000 19,828 11-15-19 3.375 30,000 31,064 02-15-20 3.625 24,000(j) 25,357 05-15-20 3.500 26,000 27,211 02-15-29 5.250 15,000 18,052 02-15-40 4.625 98,000(j) 110,157 --------------- Total 790,196 ------------------------------------------------------------------------------------- ASSET-BACKED (1.2%) Caterpillar Financial Asset Trust Series 2008-A Class A3 04-25-14 4.940 9,993 10,175 Centex Home Equity Series 2002-D Class M2 12-25-32 2.397 19,243(h) 4,088 Irwin Home Equity Corp. Series 2005-A Class A3 02-25-34 0.727 9,657(h) 8,475 --------------- Total 22,738 ------------------------------------------------------------------------------------- RESIDENTIAL MORTGAGE-BACKED (12.3%)(f) Federal Home Loan Mortgage Corp. 07-01-25 5.500 100,000(e) 107,937 Federal Home Loan Mortgage Corp. #1Q0140 08-01-36 6.105 8,430(h) 8,919 Federal National Mortgage Association 07-01-40 6.500 25,000(e) 27,379 Federal National Mortgage Association #256901 09-01-37 6.500 15,144 16,492 Federal National Mortgage Association #745392 12-01-20 4.500 11,612 12,386 Federal National Mortgage Association #881886 04-01-36 5.377 12,718(h) 13,572 Federal National Mortgage Association #886764 08-01-36 6.027 11,150(h) 11,873 Indymac Index Mortgage Loan Trust CMO Series 2006-AR3 Class 2A1B 03-25-36 5.544 23,668(h) 12,582 Wells Fargo Mortgage-Backed Securities Trust CMO Series 2004-K Class 2A3 07-25-34 4.698 12,575(h) 12,810 --------------- Total 223,950 ------------------------------------------------------------------------------------- BANKING (2.6%) Bank of America Corp. Senior Unsecured 05-01-18 5.650 10,000 10,239
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) -------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) BANKING (CONT.) Citigroup, Inc. Senior Unsecured 05-15-18 6.125% $10,000 $10,437 JPMorgan Chase & Co Senior Unsecured 06-24-15 3.400 10,000 10,008 04-23-19 6.300 5,000 5,645 The Goldman Sachs Group, Inc. Senior Unsecured 02-15-19 7.500 10,000 11,177 --------------- Total 47,506 ------------------------------------------------------------------------------------- BROKERAGE (0.2%) Lehman Brothers Holdings, Inc. Senior Unsecured 05-02-18 6.875 15,000(b,g) 3,056 ------------------------------------------------------------------------------------- CHEMICALS (0.3%) The Dow Chemical Co. Senior Unsecured 05-15-19 8.550 5,000 6,121 ------------------------------------------------------------------------------------- ELECTRIC (6.7%) Consumers Energy Co. 1st Mortgage 02-15-14 6.000 10,000 11,184 Dominion Resources, Inc. Senior Unsecured 11-15-16 5.600 15,000 16,876 DTE Energy Co. Senior Unsecured 05-15-14 7.625 5,000 5,843 Florida Power Corp. 1st Mortgage 06-15-38 6.400 5,000 5,976 Metropolitan Edison Co. Senior Unsecured 03-15-13 4.950 5,000 5,265 Nevada Power Co. 01-15-15 5.875 10,000 11,143 Nisource Finance Corp. 03-01-13 6.150 5,000 5,453 09-15-17 5.250 15,000 15,447 Ohio Power Co. Senior Unsecured 06-01-16 6.000 5,000 5,663 Potomac Electric Power Co. 1st Mortgage 04-15-14 4.650 15,000 16,157 Sierra Pacific Power Co. 05-15-16 6.000 10,000 11,204 The Cleveland Electric Illuminating Co. 1st Mortgage 11-15-18 8.875 10,000 12,775 --------------- Total 122,986 ------------------------------------------------------------------------------------- FOOD AND BEVERAGE (1.2%) Dr Pepper Snapple Group, Inc. 12-21-11 1.700 5,000 5,014 Kraft Foods, Inc. Senior Unsecured 08-11-17 6.500 5,000 5,807 02-09-40 6.500 5,000 5,542 SABMiller PLC Senior Unsecured 01-15-14 5.700 5,000(c,d) 5,527 --------------- Total 21,890 ------------------------------------------------------------------------------------- GAS PIPELINES (4.0%) CenterPoint Energy Resources Corp. Senior Unsecured 02-15-11 7.750 10,000 10,388 04-01-13 7.875 5,000 5,729 Colorado Interstate Gas Co. Senior Unsecured 11-15-15 6.800 30,000 34,568 Northwest Pipeline GP Senior Unsecured 06-15-16 7.000 5,000 5,845 Transcontinental Gas Pipe Line Co. LLC Senior Unsecured 08-15-11 7.000 5,000 5,266 04-15-16 6.400 10,000 11,367 --------------- Total 73,163 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 10 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
BONDS (CONTINUED) COUPON PRINCIPAL ISSUER RATE AMOUNT VALUE(a) INDEPENDENT ENERGY (0.3%) Anadarko Petroleum Corp. Senior Unsecured 03-15-14 7.625% $5,000(j) $4,765 ------------------------------------------------------------------------------------- MEDIA CABLE (0.3%) Comcast Corp. 05-15-18 5.700 5,000 5,496 ------------------------------------------------------------------------------------- MEDIA NON CABLE (0.6%) RR Donnelley & Sons Co. Senior Unsecured 01-15-17 6.125 10,000 10,043 ------------------------------------------------------------------------------------- NON CAPTIVE DIVERSIFIED (0.3%) General Electric Capital Corp. Senior Unsecured 01-10-39 6.875 5,000 5,521 ------------------------------------------------------------------------------------- WIRELESS (0.3%) United States Cellular Corp. Senior Unsecured 12-15-33 6.700 5,000 5,141 ------------------------------------------------------------------------------------- WIRELINES (3.7%) AT&T, Inc. Senior Unsecured 02-01-18 5.500 5,000 5,525 02-15-39 6.550 5,000 5,600 BellSouth Corp. Senior Unsecured 09-15-14 5.200 15,000 16,667 Embarq Corp. Senior Unsecured 06-01-36 7.995 5,000 4,962 TELUS Corp. Senior Unsecured 06-01-11 8.000 7,000(c) 7,421 Verizon New York, Inc. Senior Unsecured 04-01-12 6.875 15,000 16,209 04-01-32 7.375 10,000 11,308 --------------- Total 67,692 ------------------------------------------------------------------------------------- TOTAL BONDS (Cost: $1,396,696) $1,421,150 ------------------------------------------------------------------------------------- SHORT-TERM SECURITIES (1.9%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) U.S. GOVERNMENT AGENCIES U.S. Treasury Bills 10-14-10 0.150% $35,000 $34,985 ------------------------------------------------------------------------------------- TOTAL U.S. GOVERNMENT AGENCIES (Cost: $34,977) $34,985 -------------------------------------------------------------------------------------
MONEY MARKET FUND (27.7%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 506,123(i) $506,123 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $506,123) $506,123 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (7.6%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(K) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $138,946 0.030% $138,946 $138,946 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $138,946) $138,946 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,076,742)(l) $2,101,204 =====================================================================================
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 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, 2010, the value of foreign securities, excluding short- term securities, represented 1.31% 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. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At June 30, 2010, the value of these securities amounted to $5,527 or 0.30% of net assets. (e) At June 30, 2010, the cost of securities purchased, including interest purchased, on a when-issued and/or other forward-commitment basis was $135,037. 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) This position is in bankruptcy. (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, 2010. (i) Affiliated Money Market Fund - See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (j) At June 30, 2010, security was partially or fully on loan. See Note 6 to the financial statements. -------------------------------------------------------------------------------- 12 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (k) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Pool $24,797 Government National Mortgage Association 116,928 ----------------------------------------------------------- Total market value of collateral securities $141,725 -----------------------------------------------------------
(l) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $2,077,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $65,000 Unrealized depreciation (41,000) --------------------------------------------------------- Net unrealized appreciation $24,000 ---------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model -------------------------------------------------------------------------------- 14 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
FAIR VALUE AT JUNE 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(A) IDENTICAL ASSETS(B) INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------------------- Bonds Foreign Government Obligations & Agencies $-- $10,886 $-- $10,886 U.S. Government Obligations & Agencies 598,086 192,110 -- 790,196 Asset-Backed Securities -- 22,738 -- 22,738 Residential Mortgage- Backed Securities -- 223,950 -- 223,950 Corporate Debt Securities -- 373,380 -- 373,380 ---------------------------------------------------------------------------------------------- Total Bonds 598,086 823,064 -- 1,421,150 ---------------------------------------------------------------------------------------------- Short-Term Securities U.S. Government Agencies 34,985 -- -- 34,985 ---------------------------------------------------------------------------------------------- Total Short-Term Securities 34,985 -- -- 34,985 ---------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 506,123 -- -- 506,123 Investments of Cash Collateral Received for Securities on Loan -- 138,946 -- 138,946 ---------------------------------------------------------------------------------------------- Total Other 506,123 138,946 -- 645,069 ---------------------------------------------------------------------------------------------- Total $1,139,194 $962,010 $-- $2,101,204 ----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 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 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 800.221.2450. -------------------------------------------------------------------------------- 16 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $1,431,673) $1,456,135 Affiliated money market fund (identified cost $506,123) 506,123 Investments of cash collateral received for securities on loan (identified cost $138,946) 138,946 ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,076,742) 2,101,204 Capital shares receivable 9,860 Dividends and accrued interest receivable 11,480 Receivable for investment securities sold 15,451 Receivable from Investment Manager 400 ----------------------------------------------------------------------------- Total assets 2,138,395 ----------------------------------------------------------------------------- LIABILITIES Payable for investment securities purchased 15,075 Payable for securities purchased on a forward-commitment basis 135,037 Payable upon return of securities loaned 138,946 Accrued investment management services fees 557 Accrued transfer agency fees 99 Accrued administrative services fees 113 Other accrued expenses 22,705 ----------------------------------------------------------------------------- Total liabilities 312,532 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $1,825,863 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 220 Additional paid-in capital 1,917,514 Undistributed net investment income 18,931 Accumulated net realized gain (loss) (135,264) Unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 24,462 ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $1,825,863 ----------------------------------------------------------------------------- Shares outstanding 220,077 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 8.30 ----------------------------------------------------------------------------- *Value of securities on loan $ 305,864 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Interest $ 25,556 Income distributions from affiliated money market fund 397 Income from securities lending -- net 190 --------------------------------------------------------------------------- Total income 26,143 --------------------------------------------------------------------------- Expenses: Investment management services fees 2,976 Transfer agency fees 521 Administrative services fees 604 Compensation of board members 28 Custodian fees 2,655 Printing and postage 9,057 Professional fees 15,425 Other 1,232 --------------------------------------------------------------------------- Total expenses 32,498 Expenses waived/reimbursed by the Investment Manager and its affiliates (25,342) --------------------------------------------------------------------------- Total net expenses 7,156 --------------------------------------------------------------------------- Investment income (loss) -- net 18,987 --------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions 9,904 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 48,460 --------------------------------------------------------------------------- Net gain (loss) on investments and foreign currencies 58,364 --------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ 77,351 ---------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 18,987 $ 44,120 Net realized gain (loss) on investments 9,904 9,572 Net change in unrealized appreciation (depreciation) on investments and on translation of assets and liabilities in foreign currencies 48,460 36,192 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations 77,351 89,884 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (18,749) (100,000) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales 123,587 119,605 Reinvestment of distributions at net asset value 18,749 100,000 Payments for redemptions (138,622) (257,928) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 3,714 (38,323) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 62,316 (48,439) Net assets at beginning of period 1,763,547 1,811,986 --------------------------------------------------------------------------------------------- Net assets at end of period $1,825,863 $1,763,547 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 18,931 $ 18,693 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
SIX MONTHS ENDED YEAR ENDED DEC. 31, CLASS 1 JUNE 30, 2010 ------------------------------------------------- PER SHARE DATA (UNAUDITED) 2009 2008 2007 2006 2005 Net asset value, beginning of period $8.02 $8.09 $8.57 $8.57 $8.80 $9.27 -------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .09 .20 .34 .39 .41 .34 Net gains (losses) (both realized and unrealized) .28 .21 (.40) .08 (.09) (.26) -------------------------------------------------------------------------------------------------------------------------- Total from investment operations .37 .41 (.06) .47 .32 .08 -------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.09) (.48) (.42) (.47) (.55) (.55) -------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $8.30 $8.02 $8.09 $8.57 $8.57 $8.80 -------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN 4.57% 5.06% (.70%) 5.59% 3.61% .95% -------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(a) Gross expenses prior to expense waiver/reimbursement 3.77%(b) 3.51% 2.20% 2.48% 2.38% 1.70% -------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) .83%(b) .85% .85% .85% .85% .85% -------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) 2.20%(b) 2.45% 3.97% 4.49% 4.59% 3.67% -------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $2 $2 $2 $3 -------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 160% 284%(d) 232% 281% 768% 597% --------------------------------------------------------------------------------------------------------------------------
(a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. (c) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). (d) Includes mortgage dollar rolls. If mortgage dollar roll transactions were excluded, the portfolio turnover would have been 249% for the year ended Dec. 31, 2009. The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 20 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Investment Grade Fixed Income Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) 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 in fixed-income securities, diversified among a number of market sectors. The Fund has a fundamental policy that at least 80% of the Fund's assets will be invested in securities that are rated investment-grade when purchased by the Fund. The Fund offers Class 1 shares as an investment medium for variable annuity and life insurance separate accounts offered by various insurance companies. 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 from the primary exchange. 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate -------------------------------------------------------------------------------- 22 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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, 2010, the Fund has outstanding when-issued securities of $135,037. The Fund may also enter into transactions to sell purchase commitments to third parties at current market values and concurrently acquires other purchase commitments for similar securities at later dates. As an inducement for the Fund to "roll over" its purchase commitments, the Fund receives negotiated amounts in the form of reductions of the purchase price of the commitment. The Fund records the incremental difference between the forward purchase and sale of each forward roll as realized gain or loss. Losses may arise due to changes in the value of the securities or if a counterparty does not perform under the terms of the agreement. If a counterparty files for bankruptcy or becomes insolvent, the Fund's right to repurchase or sell securities may be limited. The Fund did not enter into any mortgage dollar roll transactions during the six months ended June 30, 2010. 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 tax returns filed for the last three years. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- FOREIGN CAPITAL GAINS TAXES Realized gains in certain countries may be subject to foreign taxes at the fund level, at rates ranging from approximately 10% to 15%. The Fund pays such foreign taxes on net realized gains at the appropriate rate for each jurisdiction. 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. The management fee is an annual fee that is equal to 0.345% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.07% to 0.04% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.07% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of these Fund and Board expenses is facilitated by a company providing limited -------------------------------------------------------------------------------- 24 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- administrative services to the Fund and the Board. For the six months ended June 30, 2010, other expenses paid to this company were $1. 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 0.83% for Class 1. The waived/reimbursed fees and expenses for the transfer agency fees at the class level were $4 for Class 1. The management fees and other Fund level expenses waived/reimbursed were $25,338. Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed 0.85% of Class 1 average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.79% of 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. -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $2,374,510 and $2,627,114, respectively, for the six months ended June 30, 2010. 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 were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 14,925 14,247 Reinvested distributions 2,259 12,438 Redeemed (17,009) (30,810) ---------------------------------------------------------------------- Net increase (decrease) 175 (4,125) ----------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $305,864 were on loan, secured by U.S. government securities valued at $171,458 and by cash collateral of $138,946 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such -------------------------------------------------------------------------------- 26 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $190 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $815,140 and $575,307, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 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 were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $141,804 at Dec. 31, 2009, that if not offset by capital gains will expire as follows:
2013 2014 2017 $56,149 $75,089 $10,566
-------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $3,289 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 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 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, other than as noted below. The Board has approved the redemption of all outstanding shares and the liquidation of the Fund in accordance with the Fund's Articles of Incorporation. The redemption of all shares of the Fund took place on Aug. 13, 2010. 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 -------------------------------------------------------------------------------- 28 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC also agreed to retain an independent distribution consultant to assist in developing a plan for distribution of all disgorgement and civil penalties ordered by the SEC in accordance with various undertakings detailed at http://www.sec.gov/litigation/admin/ia-2451.pdf. Ameriprise Financial and its affiliates have cooperated with the SEC and the MDOC in these legal proceedings, and have made regular reports to the RiverSource, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance reflected the interrelationship of market -------------------------------------------------------------------------------- 32 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- conditions with the particular investment strategies employed by the portfolio management team. Further, the Board noted that it has approved liquidation of the Fund. Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the -------------------------------------------------------------------------------- SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT 33 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. In this regard, the Board observed that the Fund has yet to achieve any appreciable scale to benefit from reduced fees. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com(*); 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(*); or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through Sept. 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- 34 SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO -- 2010 SEMIANNUAL REPORT SELIGMAN INVESTMENT GRADE FIXED INCOME PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9968 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN LARGE-CAP VALUE PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE TABLE OF CONTENTS -------------------------------------------------------------- Your Fund at a Glance.............. 3 Fund Expenses Example.............. 6 Portfolio of Investments........... 8 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 Approval of Investment Management Services Agreement............... 26 Proxy Voting....................... 29
-------------------------------------------------------------------------------- 2 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Large-Cap Value Portfolio (the Fund) Class 1 shares decreased 3.08% for the six months ended June 30, 2010. > The Fund outperformed its benchmark, the Russell 1000(R) Value Index, which fell 5.12% during the same six-month period. > The broad U.S. equity market, represented by the Standard & Poor's (S&P) 500 Index, lost 6.65% during the same time frame. > The Fund also outperformed its peer group, as represented by the Lipper Large- Cap Value Funds Index, which declined 7.13% during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS ----------------------------------------------------------------------------- Seligman Large-Cap Value Portfolio - Class 1 -3.08% +16.50% -8.39% +0.96% +3.35% ----------------------------------------------------------------------------- Russell 1000 Value Index(1) (unmanaged) -5.12% +16.92% -12.32% -1.64% +2.38% ----------------------------------------------------------------------------- S&P 500 Index(2) (unmanaged) -6.65% +14.43% -9.81% -0.79% -1.59% ----------------------------------------------------------------------------- Lipper Large-Cap Value Funds Index(3) (unmanaged) -7.13% +13.04% -11.28% -1.29% +0.31% ----------------------------------------------------------------------------- Lipper Large-Cap Value Funds Average(4) (unmanaged) -7.14% +12.90% -11.92% -1.86% +1.81% -----------------------------------------------------------------------------
* Not annualized. As of June 30, 2010, there were no Class 2 shares outstanding and therefore Class 2 performance is not shown. 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/expense 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 variable account, annuity contract or life insurance policy, 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 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 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) Lipper Large-Cap Value Funds Index (the Lipper Index) includes the 30 largest large-cap value funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) The Lipper Large-Cap Value Funds Average (the Lipper 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 Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Index replaced the Lipper Average as one of the Fund's benchmarks. The Lipper Index includes a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Index and the Lipper Average will be included for a one- year transition period. Thereafter, only the Lipper Index will be included. Investors cannot invest directly in an average or index. SECTOR BREAKDOWN(1) (at June 30, 2010) --------------------------------------------------------------------- Consumer Discretionary 9.8% ------------------------------------------------ Consumer Staples 14.7% ------------------------------------------------ Energy 13.3% ------------------------------------------------ Financials 23.6% ------------------------------------------------ Health Care 9.2% ------------------------------------------------ Industrials 13.0% ------------------------------------------------ Information Technology 2.5% ------------------------------------------------ Materials 5.2% ------------------------------------------------ Utilities 4.4% ------------------------------------------------ Other(2) 4.3% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). 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 LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- TOP TEN HOLDINGS(1) (at June 30, 2010) --------------------------------------------------------------------- Tyson Foods, Inc., Class A 5.6% ------------------------------------------------ The AES Corp. 4.6% ------------------------------------------------ Bank of America Corp. 4.6% ------------------------------------------------ JPMorgan Chase & Co. 4.2% ------------------------------------------------ Humana, Inc. 4.2% ------------------------------------------------ Valero Energy Corp. 4.1% ------------------------------------------------ Bristol-Myers Squibb Co. 4.0% ------------------------------------------------ CSX Corp. 3.4% ------------------------------------------------ Wal-Mart Stores, Inc. 3.3% ------------------------------------------------ The Gap, Inc. 3.1% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. 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 LARGE-CAP VALUE PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees; distribution and service (Rule 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for the class. 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 actual expense ratio for the class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- 6 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 969.20 $6.15(c) 1.26% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.55 $6.31(c) 1.26% ------------------------------------------------------------------------------------------
(a) Expenses are equal to the annualized expense ratio for the 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 of -3.08% for the six months ended June 30, 2010. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds) will not exceed 0.95% for Class 1. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place the entire six month period ended June 30, 2010, the actual expenses paid would have been $4.64 and the hypothetical expenses paid would have been $4.76. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (96.6%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (7.7%) General Dynamics Corp. 1,100 $64,416 Honeywell International, Inc. 1,500 58,545 United Technologies Corp. 800 51,928 --------------- Total 174,889 ------------------------------------------------------------------------------------- CAPITAL MARKETS (2.5%) Morgan Stanley 2,400 55,704 ------------------------------------------------------------------------------------- CHEMICALS (5.3%) EI du Pont de Nemours & Co. 1,700 58,803 Praxair, Inc. 350(c) 26,597 The Sherwin-Williams Co. 500(c) 34,595 --------------- Total 119,995 ------------------------------------------------------------------------------------- COMMERCIAL BANKS (3.0%) US Bancorp 3,000 67,050 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (2.5%) Juniper Networks, Inc. 2,500(b,c) 57,050 ------------------------------------------------------------------------------------- DIVERSIFIED FINANCIAL SERVICES (8.5%) Bank of America Corp. 7,000 100,590 JPMorgan Chase & Co. 2,500 91,525 --------------- Total 192,115 ------------------------------------------------------------------------------------- FOOD & STAPLES RETAILING (4.6%) Costco Wholesale Corp. 600 32,898 Wal-Mart Stores, Inc. 1,500 72,105 --------------- Total 105,003 ------------------------------------------------------------------------------------- FOOD PRODUCTS (5.4%) Tyson Foods, Inc., Class A 7,500 122,925 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (1.4%) Baxter International, Inc. 800 32,512 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (4.0%) Humana, Inc. 2,000(b) 91,340 ------------------------------------------------------------------------------------- INDEPENDENT POWER PRODUCERS & ENERGY TRADERS (4.5%) The AES Corp. 11,000(b) 101,640 ------------------------------------------------------------------------------------- INSURANCE (9.9%) MetLife, Inc. 1,500 56,640 Prudential Financial, Inc. 1,000 53,660 The Travelers Companies, Inc. 1,000 49,250 Unum Group 3,000 65,100 --------------- Total 224,650 ------------------------------------------------------------------------------------- MULTILINE RETAIL (4.4%) JC Penney Co., Inc. 2,200 47,256 Nordstrom, Inc. 1,600 51,504 --------------- Total 98,760 ------------------------------------------------------------------------------------- OIL, GAS & CONSUMABLE FUELS (13.4%) Chevron Corp. 700 47,502 ConocoPhillips 1,200 58,908 Marathon Oil Corp. 2,000 62,180 The Williams Companies, Inc. 2,500 45,700 Valero Energy Corp. 5,000 89,900 --------------- Total 304,190 ------------------------------------------------------------------------------------- PHARMACEUTICALS (3.9%) Bristol-Myers Squibb Co. 3,500 87,290 ------------------------------------------------------------------------------------- ROAD & RAIL (5.4%) CSX Corp. 1,500 74,445 Union Pacific Corp. 700 48,657 --------------- Total 123,102 ------------------------------------------------------------------------------------- SPECIALTY RETAIL (5.5%) Lowe's Companies, Inc. 2,800 57,176 The Gap, Inc. 3,500 68,110 --------------- Total 125,286 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) TOBACCO (4.7%) Altria Group, Inc. 2,400 $48,096 Philip Morris International, Inc. 1,300 59,592 --------------- Total 107,688 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $2,063,627) $2,191,189 ------------------------------------------------------------------------------------- MONEY MARKET FUND (4.4%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 99,623(d) $99,623 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $99,623) $99,623 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (4.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(E) Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $95,100 0.030% $95,100 $95,100 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $95,100) $95,100 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $2,258,350)(f) $2,385,912 =====================================================================================
The industries identified above are based on the Global Industry Classification Standard (GICS), which was developed by, and is the exclusive property of, Morgan Stanley Capital International Inc. and Standard & Poor's, a division of The McGraw-Hill Companies, Inc. NOTES TO PORTFOLIO OF INVESTMENTS (a) Securities are valued by using policies described in Note 2 to the financial statements. (b) Non-income producing. (c) At June 30, 2010, security was partially or fully on loan. See Note 6 to the financial statements. (d) Affiliated Money Market Fund - See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (e) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ----------------------------------------------------------- Fannie Mae Pool $16,972 Government National Mortgage Association 80,030 ----------------------------------------------------------- Total market value of collateral securities $97,002 -----------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED) (f) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $2,258,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $327,000 Unrealized depreciation (199,000) ---------------------------------------------------------- Net unrealized appreciation $128,000 ----------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
FAIR VALUE AT JUNE 30, 2010 ---------------------------------------------------------------- LEVEL 1 LEVEL 2 QUOTED PRICES OTHER LEVEL 3 IN ACTIVE SIGNIFICANT SIGNIFICANT MARKETS FOR OBSERVABLE UNOBSERVABLE DESCRIPTION(a) IDENTICAL ASSETS(b) INPUTS INPUTS TOTAL ---------------------------------------------------------------------------------------------- Equity Securities Common Stocks $2,191,189 $-- $-- $2,191,189 ---------------------------------------------------------------------------------------------- Total Equity Securities 2,191,189 -- -- 2,191,189 ---------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 99,623 -- -- 99,623 Investments of Cash Collateral Received for Securities on Loan -- 95,100 -- 95,100 ---------------------------------------------------------------------------------------------- Total Other 99,623 95,100 -- 194,723 ---------------------------------------------------------------------------------------------- Total $2,290,812 $95,100 $-- $2,385,912 ----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. 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 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 800.221.2450. -------------------------------------------------------------------------------- 12 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $2,063,627) $2,191,189 Affiliated money market fund (identified cost $99,623) 99,623 Investments of cash collateral received for securities on loan (identified cost $95,100) 95,100 ----------------------------------------------------------------------------- Total investments in securities (identified cost $2,258,350) 2,385,912 Dividends and accrued interest receivable 3,813 Receivable from Investment Manager 7,180 ----------------------------------------------------------------------------- Total assets 2,396,905 ----------------------------------------------------------------------------- LIABILITIES Capital shares payable 100 Payable for investment securities purchased 15,460 Payable upon return of securities loaned 95,100 Accrued investment management services fees 1,594 Accrued transfer agency fees 130 Accrued administrative services fees 127 Other accrued expenses 17,225 ----------------------------------------------------------------------------- Total liabilities 129,736 ----------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $2,267,169 ----------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 232 Additional paid-in capital 2,237,061 Undistributed net investment income 10,313 Accumulated net realized gain (loss) (107,999) Unrealized appreciation (depreciation) on investments 127,562 ----------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $2,267,169 ----------------------------------------------------------------------------- Shares outstanding 232,411 ----------------------------------------------------------------------------- Net asset value per share of outstanding capital stock $ 9.75 ----------------------------------------------------------------------------- *Value of securities on loan $ 91,405 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 STATEMENT OF OPERATIONS ------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 22,033 Interest 2,611 Income distributions from affiliated money market fund 51 Income from securities lending -- net 68 ---------------------------------------------------------------------------- Total income 24,763 ---------------------------------------------------------------------------- Expenses: Investment management services fees 8,644 Transfer agency fees 692 Administrative services fees 687 Compensation of board members 37 Custodian fees 1,994 Printing and postage 6,785 Professional fees 12,273 Other 1,139 ---------------------------------------------------------------------------- Total expenses 32,251 Expenses waived/reimbursed by the Investment Manager and its affiliates (17,856) ---------------------------------------------------------------------------- Total net expenses 14,395 ---------------------------------------------------------------------------- Investment income (loss) -- net 10,368 ---------------------------------------------------------------------------- REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions 23,029 Net change in unrealized appreciation (depreciation) on investments (132,166) ---------------------------------------------------------------------------- Net gain (loss) on investments (109,137) ---------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations $ (98,769) ----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENTS OF CHANGES IN NET ASSETS -------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ 10,368 $ 17,168 Net realized gain (loss) on investments 23,029 (129,424) Net change in unrealized appreciation (depreciation) on investments (132,166) 611,978 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (98,769) 499,722 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net investment income (11,399) (30,001) Net realized gain -- (218,918) --------------------------------------------------------------------------------------------- Total distributions (11,399) (248,919) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales 435,448 219,232 Reinvestment of distributions at net asset value 11,399 248,919 Payments for redemptions (253,409) (455,119) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions 193,438 13,032 --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets 83,270 263,835 Net assets at beginning of period 2,183,899 1,920,064 --------------------------------------------------------------------------------------------- Net assets at end of period $2,267,169 $2,183,899 --------------------------------------------------------------------------------------------- Undistributed net investment income $ 10,313 $ 11,344 ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 FINANCIAL HIGHLIGHTS ---------------------------------------------------------- The following table is intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $10.11 $8.75 $14.29 $13.15 $11.67 $10.65 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) .05 .09 .11 .07 .08 .07 Net gains (losses) (both realized and unrealized) (.36) 2.57 (5.55) 1.17 1.50 1.06 -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.31) 2.66 (5.44) 1.24 1.58 1.13 -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income (.05) (.16) (.10) (.10) (.10) (.11) Dividends from net realized gain (loss) -- (1.14) -- -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions (.05) (1.30) (.10) (.10) (.10) (.11) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $9.75 $10.11 $8.75 $14.29 $13.15 $11.67 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (3.08%) 30.23% (38.03%) 9.43% 13.57% 10.63% -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(A) Gross expenses prior to expense waiver/reimbursement 2.82%(b) 3.43% 1.95% 1.42% 1.32% 1.34% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(c) 1.26%(b) 1.46% 1.54% 1.42% 1.32% 1.34% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) .91%(b) .90% .87% .51% .67% .65% -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $2 $2 $2 $4 $5 $5 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 8% 39% 18% 11% 14% 27% --------------------------------------------------------------------------------------------------------------------------------
(a) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (b) Annualized. (c) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS -------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Large-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Fund has 100 million authorized shares of capital stock. The Fund generally invests at least 80% of its net assets in the common stock of "value" companies with large market capitalization ($4 billion or more) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life policies 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, 2010, there were 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 from the primary exchange. 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 -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for -------------------------------------------------------------------------------- 18 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 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 and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. The management fee is an annual fee that is equal to a percentage of the Fund's average daily net -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- assets that declines from 0.755% to 0.565% as the Fund's net assets increase. The management fee for the six months ended June 30, 2010 was 0.755% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.06% to 0.03% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.06% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, other expenses paid to this company were $1. 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, the Investment Manager and its affiliates waived/reimbursed certain fees and expenses such that net expenses (excluding fees and expenses of acquired funds*) were 1.26% for Class 1. The waived/reimbursed fees and expenses for the transfer agency fees at the class level were $5 for Class 1. The management fees and other Fund level expenses waived/reimbursed were $17,851. -------------------------------------------------------------------------------- 20 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed 1.42% of Class 1 average daily net assets. Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed 0.95% of Class 1 average daily net assets. * In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $309,079 and $181,957, respectively, for the six months ended June 30, 2010. 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 were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 39,437 21,632 Reinvested distributions 1,158 24,356 Redeemed (24,146) (49,393) ---------------------------------------------------------------------- Net increase (decrease) 16,449 (3,405) ----------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) -------------------------------------- Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $91,405 were on loan, secured by cash collateral of $95,100 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $68 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $501,130 and $417,908, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. -------------------------------------------------------------------------------- 22 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 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 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 were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $121,250 at Dec. 31, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $6,278 that is treated for income tax purposes as occurring on Jan. 1, 2010. 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 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, other than as noted below. The Board of Directors of Seligman Large-Cap Value Portfolio has approved in principle the proposed merger of the Fund into Seligman Variable Portfolio -- Larger-Cap Value Fund. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 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 (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC -------------------------------------------------------------------------------- 24 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 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, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, the Fund's operations, most notably, management's announcement of the massive -------------------------------------------------------------------------------- 26 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer -------------------------------------------------------------------------------- 28 SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- SELIGMAN LARGE-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 SELIGMAN LARGE-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9969 C (8/10)
Semiannual Report (COLUMBIA MANAGEMENT LOGO) SELIGMAN SMALLER-CAP VALUE PORTFOLIO -------------------------------------------------------------------------------- SEMIANNUAL REPORT FOR THE PERIOD ENDED JUNE 30, 2010 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. NOT FDIC INSURED - NO BANK GUARANTEE - MAY LOSE VALUE 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...... 19 Approval of Investment Management Services Agreement............... 29 Proxy Voting....................... 32
-------------------------------------------------------------------------------- 2 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT YOUR FUND AT A GLANCE ---------------------------------------------------------- (UNAUDITED) FUND SUMMARY -------------------------------------------------------------------------------- > Seligman Smaller-Cap Value Portfolio (the Fund) Class 1 shares decreased 2.20% for the six months ended June 30, 2010. > The Fund underperformed its benchmark, the Russell 2000(R) Value Index, which fell 1.64% during the same six-month period. > The Fund also underperformed its peers, as represented by the Lipper Small-Cap Core Funds Index and the Lipper Small-Cap Value Funds Index, which declined 2.09% and 1.26%, respectively, during the same period. ANNUALIZED TOTAL RETURNS (for period ended June 30, 2010) --------------------------------------------------------------------------------
SINCE INCEPTION** 6 MONTHS* 1 YEAR 3 YEARS 5 YEARS 10 YEARS 5/1/01 -------------------------------------------------------------------------------------- Seligman Smaller-Cap Value Portfolio Class 1 -2.20% +22.98% -8.92% +1.06% +8.54% N/A -------------------------------------------------------------------------------------- Class 2 -2.43% +22.62% -9.13% +0.86% N/A +6.36% -------------------------------------------------------------------------------------- Russell 2000 Value Index(1) (unmanaged) -1.64% +25.07% -9.85% -0.51% +7.48% +5.70% -------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Index(2) (unmanaged) -2.09% +21.67% -7.59% +1.15% +4.16% +4.65% -------------------------------------------------------------------------------------- Lipper Small-Cap Value Funds Index(3) (unmanaged) -1.26% +25.50% -8.14% +0.90% +8.06% +6.56% -------------------------------------------------------------------------------------- Lipper Small-Cap Core Funds Average(4) (unmanaged) -2.05% +21.63% -8.73% +0.44% +5.21% +4.78% -------------------------------------------------------------------------------------- Lipper Small-Cap Value Funds Average(5) (unmanaged) -1.22% +25.39% -9.16% +0.32% +7.57% +6.14% --------------------------------------------------------------------------------------
* 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/expense reimbursements, if any. Without such waivers/reimbursements, the Fund's returns would be lower. The total returns shown for Class 1 and -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 3 YOUR FUND AT A GLANCE (continued) ---------------------------------------------- Class 2 shares vary from each other because of differences in expenses but do not reflect expenses that apply to the variable account, annuity contract or life insurance policy, 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 (through September 26, 2010) and thereafter columbiamanagement.com or calling 800.221.2450. The performance of the indices does not reflect the effect of expenses (excluding Lipper). It is not possible to invest directly in an index or average. (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 Index includes the 30 largest small-cap core funds tracked by Lipper Inc. The Lipper Index's returns reflect reinvestment of all dividends and changes in market prices.* (3) The Lipper Small-Cap Value Funds Index includes the 30 largest small-cap value funds tracked by Lipper Inc. The Lipper Index's returns include net reinvested dividends.* (4) 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 Lipper Average's returns include net reinvested dividends.* (5) 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 Lipper Average's returns include net reinvested dividends.* * On Jan. 1, 2010, the Lipper Small-Cap Core Funds Index and Lipper Small- Cap Value Funds Index (the Lipper Indexes) replaced the Lipper Small-Cap Core Funds Average and Lipper Small-Cap Value Funds Average (the Lipper Averages), respectively, as benchmarks for the Fund. The Lipper Indexes include a select peer group from the Lipper Average. This change was made to bring the selection of the Seligman Funds' benchmarks in line with the practice of the Fund Family, which would permit a common shareholder experience and provide a more focused peer group for performance comparison purposes. Information on both the Lipper Indexes and the Lipper Averages will be included for a one-year transition period. Thereafter, only the Lipper Indexes will be included. Investors cannot invest directly in an average or index. -------------------------------------------------------------------------------- 4 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- SECTOR BREAKDOWN(1) (at June 30, 2010) ---------------------------------------------------------------------
Consumer Discretionary 8.7% ------------------------------------------------ Consumer Staples 6.9% ------------------------------------------------ Energy 4.3% ------------------------------------------------ Financials 18.5% ------------------------------------------------ Health Care 5.9% ------------------------------------------------ Industrials 32.0% ------------------------------------------------ Information Technology 20.0% ------------------------------------------------ Materials 3.6% ------------------------------------------------ Other(2) 0.1% ------------------------------------------------
(1) Sectors can be comprised of several industries. Please refer to the section entitled "Portfolio of Investments" for a complete listing. No single industry exceeded 25% of portfolio assets. Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan). 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. TOP TEN HOLDINGS(1) (at June 30, 2010) ---------------------------------------------------------------------
F5 Networks, Inc. 4.3% ------------------------------------------------ Continental Airlines, Inc., Class B 4.1% ------------------------------------------------ Delta Air Lines, Inc. 3.7% ------------------------------------------------ Quest Software, Inc. 3.7% ------------------------------------------------ Herbalife Ltd. 3.5% ------------------------------------------------ Lincoln National Corp. 3.4% ------------------------------------------------ Cubic Corp. 3.4% ------------------------------------------------ Lawson Software, Inc. 3.3% ------------------------------------------------ The Hanover Insurance Group, Inc. 3.3% ------------------------------------------------ Waste Connections, Inc. 3.2% ------------------------------------------------
(1) Percentages indicated are based upon total investments (excluding Investments of Cash Collateral Received for Securities on Loan and Cash & Cash Equivalents). For further detail about these holdings, please refer to the section entitled "Portfolio of Investments." Fund holdings are of the date given, are subject to change at any time, and are not recommendations to buy or sell any security. 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 SMALLER-CAP VALUE PORTFOLIO -- 2010 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 or by participating in a qualified pension or retirement plan. Your purchase price will be the next NAV calculated after your request is received by the Fund, an authorized insurance company or qualified pension or retirement plan. As a contract/policy owner investing in the Fund, you incur ongoing costs, which may include management fees; distribution and service (Rule 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, 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 expense 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). 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 the acquired funds using the expense ratio of each of the acquired funds as of the acquired fund's most recent shareholder report. These examples are based on an investment of $1,000 invested at the beginning of the period and held for the six months ended June 30, 2010. ACTUAL EXPENSES The first line of the table provides information about actual account values and actual expenses for each class. 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 actual expense ratio for each class and an assumed rate of return of 5% per year before expenses, which is not the actual return for the class. 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 -------------------------------------------------------------------------------- 6 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- example with the 5% hypothetical examples that appear in the shareholder reports of other similar 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 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, 2010 JUNE 30, 2010 THE PERIOD(a) EXPENSE RATIO ------------------------------------------------------------------------------------------ Class 1 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 978.00 $5.44(c) 1.11% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,019.29 $5.56(c) 1.11% ------------------------------------------------------------------------------------------ Class 2 ------------------------------------------------------------------------------------------ Actual(b) $1,000 $ 975.70 $6.66(c) 1.36% ------------------------------------------------------------------------------------------ Hypothetical (5% return before expenses) $1,000 $1,018.05 $6.80(c) 1.36% ------------------------------------------------------------------------------------------
(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, 2010: -2.20% for Class 1 and -2.43% for Class 2. (c) Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (the Investment Manager) and its affiliates have contractually agreed to waive certain fees and to absorb certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Fund's Board, such that net expenses (excluding fees and expenses of acquired funds), will not exceed 1.02% for Class 1 and 1.27% for Class 2. Any amounts waived will not be reimbursed by the Fund. This change was effective May 1, 2010. Had this change been in place for the entire six month period ended June 30, 2010, the actual expenses paid would have been $5.00 for Class 1 and $6.22 for Class 2; the hypothetical expenses paid would have been $5.11 for Class 1 and $6.36 for Class 2. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 7 PORTFOLIO OF INVESTMENTS ------------------------------------------------------- JUNE 30, 2010 (UNAUDITED) (Percentages represent value of investments compared to net assets) INVESTMENTS IN SECURITIES
COMMON STOCKS (100.8%) ISSUER SHARES VALUE(a) AEROSPACE & DEFENSE (3.4%) Cubic Corp. 80,000(d) $2,910,400 ------------------------------------------------------------------------------------- AIRLINES (7.8%) Continental Airlines, Inc., Class B 160,000(b) 3,520,000 Delta Air Lines, Inc. 270,000(b,d) 3,172,500 --------------- Total 6,692,500 ------------------------------------------------------------------------------------- BEVERAGES (1.7%) Central European Distribution Corp. 67,500(b,d) 1,443,150 ------------------------------------------------------------------------------------- CHEMICALS (2.2%) Minerals Technologies, Inc. 40,000(d) 1,901,600 ------------------------------------------------------------------------------------- COMMERCIAL SERVICES & SUPPLIES (4.4%) The Brink's Co. 50,000 951,500 Waste Connections, Inc. 80,000(b) 2,791,200 --------------- Total 3,742,700 ------------------------------------------------------------------------------------- COMMUNICATIONS EQUIPMENT (4.3%) F5 Networks, Inc. 53,500(b,d) 3,668,495 ------------------------------------------------------------------------------------- CONSTRUCTION & ENGINEERING (2.4%) The Shaw Group, Inc. 60,000(b) 2,053,200 ------------------------------------------------------------------------------------- CONTAINERS & PACKAGING (1.4%) Owens-Illinois, Inc. 45,000(b) 1,190,250 ------------------------------------------------------------------------------------- DIVERSIFIED CONSUMER SERVICES (2.0%) Sotheby's 75,000(d) 1,715,250 ------------------------------------------------------------------------------------- ELECTRICAL EQUIPMENT (7.0%) Belden, Inc. 85,000(d) 1,870,000 EnerSys 117,500(b,d) 2,510,975 Thomas & Betts Corp. 46,500(b) 1,613,550 --------------- Total 5,994,525 ------------------------------------------------------------------------------------- ENERGY EQUIPMENT & SERVICES (4.4%) Exterran Holdings, Inc. 70,000(b,d) 1,806,700 Tetra Technologies, Inc. 210,000(b,d) 1,906,800 --------------- Total 3,713,500 ------------------------------------------------------------------------------------- FOOD PRODUCTS (1.7%) Smithfield Foods, Inc. 100,000(b,d) 1,490,000 ------------------------------------------------------------------------------------- HEALTH CARE EQUIPMENT & SUPPLIES (0.9%) Analogic Corp. 17,400(d) 791,874 ------------------------------------------------------------------------------------- HEALTH CARE PROVIDERS & SERVICES (3.2%) Select Medical Holdings Corp. 90,000(b,d) 610,200 WellCare Health Plans, Inc. 90,000(b) 2,136,600 --------------- Total 2,746,800 ------------------------------------------------------------------------------------- HEALTH CARE TECHNOLOGY (1.8%) Eclipsys Corp. 85,000(b) 1,516,400 ------------------------------------------------------------------------------------- HOTELS, RESTAURANTS & LEISURE (5.4%) Penn National Gaming, Inc. 90,000(b) 2,079,000 Texas Roadhouse, Inc. 200,000(b,d) 2,524,000 --------------- Total 4,603,000 ------------------------------------------------------------------------------------- INSURANCE (18.8%) Aspen Insurance Holdings Ltd. 110,000(c) 2,721,400 Endurance Specialty Holdings Ltd. 70,000(c) 2,627,100 Infinity Property & Casualty Corp. 45,000(d) 2,078,100 Lincoln National Corp. 120,000 2,914,800 The Hanover Insurance Group, Inc. 65,000(d) 2,827,500 WR Berkley Corp. 105,000 2,778,300 --------------- Total 15,947,200 ------------------------------------------------------------------------------------- IT SERVICES (2.5%) CACI International, Inc., Class A 50,000(b,d) 2,124,000 ------------------------------------------------------------------------------------- MACHINERY (3.6%) Douglas Dynamics, Inc. 70,453(b) 810,210 Mueller Industries, Inc. 85,000(d) 2,091,000 Navistar International Corp. 3,000(b,d) 147,600 --------------- Total 3,048,810 -------------------------------------------------------------------------------------
See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- 8 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT --------------------------------------------------------------------------------
COMMON STOCKS (CONTINUED) ISSUER SHARES VALUE(a) MULTILINE RETAIL (1.4%) Fred's, Inc., Class A 110,000(d) $1,216,600 ------------------------------------------------------------------------------------- PERSONAL PRODUCTS (3.5%) Herbalife Ltd. 65,000(c) 2,993,250 ------------------------------------------------------------------------------------- PROFESSIONAL SERVICES (2.4%) School Specialty, Inc. 112,000(b,d) 2,023,840 ------------------------------------------------------------------------------------- SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT (6.4%) Cypress Semiconductor Corp. 200,000(b,d) 2,008,000 ON Semiconductor Corp. 263,600(b) 1,681,768 Varian Semiconductor Equipment Associates, Inc. 60,950(b) 1,746,827 --------------- Total 5,436,595 ------------------------------------------------------------------------------------- SOFTWARE (7.0%) Lawson Software, Inc. 390,000(b,d) 2,847,000 Quest Software, Inc. 175,000(b,d) 3,157,000 --------------- Total 6,004,000 ------------------------------------------------------------------------------------- TRANSPORTATION INFRASTRUCTURE (1.2%) Aegean Marine Petroleum Network, Inc. 52,600(c) 1,050,948 ------------------------------------------------------------------------------------- TOTAL COMMON STOCKS (Cost: $81,734,697) $86,018,887 -------------------------------------------------------------------------------------
MONEY MARKET FUND (0.1%) SHARES VALUE(a) RiverSource Short-Term Cash Fund, 0.276% 61,011(e) $61,011 ------------------------------------------------------------------------------------- TOTAL MONEY MARKET FUND (Cost: $61,011) $61,011 -------------------------------------------------------------------------------------
INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (19.2%) AMOUNT EFFECTIVE PAYABLE AT ISSUER YIELD MATURITY VALUE(a) REPURCHASE AGREEMENTS(F) Citigroup Global Markets, Inc. dated 06-30-10, matures 07-01-10, repurchase price $7,000,023 0.120% $7,000,000 $7,000,000 Goldman Sachs & Co. dated 06-30-10, matures 07-01-10, repurchase price $2,356,684 0.030 2,356,682 2,356,682 MF Global Holdings Ltd. dated 06-30-10, matures 07-01-10, repurchase price $2,000,005 0.090 2,000,000 2,000,000 Pershing LLC dated 06-30-10, matures 07-01-10, repurchase price $5,000,029 0.210 5,000,000 5,000,000 --------------- Total 16,356,682 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS OF CASH COLLATERAL RECEIVED FOR SECURITIES ON LOAN (Cost: $16,356,682) $16,356,682 ------------------------------------------------------------------------------------- TOTAL INVESTMENTS IN SECURITIES (Cost: $98,152,390)(g) $102,436,580 =====================================================================================
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. See accompanying Notes to Portfolio of Investments. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 9 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. (c) Foreign security values are stated in U.S. dollars. At June 30, 2010, the value of foreign securities, excluding short-term securities, represented 11.01% of net assets. (d) At June 30, 2010, security was partially or fully on loan. See Note 6 to the financial statements. (e) Affiliated Money Market Fund -- See Note 7 to the financial statements. The rate shown is the seven-day current annualized yield at June 30, 2010. (f) The table below represents securities received as collateral for repurchase agreements. This collateral, which is generally high quality short-term obligations, is deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral.
CITIGROUP GLOBAL MARKETS, INC. (0.120%) SECURITY DESCRIPTION VALUE(a) ------------------------------------------------------------ Fannie Mae REMICS $2,544,243 Fannie Mae-Aces 66,400 Freddie Mac Reference REMIC 414,456 Freddie Mac REMICS 3,637,190 Government National Mortgage Association 477,711 ------------------------------------------------------------ Total market value of collateral securities $7,140,000 ------------------------------------------------------------ GOLDMAN SACHS & CO. (0.030%) SECURITY DESCRIPTION VALUE(a) ------------------------------------------------------------ Fannie Mae Pool $420,582 Government National Mortgage Association 1,983,234 ------------------------------------------------------------ Total market value of collateral securities $2,403,816 ------------------------------------------------------------
-------------------------------------------------------------------------------- 10 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
MF GLOBAL, INC. (0.090%) SECURITY DESCRIPTION VALUE(a) ------------------------------------------------------------ Federal Farm Credit Bank $37,102 Federal Home Loan Bank Discount Notes 8,833 Federal Home Loan Mortgage Corp 45,650 Freddie Mac Discount Notes 600 United States Treasury Inflation Indexed Bonds 546,075 United States Treasury Note/Bond 134 United States Treasury Strip Coupon 935,491 United States Treasury Strip Principal 466,166 ------------------------------------------------------------ Total market value of collateral securities $2,040,051 ------------------------------------------------------------ PERSHING LLC (0.210%) SECURITY DESCRIPTION VALUE(a) ------------------------------------------------------------ Fannie Mae Pool $1,845,609 Fannie Mae REMICS 428,017 Federal Farm Credit Bank 68,071 Federal Home Loan Banks 127,711 Federal Home Loan Mortgage Corp 72,139 Federal National Mortgage Association 87,395 Freddie Mac Gold Pool 1,273,797 Freddie Mac Non Gold Pool 106,838 Freddie Mac REMICS 267,760 Ginnie Mae I Pool 133,911 Ginnie Mae II Pool 83,625 United States Treasury Bill 450,845 United States Treasury Note/Bond 146,703 United States Treasury Strip Coupon 7,579 ------------------------------------------------------------ Total market value of collateral securities $5,100,000 ------------------------------------------------------------
(g) At June 30, 2010, the cost of securities for federal income tax purposes was approximately $98,152,000 and the approximate aggregate gross unrealized appreciation and depreciation based on that cost was: Unrealized appreciation $19,938,000 Unrealized depreciation (15,653,000) ----------------------------------------------------------- Net unrealized appreciation $4,285,000 -----------------------------------------------------------
-------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 11 PORTFOLIO OF INVESTMENTS (continued) ------------------------------------------- FAIR VALUE MEASUREMENTS Generally accepted accounting principles (GAAP) require disclosure regarding the inputs and valuation techniques used to measure fair value and any changes in valuation inputs or techniques. In addition, investments shall be disclosed by major category. The Fund categorizes its fair value measurements according to a three-level hierarchy that maximizes the use of observable inputs and minimizes the use of unobservable inputs by prioritizing that the most observable input be used when available. Observable inputs are those that market participants would use in pricing an investment based on market data obtained from sources independent of the reporting entity. Unobservable inputs are those that reflect the Fund's assumptions about the information market participants would use in pricing an investment. An investment's level within the fair value hierarchy is based on the lowest level of any input that is deemed significant to the asset or liability's fair value measurement. The input levels are not necessarily an indication of the risk or liquidity associated with investments at that level. For example, certain U.S. government securities are generally high quality and liquid, however, they are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. Fair value inputs are summarized in the three broad levels listed below: - Level 1 -- Valuations based on quoted prices for investments in active markets that the Fund has the ability to access at the measurement date. Valuation adjustments are not applied to Level 1 investments. - Level 2 -- Valuations based on other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risks, etc.). - Level 3 -- Valuations based on significant unobservable inputs (including the Fund's own assumptions and judgment in determining the fair value of investments). Inputs that are used in determining fair value of an investment may include price information, credit data, volatility statistics, and other factors. These inputs can be either observable or unobservable. The availability of observable inputs can vary between investments, and is affected by various factors such as the type of investment, and the volume and level of activity for that investment or similar investments in the marketplace. The inputs will be considered by the Fund Administrator, along with any other relevant factors in the calculation of an investment's fair value. The Fund uses prices and inputs that are current as of the measurement date, which may include periods of market dislocations. During these periods, the availability of prices and inputs may be reduced for many investments. This condition could cause an investment to be reclassified between the various levels within the hierarchy. Non-U.S. equity securities actively traded in foreign markets may be reflected in Level 2 despite the availability of closing prices, because the Fund evaluates and determines whether those closing prices reflect fair value at the close of the New York Stock Exchange (NYSE) or require adjustment, as described in Note 2 to the financial statements -- Valuation of securities. Investments falling into the Level 3 category are primarily supported by quoted prices from brokers and dealers participating in the market for those investments. However, these may be classified as -------------------------------------------------------------------------------- 12 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 investments due to lack of market transparency and corroboration to support these quoted prices. Additionally, valuation models may be used as the pricing source for any remaining investments classified as Level 3. These models rely on one or more significant unobservable inputs and/or significant assumptions by the Fund Administrator. Inputs used in a valuation model may include, but are not limited to, financial statement analysis, discount rates and estimated cash flows, and comparable company data. The following table is a summary of the inputs used to value the Fund's investments as of June 30, 2010:
Fair value at June 30, 2010 ------------------------------------------------------------------ Level 1 Level 2 quoted prices other Level 3 in active significant significant markets for observable unobservable DESCRIPTION(a) identical assets(b) inputs inputs Total ---------------------------------------------------------------------------------------------- Equity Securities Common Stocks $86,018,887 $-- $-- $86,018,887 ---------------------------------------------------------------------------------------------- Total Equity Securities 86,018,887 -- -- 86,018,887 ---------------------------------------------------------------------------------------------- Other Affiliated Money Market Fund(c) 61,011 -- -- 61,011 Investments of Cash Collateral Received for Securities on Loan -- 16,356,682 -- 16,356,682 ---------------------------------------------------------------------------------------------- Total Other 61,011 16,356,682 -- 16,417,693 ---------------------------------------------------------------------------------------------- Total $86,079,898 $16,356,682 $-- $102,436,580 ----------------------------------------------------------------------------------------------
(a) See the Portfolio of Investments for all investment classifications not indicated in the table. (b) There were no significant transfers between Levels 1 and 2 during the period. (c) Money market fund that is a sweep investment for cash balances in the Fund at June 30, 2010. 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 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 800.221.2450. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 13 STATEMENT OF ASSETS AND LIABILITIES ------------------------------------------- JUNE 30, 2010 (UNAUDITED)
ASSETS Investments in securities, at value Unaffiliated issuers* (identified cost $81,734,697) 86,018,887 Affiliated money market fund (identified cost $61,011) 61,011 Investments of cash collateral received for securities on loan (identified cost $16,356,682) 16,356,682 ------------------------------------------------------------------------------- Total investments in securities (identified cost $98,152,390) 102,436,580 Cash 1,000 Capital shares receivable 4,227 Dividends and accrued interest receivable 14,960 ------------------------------------------------------------------------------- Total assets 102,456,767 ------------------------------------------------------------------------------- LIABILITIES Capital shares payable 634,362 Payable upon return of securities loaned 16,356,682 Accrued investment management services fees 78,804 Accrued distribution fees 5,020 Accrued transfer agency fees 5,180 Accrued administrative services fees 6,743 Other accrued expenses 42,423 ------------------------------------------------------------------------------- Total liabilities 17,129,214 ------------------------------------------------------------------------------- Net assets applicable to outstanding capital stock $ 85,327,553 ------------------------------------------------------------------------------- REPRESENTED BY Capital stock -- $.001 par value $ 13,844 Additional paid-in capital 94,092,743 Accumulated net investment loss (325,401) Accumulated net realized gain (loss) (12,737,823) Unrealized appreciation (depreciation) on investments 4,284,190 ------------------------------------------------------------------------------- Total -- representing net assets applicable to outstanding capital stock $ 85,327,553 ------------------------------------------------------------------------------- *Value of securities on loan $ 15,883,339 -------------------------------------------------------------------------------
NET ASSET VALUE PER SHARE NET ASSETS SHARES OUTSTANDING NET ASSET VALUE PER SHARE Class 1 $64,758,262 10,428,318 $6.21 Class 2 $20,569,291 3,415,676 $6.02 -----------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 14 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT STATEMENT OF OPERATIONS -------------------------------------------------------- SIX MONTHS ENDED JUNE 30, 2010 (UNAUDITED)
INVESTMENT INCOME Income: Dividends 238,252 Income distributions from affiliated money market fund 154 Income from securities lending -- net 5,061 ------------------------------------------------------------------------------ Total income 243,467 ------------------------------------------------------------------------------ Expenses: Investment management services fees 451,904 Distribution fees -- Class 2 28,559 Transfer agency fees Class 1 22,309 Class 2 6,905 Administrative services fees 38,666 Compensation of board members 1,565 Custodian fees 3,748 Printing and postage 3,820 Professional fees 13,031 Other 4,177 ------------------------------------------------------------------------------ Total expenses 574,684 Expenses waived/reimbursed by the Investment Manager and its affiliates (7,716) ------------------------------------------------------------------------------ Total net expenses 566,968 ------------------------------------------------------------------------------ Investment income (loss) -- net (323,501) ------------------------------------------------------------------------------ REALIZED AND UNREALIZED GAIN (LOSS) -- NET Net realized gain (loss) on security transactions 1,661,800 Net change in unrealized appreciation (depreciation) on investments (2,977,618) ------------------------------------------------------------------------------ Net gain (loss) on investments (1,315,818) ------------------------------------------------------------------------------ Net increase (decrease) in net assets resulting from operations $(1,639,319) ------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 15 STATEMENTS OF CHANGES IN NET ASSETS --------------------------------------------
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 (UNAUDITED) OPERATIONS AND DISTRIBUTIONS Investment income (loss) -- net $ (323,501) $ (574,856) Net realized gain (loss) on investments 1,661,800 (11,122,955) Net change in unrealized appreciation (depreciation) on investments (2,977,618) 37,693,309 --------------------------------------------------------------------------------------------- Net increase (decrease) in net assets resulting from operations (1,639,319) 25,995,498 --------------------------------------------------------------------------------------------- Distributions to shareholders from: Net realized gain Class 1 -- (1,588,590) Class 2 -- (501,310) Tax return of capital Class 1 -- (63) Class 2 -- (19) --------------------------------------------------------------------------------------------- Total distributions -- (2,089,982) --------------------------------------------------------------------------------------------- CAPITAL SHARE TRANSACTIONS Proceeds from sales Class 1 shares 2,074,941 8,075,270 Class 2 shares 1,293,017 2,136,746 Reinvestment of distributions at net asset value Class 1 shares -- 1,588,653 Class 2 shares -- 501,329 Payments for redemptions Class 1 shares (9,381,098) (18,783,752) Class 2 shares (2,798,127) (4,787,236) --------------------------------------------------------------------------------------------- Increase (decrease) in net assets from capital share transactions (8,811,267) (11,268,990) --------------------------------------------------------------------------------------------- Total increase (decrease) in net assets (10,450,586) 12,636,526 Net assets at beginning of period 95,778,139 83,141,613 --------------------------------------------------------------------------------------------- Net assets at end of period $ 85,327,553 $ 95,778,139 --------------------------------------------------------------------------------------------- Accumulated net investment loss/excess of distributions over net investment income $ (325,401) $ (1,900) ---------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 16 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT FINANCIAL HIGHLIGHTS ----------------------------------------------------------- The following tables are intended to help you understand the Fund's financial performance. Certain information reflects financial results for a single share of a class held for the periods shown. Per share net investment income (loss) amounts are calculated based on average shares outstanding during the period. Total returns assume reinvestment of all dividends and distributions. Total returns do not reflect payment of the expenses that apply to the variable accounts or contract charges, if any, and are not annualized for periods of less than one year.
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 1 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $6.35 $4.79 $17.21 $18.51 $16.67 $19.40 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.02) (.03) (.09) (.11) (.12) (.07) Net gains (losses) (both realized and unrealized) (.12) 1.73 (6.83) .90 3.66 (.71) -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.14) 1.70 (6.92) .79 3.54 (.78) -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- (.11) Dividends from net realized gain (loss) -- (.14) (5.50) (2.09) (1.70) (1.84) Tax return of capital -- (.00)(a) -- -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions -- (.14) (5.50) (2.09) (1.70) (1.95) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.21 $6.35 $4.79 $17.21 $18.51 $16.67 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (2.20%) 35.46% (39.53%) 4.14% 21.25% (3.98%) -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.13%(c) 1.23% 1.22% 1.14% 1.13% 1.14% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.11%(c) 1.23% 1.22% 1.14% 1.13% 1.14% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.61%)(c) (.64%) (.63%) (.58%) (.66%) (.37%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $65 $73 $64 $148 $188 $199 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 2% 8% 14% 27% 32% 23% --------------------------------------------------------------------------------------------------------------------------------
See accompanying Notes to Financial Highlights. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 17 FINANCIAL HIGHLIGHTS (continued) -----------------------------------------------
YEAR ENDED DEC. 31, SIX MONTHS ENDED ------------------------------------------------------- CLASS 2 JUNE 30, 2010 2009 2008 2007 2006 2005 PER SHARE DATA (UNAUDITED) Net asset value, beginning of period $6.17 $4.67 $17.03 $18.37 $16.59 $19.26 -------------------------------------------------------------------------------------------------------------------------------- INCOME FROM INVESTMENT OPERATIONS: Net investment income (loss) (.03) (.04) (.11) (.15) (.15) (.10) Net gains (losses) (both realized and unrealized) (.12) 1.68 (6.75) .90 3.63 (.70) -------------------------------------------------------------------------------------------------------------------------------- Total from investment operations (.15) 1.64 (6.86) .75 3.48 (.80) -------------------------------------------------------------------------------------------------------------------------------- LESS DISTRIBUTIONS: Dividends from net investment income -- -- -- -- -- (.03) Dividends from net realized gain (loss) -- (.14) (5.50) (2.09) (1.70) (1.84) Tax return of capital -- (.00)(a) -- -- -- -------------------------------------------------------------------------------------------------------------------------------- Total distributions -- (.14) (5.50) (2.09) (1.70) (1.87) -------------------------------------------------------------------------------------------------------------------------------- Net asset value, end of period $6.02 $6.17 $4.67 $17.03 $18.37 $16.59 -------------------------------------------------------------------------------------------------------------------------------- TOTAL RETURN (2.43%) 35.09% (39.58%) 3.96% 20.99% (4.13%) -------------------------------------------------------------------------------------------------------------------------------- RATIOS TO AVERAGE NET ASSETS(b) Gross expenses prior to expense waiver/reimbursement 1.38%(c) 1.45% 1.42% 1.33% 1.32% 1.33% -------------------------------------------------------------------------------------------------------------------------------- Net expenses after expense waiver/reimbursement(d) 1.36%(c) 1.45% 1.42% 1.33% 1.32% 1.33% -------------------------------------------------------------------------------------------------------------------------------- Net investment income (loss) (.86%)(c) (.86%) (.83%) (.77%) (.85%) (.56%) -------------------------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL DATA Net assets, end of period (in millions) $21 $23 $19 $41 $41 $36 -------------------------------------------------------------------------------------------------------------------------------- Portfolio turnover rate 2% 8% 14% 27% 32% 23% --------------------------------------------------------------------------------------------------------------------------------
NOTES TO FINANCIAL HIGHLIGHTS (a) Rounds to less than $0.01 per share. (b) In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the acquired funds in which it invests. Such indirect expenses are not included in the reported expense ratios. (c) Annualized. (d) The Investment Manager and its affiliates agreed to waive/reimburse certain fees and expenses (excluding fees and expenses of acquired funds). The accompanying Notes to Financial Statements are an integral part of this statement. -------------------------------------------------------------------------------- 18 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT NOTES TO FINANCIAL STATEMENTS ------------------------------------------------- (UNAUDITED AS OF JUNE 30, 2010) 1. ORGANIZATION Seligman Smaller-Cap Value Portfolio (the Fund) is a series of Seligman Portfolios, Inc. (the Corporation) and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a diversified, open-end management investment company. The Fund has 150 million authorized shares of capital stock. The Fund invests at least 80% of its net assets in the common stock of "value" companies with smaller market capitalization ($3 billion or less) at the time of purchase by the Fund. The Fund offers Class 1 and Class 2 shares, which are provided as an investment medium for variable annuity contracts and life insurance policies offered by various insurance companies. The two classes of shares represent interests in the same portfolio of investments, have the same rights, and are generally identical in all respects except that each class bears its separate class-specific expenses, and has exclusive voting rights with respect to any matter on which a separate vote of any class is required. You may not buy (nor will you own) shares of the Fund directly. Shares of the Fund are offered to various life insurance companies and their variable accounts or variable subaccounts (the subaccounts) to fund the benefits of their variable annuity and variable life insurance products. You invest by purchasing a variable annuity contract or life insurance policy and allocating your purchase payments to the subaccounts that invest in the Fund. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 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 from the primary exchange. 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 -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 19 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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 Corporation's Board of Directors (the Board) generally contemplate the use of fair valuation in the event that price quotations or valuations are not readily available, price quotations or valuations from other sources are not reflective of market value and thus deemed unreliable, or a significant event has occurred in relation to a security or class of securities (such as foreign securities) that is not reflected in price quotations or valuations from other sources. A fair value price is a good faith estimate of the value of a security at a given point in time. Many securities markets and exchanges outside the U.S. close prior to the close of the NYSE and therefore the closing prices for securities in such markets or on such exchanges may not fully reflect events that occur after such close but before the close of the NYSE, including significant movements in the U.S. market after foreign exchanges have closed. Accordingly, in those situations, Ameriprise Financial, Inc. (Ameriprise Financial), parent company of Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, LLC) (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. The fair value of a security is likely to be different from the quoted or published price, if available. 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. REPURCHASE AGREEMENTS The Fund may enter into repurchase agreements. Generally, securities received as collateral subject to repurchase agreements are deposited with the Fund's custodian and, pursuant to the terms of the repurchase agreement, must have an aggregate market value greater than or equal to the repurchase price plus accrued interest at all times. The market value of securities held as collateral for -------------------------------------------------------------------------------- 20 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- repurchase agreements is monitored on a daily basis to ensure the existence of the proper level of collateral. 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 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 and interest income, including amortization of premium, market discount and original issue discount using the effective interest method, is accrued daily. 3. EXPENSES INVESTMENT MANAGEMENT SERVICES FEES Under an Investment Management Services Agreement, the Investment Manager determines which securities will be purchased, held, or sold. The management fee is an annual fee that is equal to a percentage of the Fund's average daily net -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 21 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- assets that declines from 0.935% to 0.745% as the Fund's net assets increase. The management fee for the six months ended June 30, 2010 was 0.935% of the Fund's average daily net assets. ADMINISTRATIVE SERVICES FEES Under an Administrative Services Agreement, the Fund pays Ameriprise Financial an annual fee for administration and accounting services equal to a percentage of the Fund's average daily net assets that declines from 0.08% to 0.05% as the Fund's net assets increase. The fee for the six months ended June 30, 2010 was 0.08% of the Fund's average daily net assets. OTHER FEES Other expenses are for, among other things, certain expenses of the Fund or the Board including: Fund boardroom and office expense, employee compensation, employee health and retirement benefits, and certain other expenses. Payment of 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, 2010, 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 RiverSource, Seligman and Threadneedle 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 Fund has a Transfer Agency and Servicing agreement with Columbia Management Investment Services Corp. (formerly known as RiverSource Service Corporation) (the Transfer Agent). The Fund pays the Transfer Agent at an annual rate of 0.06% of the Fund's average daily net assets. The Transfer Agent also receives reimbursement for certain out-of-pocket expenses. DISTRIBUTION FEES The Fund has an agreement with Columbia Management Investment Distributors, Inc. (formerly known as 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. -------------------------------------------------------------------------------- 22 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- EXPENSES WAIVED/REIMBURSED BY THE INVESTMENT MANAGER AND ITS AFFILIATES For the six months ended June 30, 2010, 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.............................................. 1.11% Class 2.............................................. 1.36
The management fees waived/reimbursed at the Fund level were $7,716. Under an agreement which was effective until April 30, 2010, the Investment Manager and its affiliates contractually agreed to waive certain fees and reimburse certain expenses such that net expenses (excluding fees and expenses of acquired funds*) would not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 1.22% Class 2.............................................. 1.47
Effective May 1, 2010, the Investment Manager and its affiliates have contractually agreed to waive certain fees and reimburse certain expenses until April 30, 2011, unless sooner terminated at the sole discretion of the Board, such that net expenses (excluding fees and expenses of acquired funds*) will not exceed the following percentage of the class' average daily net assets: Class 1.............................................. 1.02% Class 2.............................................. 1.27
* In addition to the fees and expenses which the Fund bears directly, the Fund indirectly bears a pro rata share of the fees and expenses of the funds in which it invests (also referred to as "acquired funds"), including affiliated and non-affiliated pooled investment vehicles (including mutual funds and exchange traded funds). Because the acquired funds have varied expense and fee levels and the Fund may own different proportions of acquired funds at different times, the amount of fees and expenses incurred indirectly by the Fund will vary. 4. SECURITIES TRANSACTIONS Cost of purchases and proceeds from sales of securities (other than short-term obligations) aggregated $1,699,079 and $10,372,541, respectively, for the six months ended June 30, 2010. Realized gains and losses are determined on an identified cost basis. -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 23 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 5. CAPITAL SHARE TRANSACTIONS Transactions in shares of capital stock for the periods indicated were as follows:
SIX MONTHS ENDED YEAR ENDED JUNE 30, 2010 DEC. 31, 2009 ---------------------------------------------------------------------- CLASS 1 Sold 301,528 1,929,617 Reinvested distributions -- 247,069 Redeemed (1,405,786) (3,975,316) ---------------------------------------------------------------------- Net increase (decrease) (1,104,258) (1,798,630) ---------------------------------------------------------------------- CLASS 2 Sold 194,844 424,412 Reinvested distributions -- 80,341 Redeemed (430,930) (971,602) ---------------------------------------------------------------------- Net increase (decrease) (236,086) (466,849) ----------------------------------------------------------------------
6. LENDING OF PORTFOLIO SECURITIES The Fund has entered into a Master Securities Lending Agreement (the Agreement) with JPMorgan Chase Bank, National Association (JPMorgan). The Agreement authorizes JPMorgan as lending agent to lend securities to authorized borrowers in order to generate additional income on behalf of the Fund. Pursuant to the Agreement, the securities loaned are secured by cash or U.S. government securities equal to at least 100% of the market value of the loaned securities. Any additional collateral required to maintain those levels due to market fluctuations of the loaned securities is delivered the following business day. Cash collateral received is invested by the lending agent on behalf of the Fund into authorized investments pursuant to the Agreement. The investments made with the cash collateral are listed in the Portfolio of Investments. The values of such investments and any uninvested cash collateral are disclosed in the Statement of Assets and Liabilities along with the related obligation to return the collateral upon the return of the securities loaned. At June 30, 2010, securities valued at $15,883,339 were on loan, secured by cash collateral of $16,356,682 invested in short-term securities or in cash equivalents. Risks of delay in recovery of securities or even loss of rights in the securities may occur should the borrower of the securities fail financially. Risks may also arise to the extent that the value of the securities loaned increases above the value of the collateral received. JPMorgan will indemnify the Fund from losses resulting from a borrower's failure to return a loaned security when due. Such indemnification does not extend to losses associated with declines in the value of cash collateral investments. Loans are subject to termination by the Fund or the -------------------------------------------------------------------------------- 24 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- borrower at any time, and are, therefore, not considered to be illiquid investments. Pursuant to the Agreement, the Fund receives income for lending its securities either in the form of fees or by earning interest on invested cash collateral, net of negotiated rebates paid to borrowers and fees paid to the lending agent for services provided and any other securities lending expenses. Net income of $5,061 earned from securities lending for the six months ended June 30, 2010 is included in the Statement of Operations. The Fund also continues to earn interest and dividends on the securities loaned. 7. AFFILIATED MONEY MARKET FUND The Fund may invest its daily cash balance in RiverSource Short-Term Cash Fund, a money market fund established for the exclusive use of RiverSource, Seligman and Threadneedle funds and other institutional clients of the Investment Manager. The cost of the Fund's purchases and proceeds from sales of shares of RiverSource Short-Term Cash Fund aggregated $3,733,647 and $3,696,634, respectively, for the six months ended June 30, 2010. 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, 2010, can be found in the Portfolio of Investments. 8. BANK BORROWINGS The Fund has entered into a revolving credit facility with a syndicate of banks led by JPMorgan Chase Bank, N.A. (the Administrative Agent), whereby the Fund may borrow for the temporary funding of shareholder redemptions or for other temporary or emergency purposes. The credit facility agreement, which is a collective agreement between the Fund and certain other RiverSource, Seligman and Threadneedle funds, severally and not jointly, permits collective borrowings up to $300 million. The borrowers shall have the right, upon written notice to the Administrative Agent to request an increase of up to $200 million in the aggregate amount of the credit facility from new or existing lenders, provided that the aggregate amount of the credit facility shall at no time exceed $500 million. Participation in such increase by any existing lender shall be at such lender's sole discretion. Interest is charged to each Fund based on its borrowings at a rate equal to the sum of the federal funds rate plus (i) 1.25% per annum plus (ii) if one-month LIBOR exceeds the federal funds rate, the amount of such excess. Each borrowing under the credit facility matures no later than 60 days after the date of borrowing. The Fund also pays a commitment fee equal to its pro rata share of the amount of the credit facility at a rate of 0.10% per -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 25 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- annum, in addition to an upfront fee equal to its pro rata share of 0.04% of the amount of the credit facility. The Fund had no borrowings during the six months ended June 30, 2010. 9. FEDERAL TAX INFORMATION Net investment income (loss) and net realized gains (losses) may differ for financial statement and tax purposes primarily because of post-October losses. The character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. Also, due to the timing of dividend distributions, the fiscal year in which amounts are distributed may differ from the year that the income or realized gains were recorded by the Fund. For federal income tax purposes, the Fund had a capital loss carry-over of $14,150,615 at Dec. 31, 2009, that if not offset by capital gains will expire in 2017. Because the measurement periods for a regulated investment company's income are different for excise tax purposes versus income tax purposes, special rules are in place to protect the amount of earnings and profits needed to support excise tax distributions. As a result, the Fund is permitted to treat net capital losses realized between Nov. 1, 2009 and its fiscal year end (post-October loss) as occurring on the first day of the following tax year. At Dec. 31, 2009, the Fund had a post-October loss of $249,009 that is treated for income tax purposes as occurring on Jan. 1, 2010. It is unlikely the Board will authorize a distribution of any net realized capital gains until the available capital loss carry-over has been offset or expires. There is no assurance that the Fund will be able to utilize all of its capital loss carry-over before it expires. 10. SUBSEQUENT EVENTS Management has evaluated Fund related events and transactions that occurred during the period from the date of the Statement of Assets and Liabilities through 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, other than as noted below. The Board of Directors of Seligman Smaller-Cap Value Portfolio has approved in principle the proposed merger of the Fund into Seligman Variable Portfolio -- Smaller-Cap Value Fund. It is currently anticipated that a Special Meeting of Shareholders will be held during the first half of 2011 to vote on the proposal. -------------------------------------------------------------------------------- 26 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- 11. INFORMATION REGARDING PENDING AND SETTLED LEGAL PROCEEDINGS In June 2004, an action captioned John E. Gallus et al. v. American Express Financial Corp. and American Express Financial Advisors Inc. was filed in the United States District Court for the District of Arizona. The plaintiffs allege that they are investors in several American Express Company (now known as RiverSource) mutual funds and they purport to bring the action derivatively on behalf of those funds under the Investment Company Act of 1940. The plaintiffs allege that fees allegedly paid to the defendants by the funds for investment advisory and administrative services are excessive. The plaintiffs seek remedies including restitution and rescission of investment advisory and distribution agreements. The plaintiffs voluntarily agreed to transfer this case to the United States District Court for the District of Minnesota (the District Court). In response to defendants' motion to dismiss the complaint, the District Court dismissed one of plaintiffs' four claims and granted plaintiffs limited discovery. Defendants moved for summary judgment in April 2007. Summary judgment was granted in the defendants' favor on July 9, 2007. The plaintiffs filed a notice of appeal with the Eighth Circuit Court of Appeals (the Eighth Circuit) on August 8, 2007. On April 8, 2009, the Eighth Circuit reversed summary judgment and remanded to the District Court for further proceedings. On August 6, 2009, defendants filed a writ of certiorari with the U.S. Supreme Court (the Supreme Court), asking the Supreme Court to stay the District Court proceedings while the Supreme Court considers and rules in a case captioned Jones v. Harris Associates, which involves issues of law similar to those presented in the Gallus case. On March 30, 2010, the Supreme Court issued its ruling in Jones v. Harris Associates, and on April 5, 2010, the Supreme Court vacated the Eighth Circuit's decision in the Gallus case and remanded the case to the Eighth Circuit for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. On June 4, 2010, the Eighth Circuit remanded the Gallus case to the District Court for further consideration in light of the Supreme Court's decision in Jones v. Harris Associates. In December 2005, without admitting or denying the allegations, American Express Financial Corporation (AEFC, which is now known as Ameriprise Financial, Inc. (Ameriprise Financial)), entered into settlement agreements with the Securities and Exchange Commission (SEC) and Minnesota Department of Commerce (MDOC) related to market timing activities. As a result, AEFC was censured and ordered to cease and desist from committing or causing any violations of certain provisions of the Investment Advisers Act of 1940, the Investment Company Act of 1940, and various Minnesota laws. AEFC agreed to pay disgorgement of $10 million and civil money penalties of $7 million. AEFC -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 27 NOTES TO FINANCIAL STATEMENTS (continued) ------------------------------------- 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, Seligman and Threadneedle funds' Boards of Directors/Trustees. 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 SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT ---------------------------------------------------------------------- Columbia Management Investment Advisers, LLC ("Columbia Management" or the "investment manager"), formerly known as RiverSource Investments, LLC, a wholly- owned subsidiary of Ameriprise Financial, Inc. ("Ameriprise Financial"), serves as the investment manager to the Fund. Under an investment management services agreement (the "IMS Agreement"), Columbia Management provides investment advice and other services to the Fund and all RiverSource funds (collectively, the "Funds"). On an annual basis, the Fund's Board of Directors (the "Board"), including the independent Board members (the "Independent Directors"), considers renewal of the IMS Agreement. Columbia Management prepared detailed reports for the Board and its Contracts Committee in March and April 2010, including reports based on data provided by independent organizations and a comprehensive response to each item of information requested by independent legal counsel to the Independent Directors ("Independent Legal Counsel") in a letter to the investment manager, to assist the Board in making this determination. All of the materials presented in March and April 2010 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Chair of the Board and the Chair of the Contracts Committee (including materials relating to the Fund's expense cap), and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) reviews information prepared by Columbia Management addressing the services Columbia Management provides and Fund performance. The Board accords particular weight to the work, deliberations and conclusions of the Contracts Committee, the Investment Review Committee and the Compliance Committee in determining whether to continue the IMS Agreement. At the April 6-8, 2010 in-person Board meeting, Independent Legal Counsel reviewed with the Independent Directors various factors relevant to the Board's consideration of advisory agreements and the Board's legal responsibilities related to such consideration. Following an analysis and discussion of the factors identified below, the Board, including all of the Independent Directors, approved renewal of the IMS Agreement. Nature, Extent and Quality of Services Provided by Columbia Management: The Board analyzed various reports and presentations it had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Board specifically considered many developments during the past year concerning the services provided by Columbia Management, including, in particular, the continued investment in, and resources dedicated to, -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 29 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- the Fund's operations, most notably, management's announcement of the massive investment made in the acquisition of the long-term asset management business of Columbia Management Group, LLC (the "Columbia Transaction") and the completed integration of J. & W. Seligman & Co. Incorporated, acquisitions which should continue to enhance investment capabilities and provide access to a greater depth of experienced portfolio managers in key categories. The Board noted, in particular, that upon the close of the Columbia Transaction, the investment manager will have grown to 10 investment offices (compared to 6 in 2009). In addition, the Board reviewed information concerning the investment manager's new Chief Investment Officer upon the close of the Columbia Transaction, including the application of his particular investment philosophy, which is intended to enhance the risk and portfolio management oversight of the entire fund family. Moreover, in connection with the Board's evaluation of the overall package of services provided by Columbia Management, the Board considered the quality of the administrative and transfer agency services provided by Columbia Management's affiliates to the Fund. The Board also reviewed the financial condition of Columbia Management and its affiliates, and each entity's ability to carry out its responsibilities under the IMS Agreement. Further, the Board considered Columbia Management's ability to retain key personnel in certain targeted areas and its expectations in this regard. The Board also discussed the acceptability of the terms of the IMS Agreement (including the relatively broad scope of services required to be performed by Columbia Management). The Board concluded that the services being performed under the IMS Agreement were of a reasonably high quality. Based on the foregoing, and based on other information received (both oral and written, including the information on investment performance referenced below) and other considerations, the Board concluded that Columbia Management and its affiliates were in a position to continue to provide a high quality and level of services to the Fund. Investment Performance: For purposes of evaluating the nature, extent and quality of services provided under the IMS Agreement, the Board carefully reviewed the investment performance of the Fund. In this regard, the Board considered detailed reports containing data prepared by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index, the percentage ranking of the Fund among its comparison group and the net assets of the Fund. The Board observed that the Fund's investment performance met expectations. -------------------------------------------------------------------------------- 30 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT -------------------------------------------------------------------------------- Comparative Fees, Costs of Services Provided and the Profits Realized By Columbia Management and its Affiliates from their Relationships with the Fund: The Board reviewed comparative fees and the costs of services to be provided under the IMS Agreement. The Board members considered detailed comparative information set forth in an annual report on fees and expenses, including, among other things, data (prepared by an independent organization) showing a comparison of the Fund's expenses with median expenses paid by funds in its peer group, as well as data showing the Fund's contribution to Columbia Management's profitability. They also reviewed information in the report showing the fees charged by Columbia Management to other client accounts (with similar investment strategies to those of the Fund). The Board accorded particular weight to the notion that the level of fees should reflect a rational pricing model applied consistently across the various product lines in the Funds' family, while assuring that the overall fees for each fund (with few defined exceptions) are generally in line with the "pricing philosophy" (i.e., that the total expense ratio of each fund, with few exceptions, is at or below the median expense ratio of funds in the same comparison group). The Board took into account that the Fund's total expense ratio (after considering proposed expense caps/waivers) approximated the peer group's median expense ratio. Based on its review, the Board concluded that the Fund's management fee was fair and reasonable in light of the extent and quality of services that the Fund receives. The Board also considered various preliminary integration plans in connection with the Columbia Transaction which, if implemented, would impact the fee structures of various RiverSource Funds. The Board was satisfied with the principles underlying these plans, which, at their preliminary stage, are designed to achieve a rational, consistent pricing model across the combined fund families, as well as preserve the "pricing philosophy" of the Funds. The Board also considered the expected profitability of Columbia Management and its affiliates in connection with Columbia Management providing investment management services to the Fund. In this regard, the Board referred to a detailed profitability report, discussing the profitability to Columbia Management and Ameriprise Financial from managing and operating the Fund, including data showing comparative profitability over the past two years. In this regard, the Board observed slightly reduced profitability in 2009 vs. 2008. The Board also considered the services acquired by the investment manager through the use of commission dollars paid by the Funds on portfolio transactions. The Board noted that the fees paid by the Fund should permit the investment manager to offer -------------------------------------------------------------------------------- SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT 31 APPROVAL OF INVESTMENT MANAGEMENT SERVICES AGREEMENT (continued) ---------------------------------------------------------- competitive compensation to its personnel, make necessary investments in its business and earn an appropriate profit. The Board concluded that profitability levels were reasonable. Economies of Scale to be Realized: The Board also considered the economies of scale that might be realized by Columbia Management as the Fund grows and took note of the extent to which Fund shareholders might also benefit from such growth. The Board considered that the IMS Agreement provides for lower fees as assets increase at pre-established breakpoints and concluded that the IMS Agreement satisfactorily provided for sharing these economies of scale. Based on the foregoing, the Board, including all of the Independent Directors, concluded that the investment management service fees were fair and reasonable in light of the extent and quality of services provided. In reaching this conclusion, no single factor was determinative. On April 8, 2010, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement for an additional annual period. 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 800.221.2450; contacting your financial intermediary; visiting seligman.com*; 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*; or searching the website of the SEC at www.sec.gov. * Information will be available at seligman.com through September 26, 2010 and thereafter at columbiamanagement.com. -------------------------------------------------------------------------------- 32 SELIGMAN SMALLER-CAP VALUE PORTFOLIO -- 2010 SEMIANNUAL REPORT SELIGMAN SMALLER-CAP VALUE PORTFOLIO 734 Ameriprise Financial Center Minneapolis, MN 55474 This report must be accompanied or preceded by the Fund's current prospectus. Seligman mutual funds are distributed by Columbia Management Investment Distributors, Inc. (formerly known as RiverSource Fund Distributors, Inc.), member FINRA, and managed by Columbia Management Investment Advisers, LLC (formerly known as RiverSource Investments, Inc.). Seligman is an offering brand of Columbia Management Investment Advisers, LLC. (COLUMBIA MANAGEMENT (C)2010 Columbia Management Investment Advisers, LLC. All LOGO) rights reserved. SL-9953 C (8/10)
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. Investments. (a) The registrant's "Schedule 1 - Investments in securities of unaffiliated issuers" (as set forth in 17 CFR 210.12-12) is included in Item 1 of this Form N-CSR. (b) Not applicable. Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. Not applicable. Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable. Item 9. Purchases 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. There were no material changes to the procedure by which shareholders may recommend nominees to the registrant's board of directors. Item 11. Controls and Procedures. (a) The registrant's principal executive officer and principal financial officer, based on their evaluation of the registrant's disclosure controls and procedures as of a date within 90 days of the filing of this report, have concluded that such controls and procedures are adequately designed to ensure that information required to be disclosed by the registrant in Form N-CSR is accumulated and communicated to the registrant's management, including the principal executive officer and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. (b) There was no change in the registrant's internal controls over financial reporting that occurred during the registrant's second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting. Item 12. Exhibits. (a)(1) Code of ethics required to be disclosed under Item 2 of Form N-CSR: Not applicable for semi annual reports. (a)(2) Certifications pursuant to Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) attached hereto as Exhibit 99.CERT. (a)(3) Not applicable. (b) Certification pursuant to Rule 30a-2(b) under the Investment Company Act of 1940 (17 CFR 270.30a-2(b)) attached hereto as Exhibit 99.906CERT. 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/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date August 30, 2010 Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated. By /s/ J. Kevin Connaughton ---------------------------------- J. Kevin Connaughton President and Principal Executive Officer Date August 30, 2010 By /s/ Jeffrey P. Fox ---------------------------------- Jeffrey P. Fox Treasurer and Principal Financial Officer Date August 30, 2010