Columbia Seligman Premium Technology Growth Fund, Inc.
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED

MANAGEMENT INVESTMENT COMPANIES

Investment Company Act File Number 811-22328

COLUMBIA SELIGMAN PREMIUM TECHNOLOGY GROWTH FUND, 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, 2012

 

 

 


Table of Contents

Item 1. Reports to Stockholders.

Semiannual Report


Table of Contents

Semiannual Report

June 30, 2012

   LOGO

 

Columbia Seligman Premium Technology Growth Fund

 

 

 

LOGO


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Under the Fund’s managed distribution policy and subject to the approval of the Fund’s Board of Directors (the Board), the Fund expects to make quarterly cash distributions (in November, February, May, and August) to Common Stockholders. The Fund’s most recent distribution (May 24, 2012) amounted to $0.4625 per share, which is equal to a quarterly rate of 2.3125% (9.25% annualized) of the $20.00 offering price in the Fund’s initial public offering in November 2009. You should not draw any conclusions about the Fund’s investment performance from the amount of the distribution or from the terms of the Fund’s distribution policy. The Fund estimates that it has distributed more than its income and net realized capital gains; therefore, a portion of your distribution may be a return of capital. A return of capital may occur, for example, when some or all of the money that you invested in the Fund is paid back to you. A return of capital distribution does not necessarily reflect the Fund’s investment performance and should not be confused with ‘yield’ or ‘income’. The Fund’s Board may determine in the future that the Fund’s managed distribution policy and the amount or timing of the distributions should not be continued in light of changes in the Fund’s portfolio holdings, market or other conditions or factors, including that the distribution rate under such policy may not be dependent upon the amount of the Fund’s earned income or realized capital gains. The Board could also consider amending or terminating the current distribution policy because of potential adverse tax consequences associated with maintaining the policy. In certain situations, returns of capital could be taxable for federal income tax purposes, and all or a portion of the Fund’s capital loss carryforwards from prior years, if any, could effectively be forfeited. The Board may amend or terminate the Fund’s distribution policy at any time without prior notice to Fund stockholders; any such change or termination may have an adverse effect on the market price of the Fund’s shares.

See Notes to Financial Statements for additional information related to the Fund’s managed distribution policy.


Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Letter to Stockholders

 

Dear Stockholders,

We are pleased to present the semiannual stockholder report for Columbia Seligman Premium Technology Growth Fund (the fund). The report includes the fund’s investment results, a portfolio of investments and financial statements as of June 30, 2012.

The fund’s Common Stock returned 3.55% based on net asset value, and 6.95% based on market price, for the six months ended June 30, 2012. The fund underperformed its benchmark, the S&P North American Technology Sector Index, which returned 11.17% during the same period.

In April 2012, Braj Agrawal joined Paul Wick and Ajay Diwan as a portfolio manager of the fund. John Schonberg no longer serves as a portfolio manager for the fund.

During the first half of 2012, the fund paid two distributions that aggregated $0.925 per share. In October 2010, the Fund received exemptive relief from the Securities and Exchange Commission that permits the fund to make periodic distributions of long-term capital gains more often than once in any one taxable year. Unless you elected otherwise, distributions were paid in additional shares of the fund.

On April 12, 2012, the fund held its 2nd Annual Meeting of Stockholders. During the meeting, Stockholders re-elected three Directors and ratified the selection of Ernst & Young LLP (Ernst & Young) as the fund’s independent registered public accounting firm for 2012. Subsequently, at its June Meeting, the fund’s Audit Committee recommended, and the fund’s Board of Directors approved, the appointment of PricewaterhouseCoopers LLP (PricewaterhouseCoopers) as independent auditor for the fund, as well as the other funds in the Columbia Family of Funds (collectively, the funds). PricewaterhouseCoopers’ engagement is effective at the completion of Ernst & Young’s audits of the financial statements of the funds with fiscal years ending July 31, 2012, which is expected to be completed in September 2012. Ernst & Young completed the audit of the fund’s financial statements for the fiscal year ended December 31, 2011 and issued its report on February 22, 2012.

Information about the fund, including daily pricing, current performance, fund holdings, stockholder reports, distributions and other information can be found at columbiamanagement.com under the Closed-End Funds tab.

On behalf of the Board, we would like to thank you for your support of Columbia Seligman Premium Technology Growth Fund.

Stephen R. Lewis

 

LOGO

Chairman of the Board

 

 

For more information, go online to columbiamanagement.com; or call American Stock Transfer & Trust Company, LLC, the fund’s Stockholder Servicing Agent, at 800.937.5449. Customer Service Representatives are available to answer your questions Monday through Friday from 9 a.m. to 5 p.m. Eastern time.

 

Semiannual Report 2012


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Table of Contents

 

The views expressed in this report reflect the current views of the respective parties. These views are not guarantees of future performance and involve certain risks, uncertainties and assumptions that are difficult to predict, so actual outcomes and results may differ significantly from the views expressed. These views are subject to change at any time based upon economic, market or other conditions and the respective parties disclaim any responsibility to update such views. These views may not be relied on as investment advice and, because investment decisions for a Columbia Fund are based on numerous factors, may not be relied on as an indication of trading intent on behalf of any particular Columbia Fund. References to specific securities should not be construed as a recommendation or investment advice.

Performance Overview     3   
Portfolio Overview     4   
Portfolio of Investments     5   
Statement of Assets and Liabilities     9   
Statement of Operations     10   
Statement of Changes in Net Assets     11   
Financial Highlights     13   
Notes to Financial Statements     14   
Supplemental Information     24   
Approval of Investment Management Services Agreement     25   
Results of Meeting of Stockholders     27   
Important Information About This Report     29   
 

 

Semiannual Report 2012


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Columbia Seligman Premium Technology Growth Fund  

 

Performance Overview

 

Performance Summary

 

>  

Columbia Seligman Premium Technology Growth Fund (the fund) Common Stock returned 3.55% based on net asset value, and 6.95% based on market price, for the six-month period ended June 30, 2012.

 

>  

The fund’s benchmark, the S&P North American Technology Sector (NATS) Index, returned 11.17% for the same time period.

 

Average Annual Total Returns (%) (for period ended June 30, 2012)

  

        Inception      6 Months
cumulative
       1 Year        Life  

Market Price

     11/24/09        6.95           -6.93           0.82   

Net Asset Value

     11/30/09        3.55           -3.71           4.94   

S&P North American Technology Sector Index

              11.17           6.96           11.33   

Life total return for market price is based on the initial offering price on November 24, 2009, which was $20.00 per share.

Life total return for net asset value (NAV) is from the opening of business on November 30, 2009 and includes the 4.50% initial sales load. The NAV price per share of the Fund's Common Stock at inception was $19.10.

Index inception return is calculated from 11/30/2009.

Performance data quoted represents past performance and current performance may be lower or higher. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when sold, may be worth more or less than the original cost. For current month-end performance information, please visit columbiamanagement.com.

Returns reflect changes in market price or net asset value, as applicable, and assume reinvestment of distributions. Returns do not reflect the deduction of taxes that investors may pay on distributions or the sale of shares.

The S&P NATS Index is an unmanaged modified capitalization-weighted index based on a universe of technology-related stocks.

Indices are not available for investment, are not professionally managed and do not reflect sales charges, fees, brokerage commissions, taxes or other expenses of investing. Securities in the fund may not match those in an index.

 

Price Per Share

  

      June 30, 2012        March 31, 2012        December 31, 2011   

Market price ($)

    15.90        18.90        15.66   

Net asset value ($)

    16.84        19.39        17.13   

 

Distributions Paid Per Common Share

  

Payable date

    Per share amount ($)   

February 23, 2012

    0.4625   

May 24, 2012

    0.4625   

The net asset value of the fund’s shares may not always correspond to the market price of such shares. Common stock of many closed-end funds frequently trade at a discount from their net asset value. The fund is subject to stock market risk, which is the risk that stock prices overall will decline over short or long periods, adversely affecting the value of an investment in the fund.

 

Semiannual Report 2012     3   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Portfolio Overview

 

Portfolio Management

Paul Wick

Ajay Diwan

Braj Agrawal

Morningstar Style Box™

 

LOGO

The Morningstar Style Box™ is based on the fund’s portfolio holdings. For equity funds, the vertical axis shows the market capitalization of the stocks owned, and the horizontal axis shows investment style (value, blend, or growth). Information shown is based on the most recent data provided by Morningstar.

©2012 Morningstar, Inc. All rights reserved. The Morningstar information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information.

 

Portfolio Breakdown (%)
(at June 30, 2012)

   

Stocks

    95.4   

Consumer Discretionary

    0.5   

Health Care

    1.4   

Information Technology

    91.9   

Telecommunication Services

    1.6   

Other (a)

    4.6   

Percentages indicated are based upon total investments. The Fund’s portfolio composition is subject to change.

(a) Includes investments in Money Market Funds.

 

Top Ten Holdings (%)
(at June 30, 2012)

   

Synopsys, Inc.

    8.4   

Apple, Inc.

    7.9   

Advanced Micro Devices, Inc.

    6.7   

Microsoft Corp.

    5.5   

KLA-Tencor Corp.

    5.1   

Symantec Corp.

    5.1   

Nuance Communications, Inc.

    4.4   

Lam Research Corp.

    3.9   

Oracle Corp.

    3.9   

Amdocs Ltd.

    3.6   

Percentages indicated are based upon total investments (excluding Money Market Funds).

For further detail about these holdings, please refer to the section entitled “Portfolio of Investments.”

Fund holdings are as of the date given, are subject to change at any time, and are not recommendations to buy or sell any security.

 

 

4   Semiannual Report 2012


Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Portfolio of Investments

June 30, 2012 (Unaudited)

(Percentages represent value of investments compared to net assets)

 

Common Stocks 96.5%   
Issuer   Shares     Value ($)  
   

Consumer Discretionary 0.5%

  

Media 0.5%

  

News Corp., Class A

    57,800        1,288,362   
                 

Total Consumer Discretionary

      1,288,362   
   

Health Care 1.4%

  

Life Sciences Tools & Services 1.4%

  

Agilent Technologies, Inc.

    47,200        1,852,128   

Life Technologies Corp.(a)

    24,900        1,120,251   

Thermo Fisher Scientific, Inc.

    13,000        674,830   
                 

Total

      3,647,209   
                 

Total Health Care

      3,647,209   
   

Information Technology 93.0%

  

Communications Equipment 5.0%

  

Aruba Networks, Inc.(a)

    4,000        60,200   

Cisco Systems, Inc.

    246,200        4,227,254   

QUALCOMM, Inc.

    148,345        8,259,850   

Radware, Ltd.(a)

    10,900        417,361   
                 

Total

      12,964,665   

Computers & Peripherals 14.4%

  

Apple, Inc.(a)

    33,400        19,505,600   

Dell, Inc.(a)

    315,700        3,952,564   

EMC Corp.(a)

    300,000        7,689,000   

NetApp, Inc.(a)

    180,500        5,743,510   
                 

Total

      36,890,674   

Electronic Equipment, Instruments & Components 3.5%

  

Avnet, Inc.(a)

    177,000        5,462,220   

Flextronics International Ltd.(a)

    254,800        1,579,760   

IPG Photonics Corp.(a)

    29,545        1,287,867   

Murata Manufacturing Co., Ltd.

    12,100        636,467   
                 

Total

      8,966,314   

Internet Software & Services 0.3%

  

Constant Contact, Inc.(a)

    12,200        218,136   

Dena Co., Ltd.

    16,500        434,305   
                 

Total

      652,441   

IT Services 7.6%

  

Amdocs Ltd.(a)

    300,709        8,937,071   

hiSoft Technology International Ltd., ADR(a)

    108,384        1,553,143   

Visa, Inc., Class A

    55,200        6,824,376   

WNS Holdings Ltd., ADR(a)

    213,889        2,081,140   
                 

Total

      19,395,730   

Office Electronics 2.0%

  

Canon, Inc.

    22,000        878,031   
Common Stocks (continued)   
Issuer   Shares     Value ($)  
   

Xerox Corp.

    541,300        4,260,031   
                 

Total

      5,138,062   

Semiconductors & Semiconductor Equipment 23.0%

  

Advanced Micro Devices, Inc.(a)

    2,904,655        16,643,673   

Atmel Corp.(a)

    215,600        1,444,520   

Broadcom Corp., Class A(a)

    73,400        2,480,920   

KLA-Tencor Corp.

    256,200        12,617,850   

Lam Research Corp.(a)

    255,937        9,659,062   

Marvell Technology Group Ltd.

    314,096        3,543,003   

Microchip Technology, Inc.

    42,200        1,395,976   

Microsemi Corp.(a)

    187,600        3,468,724   

Semtech Corp.(a)

    61,500        1,495,680   

Spansion, Inc., Class A(a)

    134,375        1,475,438   

Teradyne, Inc.(a)

    344,200        4,839,452   
                 

Total

      59,064,298   

Software 37.2%

  

BMC Software, Inc.(a)

    100,162        4,274,914   

Cadence Design Systems, Inc.(a)

    192,700        2,117,773   

Check Point Software Technologies Ltd.(a)

    86,200        4,274,658   

Citrix Systems, Inc.(a)

    19,200        1,611,648   

Fortinet, Inc.(a)

    22,200        515,484   

JDA Software Group, Inc.(a)

    54,329        1,613,028   

Mentor Graphics Corp.(a)

    52,300        784,500   

Microsoft Corp.

    448,600        13,722,674   

Nuance Communications, Inc.(a)

    459,600        10,947,672   

Oracle Corp.(b)

    323,200        9,599,040   

Parametric Technology Corp.(a)

    349,968        7,335,330   

Rovi Corp.(a)

    213,200        4,182,984   

Symantec Corp.(a)

    862,300        12,598,203   

Synopsys, Inc.(a)

    705,484        20,762,394   

VMware, Inc., Class A(a)

    12,900        1,174,416   
                 

Total

      95,514,718   
                 

Total Information Technology

      238,586,902   
   

Telecommunication Services 1.6%

  

Diversified Telecommunication Services 1.5%

  

AT&T, Inc.

    40,000        1,426,400   

Verizon Communications, Inc.

    51,700        2,297,548   
                 

Total

      3,723,948   

Wireless Telecommunication Services 0.1%

  

Sprint Nextel Corp.(a)

    111,700        364,142   
                 

Total Telecommunication Services

      4,088,090   
                 

Total Common Stocks
(Cost: $237,330,380)

      $247,610,563   
 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2012     5   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Portfolio of Investments (continued)

June 30, 2012 (Unaudited)

 

 

Money Market Funds 4.6%   
    Shares     Value ($)  
   

Columbia Short-Term Cash Fund, 0.152%(c)(d)(e)

    11,937,057        11,937,057   
                 

Total Money Market Funds
(Cost: $11,937,057)

   

    11,937,057   
                 

Total Investments
(Cost: $249,267,437)

   

    259,547,620   
                 

Other Assets & Liabilities, Net

  

    (2,799,549
                 

Net Assets

  

    256,748,071   
                 

 

Investment in Derivatives

 

Open Options Contracts Written at June 30, 2012

  

Issuer

   Puts/Calls     
 
Number of
Contracts
 
  
    
 
Exercise
Price ($)
 
  
    
 
Premium
Received ($)
 
  
    
 
Expiration
Date
 
  
     Value ($)   

Aruba Networks, Inc.

   Put      51         20.00         8,806         July 2012         24,735   

NASDAQ 100 Index

   Call      255         2,600.00         1,190,526         July 2012         1,267,350   

NASDAQ 100 Index

   Call      225         2,625.00         861,472         July 2012         789,750   

Oracle Corp.

   Call      649         40.00         59,342         Jan. 2013         5,841   

Oracle Corp.

   Call      825         35.00         56,656         Jan. 2013         42,488   

Oracle Corp.

   Put      1,299         20.00         233,838         Jan. 2013         45,465   

Oracle Corp.

   Put      1,156         25.00         159,150         Jan. 2013         110,976   

Parametric Technology Corp.

   Put      356         20.00         24,391         July 2012         14,240   
                                                   

Total

                    2,300,845   
                                                   

Notes to Portfolio of Investments

 

(a) Non-income producing.

 

(b) At June 30, 2012, securities valued at $4,377,780 were held to cover open call options written.

 

(c) The rate shown is the seven-day current annualized yield at June 30, 2012.

 

(d) As defined in the Investment Company Act of 1940, an affiliated company is one in which the Fund owns 5% or more of its outstanding voting securities, or a company which is under common ownership or control with the Fund. Holdings and transactions in these affiliated companies during the period ended June 30, 2012, are as follows:

 

Issuer

   
 
Beginning
Cost ($)
 
  
   
 
Purchase
Cost ($)
 
  
   
 
 
Sales Cost/
Proceeds
From Sales ($)
 
 
  
   
 
Realized
Gain/Loss ($)
 
  
   
 
Ending
Cost ($)
 
  
   

 
 

Dividends

or Interest
Income ($)

  

 
  

    Value ($)   

Columbia Short-Term Cash Fund

    7,300,551        84,138,615        (79,502,109            11,937,057        10,280        11,937,057   

 

(e) At June 30, 2012, cash or short-term securities were designated to cover open put and/or call options written.

Abbreviation Legend

ADR    American Depositary Receipt

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.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

6   Semiannual Report 2012


Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Portfolio of Investments (continued)

June 30, 2012 (Unaudited)

 

Fair Value Measurements (continued)

 

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 (including NAV for open-end mutual funds). 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 Investment Manager, 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.

Foreign equity securities actively traded in markets where there is a significant delay in the local close relative to the New York Stock Exchange (NYSE) are classified as Level 2. The values of these securities may include an adjustment to reflect the impact of significant market movements following the close of local trading, as described in Note 2 to the financial statements — Security Valuation.

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 Investment Manager. Inputs used in valuations may include, but are not limited to, financial statement analysis, capital account balances, discount rates and estimated cash flows, and comparable company data.

Under the direction of the Fund’s Board of Directors (the Board), the Investment Manager’s Valuation Committee (the Committee) is responsible for carrying out the valuation procedures approved by the Board. The Committee consists of voting and non-voting members from various groups within the Investment Manager’s organization, including operations and accounting, trading and investments, compliance, risk management and legal.

The Committee meets at least monthly to review and approve valuation matters, which may include a description of specific valuation determinations, data regarding pricing information received from approved pricing vendors and brokers and the results of Board-approved valuation control policies and procedures (the Policies). The Policies address, among other things, instances when market quotations are readily available, including recommendation of third party pricing vendors and a determination of appropriate pricing methodologies; events that require specific valuation determinations and assessment of fair value techniques; securities with a potential for stale pricing, including those that are illiquid, restricted, or in default; and the effectiveness of third- party pricing vendors, including periodic reviews of vendors. The Committee meets more frequently, as needed, to discuss additional valuation matters, which may include the need to review back-testing results, review time-sensitive information or approve related valuation actions. The Committee reports to the Board, with members of the Committee meeting with the Board at each of its regularly scheduled meetings to discuss valuation matters and actions during the period, similar to those described earlier.

For investments categorized as Level 3, the Committee monitors information similar to that described above, which may include: (i) data specific to the issuer or comparable issuers, (ii) general market or specific sector news and (iii) quoted prices and specific or similar security transactions. The Committee considers this data and any changes from prior periods in order to assess the reasonableness of observable and unobservable inputs, any assumptions or internal models used to value those securities and changes in fair value. This data is also used to corroborate, when available, information received from approved pricing vendors and brokers. Various factors impact the frequency of monitoring this information (which may occur as often as daily). However, the Committee may determine that changes to inputs, assumptions and models are not required as a result of the monitoring procedures performed.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2012     7   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Portfolio of Investments (continued)

June 30, 2012 (Unaudited)

 

Fair Value Measurements (continued)

 

The following table is a summary of the inputs used to value the Fund’s investments at June 30, 2012:

 

Description

   
 
 
 
Level 1
Quoted Prices in Active
Markets for Identical
Assets ($)
 
 
 
  
   
 
 
Level 2
Other Significant
Observable Inputs ($)
 
 
  
   
 
 
Level 3
Significant
Unobservable Inputs ($)
 
 
  
    Total ($)   

Equity Securities

       

Common Stocks

       

Consumer Discretionary

    1,288,362                      1,288,362   

Health Care

    3,647,209                      3,647,209   

Information Technology

    236,638,098        1,948,804               238,586,902   

Telecommunication Services

    4,088,090                      4,088,090   
                                 

Total Equity Securities

    245,661,759        1,948,804               247,610,563   
                                 

Other

       

Money Market Funds

    11,937,057                      11,937,057   
                                 

Total Other

    11,937,057                      11,937,057   
                                 

Investments in Securities

    257,598,816        1,948,804               259,547,620   

Liabilities

       

Options Contracts Written

    (2,300,845                   (2,300,845
                                 

Total

    255,297,971        1,948,804               257,246,775   
                                 

See the Portfolio of Investments for all investment classifications not indicated in the table.

The Fund’s assets assigned to the Level 2 input category are generally valued using the market approach, in which a security’s value is determined through reference to prices and information from market transactions for similar or identical assets. These assets include certain foreign securities for which a third party statistical pricing service may be employed for purposes of fair market valuation. The models utilized by the third party statistical pricing service take into account a security’s correlation to available market data including, but not limited to, intraday index, ADR, and ETF movements.

There were no transfers of financial assets between Levels 1 and 2 during the period.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

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Columbia Seligman Premium Technology Growth Fund  

 

Statement of Assets and Liabilities

June 30, 2012 (Unaudited)

 

Assets

 

Investments, at value

 

Unaffiliated issuers (identified cost $237,330,380)

    $247,610,563   

Affiliated issuers (identified cost $11,937,057)

    11,937,057   

 

 

Total investments (identified cost $249,267,437)

    259,547,620   

Receivable for:

 

Investments sold

    1,306,276   

Dividends

    64,921   

 

 

Total assets

    260,918,817   

 

 

Liabilities

 

Option contracts written, at value (premiums received $2,594,181)

    2,300,845   

Payable for:

 

Investments purchased

    1,545,354   

Investment management fees

    198,990   

Administration fees

    11,939   

Compensation of board members

    10,359   

Stockholders’ meeting fees

    19,245   

Other expenses

    84,014   

 

 

Total liabilities

    4,170,746   

 

 

Net assets applicable to outstanding common stock

    $256,748,071   

 

 

Represented by

 

Paid-in capital

    $244,800,183   

Excess of distributions over net investment income

    (864,296

Accumulated net realized gain

    2,238,707   

Unrealized appreciation (depreciation) on:

 

Investments

    10,280,183   

Foreign currency translations

    (42

Options contracts written

    293,336   

 

 

Total — representing net assets applicable to outstanding common stock

    $256,748,071   

 

 

Shares outstanding applicable to common stock

    15,250,711   

 

 

Net asset value per share of outstanding common stock

    $16.84   

 

 

Market price per share of common stock

    $15.90   

 

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2012     9   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Statement of Operations

Six months ended June 30, 2012 (Unaudited)

 

Net investment income

 

Income:

 

Dividends

    734,100   

Dividends from affiliates

    10,280   

Foreign taxes withheld

    (2,669

 

 

Total income

    741,711   

 

 

Expenses:

 

Investment management fees

    1,369,563   

Stockholder account and registrar fees

    6,554   

Administration fees

    82,172   

Compensation of board members

    15,107   

Stockholders’ meeting fees

    17,745   

Custodian fees

    7,208   

Printing and postage fees

    36,393   

Professional fees

    23,700   

Other

    43,916   

 

 

Total expenses

    1,602,358   

 

 

Net investment loss

    (860,647

 

 

Realized and unrealized gain (loss) — net

 

Net realized gain (loss) on:

 

Investments

    15,053,607   

Foreign currency translations

    (5,905

Options contracts written

    (11,170,247

 

 

Net realized gain

    3,877,455   

Net change in unrealized appreciation (depreciation) on:

 

Investments

    6,300,741   

Foreign currency translations

    (42

Options contracts written

    306,294   

 

 

Net change in unrealized appreciation

    6,606,993   

 

 

Net realized and unrealized gain

    10,484,448   

 

 

Net increase in net assets resulting from operations

    $9,623,801   

 

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

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Columbia Seligman Premium Technology Growth Fund  

 

Statement of Changes in Net Assets

 

     
 
 
 
Six Months
Ended
June 30, 2012
(Unaudited)
  
  
  
  
   
 
 
Year Ended
December 31,
2011
  
  
  

Operations

   

Net investment loss

    $(860,647     $(1,095,407

Net realized gain

    3,877,455        8,597,470   

Net change in unrealized appreciation (depreciation)

    6,606,993        (29,734,483

 

 

Net increase (decrease) in net assets resulting from operations

    9,623,801        (22,232,420

 

 

Distributions to stockholders:

   

Net realized gains

    (875,084     (8,198,479

Tax return of capital

    (13,216,424     (19,799,906

 

 

Total distributions to stockholders

    (14,091,508     (27,998,385

 

 

Increase (decrease) in net assets from capital share transactions

    393,573        2,992,813   

 

 

Total decrease in net assets

    (4,074,134     (47,237,992

Net assets at beginning of period

    260,822,205        308,060,197   

 

 

Net assets at end of period

    $256,748,071        $260,822,205   

 

 

Excess of distributions over net investment income

    $(864,296     $(3,649

 

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2012     11   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Statement of Changes in Net Assets (continued)

 

     
 
Six Months Ended
June 30, 2012 (Unaudited)
 
  
   
 
Year Ended
December 31, 2011
 
  
      Shares        Dollars ($)        Shares        Dollars ($)   

Capital stock activity

       

Distributions reinvested

    22,401        393,573        161,639        2,992,813   

 

 

Total net increase

    22,401        393,573        161,639        2,992,813   

 

 

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

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Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Financial Highlights

 

The Fund’s financial highlights are presented below. Per share operating performance data is designed to allow investors to trace the operating performance, on a per Common stock basis, from the beginning net asset value to the ending net asset value, so that investors can understand what effect the individual items have on their investment, assuming it was held throughout the period. Generally, the per share amounts are derived by converting the actual dollar amounts incurred for each item, as disclosed in the financial statements, to their equivalent per Common stock amounts, using average Common stock outstanding during the period.

Total return measures the Fund’s performance assuming that investors purchased Fund shares at market price or net asset value as of the beginning of the period, reinvested all their distributions, and then sold their shares at the closing market price or net asset value on the last day of the period. The computations do not reflect taxes or any sales commissions investors may incur in purchasing or selling Fund shares and taxes investors may incur on distributions or on the sale of Fund shares. Total returns are not annualized for periods of less than one year.

 

   
 
 
Six Months  Ended
June 30,
2012
 
 
  
    Year Ended December 31,   
    (Unaudited)        2011        2010        2009(a)   

Per share data

       

Net asset value, beginning of period

    $17.13        $20.45        $19.91        $19.10(b)   
                                 

Income from investment operations

       

Net investment income (loss)

    (0.06)        (0.07)        (0.11)        (0.02)   
                                 

Net realized and unrealized gain (loss)

    0.70        (1.40)        2.49        0.87   
                                 

Increase from payments by affiliate

    —               (0.00)(c)        0.01        —          
                                 

Total from investment operations

    0.64        (1.47)        2.39        0.85   
                                 

Offering costs

    —               —               (0.00)(c)        (0.04)   
                                 

Less distributions to stockholders:

       

Net investment income

    —               —               (1.13)        —          
                                 

Net realized gains

    (0.06)        (0.54)        —              —          
                                 

Tax return of capital

    (0.87)        (1.31)        (0.72)        —          
                                 

Total distributions to stockholders

    (0.93)        (1.85)        (1.85)        —          
                                 

Net asset value, end of period

    $16.84        $17.13        $20.45        $19.91   
                                 

Market price, end of period

    $15.90        $15.66        $19.13        $20.00   
                                 

Total return based upon net asset value

    3.55%        (7.37%)(d)        13.29%(d)        4.24%(e)   
                                 

Total return based upon market price

    6.95%        (9.48%)        5.50%        0.00%(f)   
                                 

Ratios to average net assets(g)

       

Total expenses

    1.17%(h)        1.10%        1.21%        1.22%(h)   
                                 

Net investment income

    (0.63%)(h)        (0.39%)        (0.60%)        (0.96%)(h)   
                                 

Supplemental data

       

Net assets, end of period (in thousands)

    $256,748            $260,822            $308,060           $284,875       
                                 

Portfolio turnover

    43%            71%            102%           8%       
                                 

Notes to Financial Highlights

 

(a) For the period from November 30, 2009 (commencement of operations) to December 31, 2009.

 

(b) Net asset value, beginning of period, of $19.10 reflects a deduction of $0.90 per share sales change from the initial offering price of $20.00 per share.

 

(c) Rounds to less than $0.01.

 

(d) During the years ended December 31, 2011 and 2010, the Fund received a payment from an affiliate. Had the Fund not received this payment, the total return would have been lower by 0.01% and 0.03%, respectively.

 

(e) Since inception total return for net asset value (NAV) is from the opening of business on November 30, 2009, and includes the 4.50% initial sales load. The NAV price per share of the Fund’s Common Stock at inception was $19.10.

 

(f) Since inception total return for market price is based on the initial offering price on November 24, 2009, which was $20.00 per share.

 

(g) 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.

 

(h) Annualized.

 

The accompanying Notes to Financial Statements are an integral part of this statement.

 

Semiannual Report 2012     13   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Notes to Financial Statements

June 30, 2012 (Unaudited)

 

Note 1. Organization

Columbia Seligman Premium Technology Growth Fund (the Fund) is a non-diversified fund. The Fund is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as a closed-end management investment company.

The Fund was incorporated under the laws of the State of Maryland on September 3, 2009, and commenced investment operations on November 30, 2009. The Fund had no investment operations prior to November 30, 2009 other than those relating to organizational matters and the sale to Columbia Management Investment Advisers, LLC (the Investment Manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), of 5,250 common shares (Common Stock) at a cost of $100,275 on October 14, 2009. As of December 31, 2009, the Fund issued 14,300,000 shares of Common Stock, including 13,100,000 shares of Common Stock in its initial public offering and 1,200,000 shares of Common Stock purchased by the Fund’s underwriters pursuant to an over-allotment option granted to the underwriters in connection with the initial public offering. On January 13, 2010, the Fund’s underwriters purchased an additional 545,000 shares of Common Stock pursuant to the over-allotment option, resulting in a total of 14,845,000 shares of Common Stock issued by the Fund in its initial public offering, including shares purchased by the underwriters pursuant to the over-allotment option. With this closing of this additional purchase of Common Stock, the Fund’s total raise-up in its initial public offering was an aggregate of $296.9 million. The Fund has one billion authorized shares of Common Stock. The issued and outstanding Common Stock trades on the New York Stock Exchange (NYSE) under the symbol “STK”.

The Fund currently has outstanding Common Stock. Each outstanding share of Common Stock entitles the holder thereof to one vote on all matters submitted to a vote of the Common Stockholders, including the election of directors. Because the Fund has no other classes or series of stock outstanding, Common Stock possesses exclusive voting power. All of the Fund’s shares of Common Stock have equal dividend, liquidation, voting and other rights. The Fund’s Common Stockholders have no preference, conversion, redemption, exchange, sinking fund, or appraisal rights and have no preemptive rights to subscribe for any of the Fund’s securities.

Although the Fund has no current intention to do so, the Fund is authorized and reserves the flexibility to use leverage to increase its investments or for other management activities through the issuance of preferred shares (Preferred Stock) and/or borrowings. The costs of issuing Preferred Stock and/or a borrowing program would be borne by holders of Common Stock (Common Stockholders) and consequently would result in a reduction of net asset value of Common Stock.

The Fund’s investment objectives are to seek growth of capital and current income. Under normal market conditions, the Fund’s investment program will consist primarily of (i) investing in a portfolio of equity securities of technology and technology-related companies that seeks to exceed the total return, before fees and expenses, of the S&P North American Technology Sector Index and (ii) writing call options on the NASDAQ 100 Index®, an unmanaged index that includes the largest and most active non-financial domestic and international companies listed on the Nasdaq Stock Market, or its exchange-traded fund equivalent (the NASDAQ 100) on a month-to-month basis, with an aggregate notional amount typically ranging from 0% to 90% of the underlying value of the Fund’s holdings of Common Stock. The Fund expects to generate current income from premiums received from writing call options on the NASDAQ 100. The Fund may also buy or write other call and put options on securities, indices, ETFs and market baskets of securities to generate additional income or return or to provide the portfolio with downside protection as further described below in Note 2 to the financial statements — Derivative Instruments.

Note 2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of financial statements in accordance with U.S. generally accepted accounting principles (GAAP) requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of its financial statements.

Security Valuation

All equity securities are valued at the close of business of the New York Stock Exchange (NYSE). Equity securities are valued at the last quoted sales price on the principal exchange or market on which they trade, except for securities traded on the NASDAQ Stock Market, which are valued at the NASDAQ official close price. Unlisted securities or listed securities for which there were no sales during the day are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets.

Debt securities generally are valued by pricing services approved by the Board of Directors (the Board) based upon market transactions for normal, institutional-size trading units of similar securities. The services may use various pricing

 

 

14   Semiannual Report 2012


Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics and other data, as well as broker quotes. Debt securities for which quotations are readily available may also be valued based upon an over-the-counter or exchange bid quotation.

Foreign securities are valued based on quotations from the principal market in which such securities are normally traded. If any foreign share prices are not readily available as a result of limited share activity the securities are valued at the mean of the latest quoted bid and ask prices on such exchanges or markets. Foreign currency exchange rates are generally determined at 4:00 p.m. Eastern (U.S.) time. However, many securities markets and exchanges outside the U.S. close prior to the close of the NYSE; 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. In those situations, foreign securities will be fair valued pursuant to the policy adopted by the Board, including utilizing a third party pricing service to determine these fair values. The third party pricing service takes into account multiple factors, including, but not limited to, movements in the U.S. securities markets, certain depositary receipts, futures contracts and foreign exchange rates that have occurred subsequent to the close of the foreign exchange or market, 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.

Investments in other open-end investment companies, including money market funds, are valued at net asset value.

Short-term securities purchased within 60 days to maturity are valued at amortized cost, which approximates market value. The value of short-term securities originally purchased with maturities greater than 60 days is determined based on an amortized value to par upon reaching 60 days to maturity. 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.

Option contracts are valued at the mean of the latest quoted bid and asked prices on their primary exchanges. Option contracts, including over-the-counter option contracts, with no readily available market value are valued using quotations obtained from independent brokers as of the close of the NYSE.

Investments for which market quotations are not readily available, or that have quotations which management believes are not reliable, are valued at fair value as determined in good faith under consistently applied procedures established by and under the general supervision of the Board. If a security or

class of securities (such as foreign securities) is valued at fair value, such value is likely to be different from the last quoted market price for the security.

The determination of fair value often requires significant judgment. To determine fair value, management may use assumptions including but not limited to future cash flows and estimated risk premiums. Multiple inputs from various sources may be used to determine fair value.

Foreign Currency Transactions and Translation

The values of all assets and liabilities denominated in foreign currencies are translated into U.S. dollars at that day’s exchange rates. Net realized and unrealized gains (losses) on foreign currency transactions and translations include gains (losses) arising from the fluctuation in exchange rates between trade and settlement dates on securities transactions, gains (losses) arising from the disposition of foreign currency and currency gains (losses) between the accrual and payment dates on dividends, interest income and foreign withholding taxes.

For financial statement purposes, the Fund does not distinguish that portion of gains (losses) on investments which is due to changes in foreign exchange rates from that which is due to changes in market prices of the investments. Such fluctuations are included with the net realized and unrealized gains (losses) on investments in the Statement of Operations.

Derivative Instruments

The Fund may invest in certain derivative instruments, which are transactions whose values depend on or are derived from (in whole or in part) the value of one or more other assets, such as securities, currencies, commodities or indices. The Fund uses a rules-based call option writing strategy on the NASDAQ 100 Index®, an unmanaged index that includes the largest and most active nonfinancial domestic and international companies listed on the Nasdaq Stock Market, or its exchange-traded fund equivalent (NASDAQ 100) on a month-to-month basis, with an aggregate notional amount ranging from 0% to 90% of the underlying value of the Fund’s holdings of common stock (the Rules-based Option Strategy). In addition to the Rules-based Option Strategy, the Fund may write additional calls with aggregate notional amounts of up to 25% of the value of the Fund’s holdings in common stocks (to a maximum of 90% when aggregated with the call options written pursuant to the Rules-based Option Strategy) when call premiums are attractive relative to the risk of the price of the NASDAQ 100. The Fund may also close (or buy back) a written call option if the Investment Manager believes that a substantial amount of the premium (typically, 70% or more) to be received by the Fund has been captured before exercise, potentially reducing the call position to 0% of total equity until additional calls are written.

 

 

Semiannual Report 2012     15   


Table of Contents
   Columbia Seligman Premium Technology Growth Fund

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

The Fund may also seek to provide downside protection by purchasing puts on the NASDAQ 100 when premiums on these options are considered by the Investment Manager to be low and, therefore, attractive relative to the downside protection provided.

The Fund may also buy or write other call and put options on securities, indices, ETFs and market baskets of securities to generate additional income or return or to provide the portfolio with downside protection. In this regard, options may include writing “in-” or “out-of-the-money” put options or buying or selling options in connection with closing out positions prior to expiration of any options. However, the Fund does not intend to write “naked” call options on individual stocks (i.e., selling a call option on an individual security not owned by the Fund) other than in connection with implementing the options strategies with respect to the NASDAQ 100. The put and call options purchased, sold or written by the Fund may be exchange-listed or over-the-counter (OTC).

Investments in derivative instruments may expose the Fund to certain additional risks, including those detailed below.

Options

Options are contracts which entitle the holder to purchase or sell securities or other identified assets at a specified price, or in the case of index option contracts, to receive or pay the difference between the index value and the strike price of the index option contract. The Fund purchased and wrote option contracts to facilitate buying and selling of securities for investments. Completion of transactions for option contracts 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 option contract trades. Cash collateral held or posted by the Fund for such option contract 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. The Fund will realize a gain or loss when the option contract expires. When option contracts are exercised, the proceeds on sales for a written call or purchased put option contract, or the purchase cost for a written put or purchased call option contract, is adjusted by the amount of premium received or paid.

The risk in buying an option contract is that the Fund pays a premium whether or not the option contract 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 contract 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 contract is

that the Fund may incur a loss if the market price of the security decreases and the option contract 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 under the contract. For OTC options contracts, the transaction is also subject to counterparty credit risk. The maximum payout amount may be offset by the subsequent sale, if any, of assets obtained upon the exercise of the put option contracts by holders of the option contracts or proceeds received upon entering into the contracts. The maximum payout amount was $6,302,000 at June 30, 2012.

Contracts and premiums associated with options contracts written for the six months ended June 30, 2012 are as follows:

 

      Calls        Puts   
      Contracts        Premiums ($)        Contracts        Premiums ($)   

Balance at December 31, 2011

    1,224        2,836,611        1,377        440,868   

Opened

    4,437        13,925,093        2,650        311,380   

Closed

    (3,132     (12,285,229     (1,125     (319,857

Expired

    (575     (2,308,479              

Exercised

                  (40     (6,207

Balance at June 30, 2012

    1,954        2,167,996        2,862        426,184   

Effects of Derivative Transactions in 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.

The following table is a summary of the fair value of derivative instruments at June 30, 2012:

 

  Liability Derivatives   

Risk Exposure
Category

 

Statement of Assets
and Liabilities Location

    Fair Value ($)   

Equity contracts

 

Options contracts
written, at value

    2,300,845   
 

 

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Table of Contents
Columbia Seligman Premium Technology Growth Fund  

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

The effect of derivative instruments in the Statement of Operations for the six months ended June 30, 2012:

 

Amount of Realized Gain (Loss) on Derivatives Recognized in Income

  

Risk
Exposure Category

   
 
 
Options
Contracts
Written and
Purchased ($)
  
  
  

Equity contracts

    (11,170,247

Change in Unrealized Appreciation (Depreciation) on Derivatives Recognized in Income

   

Risk Exposure Category

   
 
 
Options Contracts
Written and
Purchased ($)
  
  
  

Equity contracts

    306,294   

The following table is a summary of the volume of derivative instruments for the six months ended June 30, 2012:

 

Derivative Instrument

    Contracts Opened   

Options Contracts

    11,919   

Security Transactions

Security transactions are accounted for on the trade date. Cost is determined and gains (losses) are based upon the specific identification method for both financial statement and federal income tax purposes.

Income Recognition

Corporate actions and dividend income are recorded net of any non-reclaimable tax withholdings, on the ex-dividend date or upon receipt of ex-dividend notification in the case of certain foreign securities.

Awards from class action litigation are recorded as a reduction of cost basis if the Fund still owns the applicable securities on the payment date. If the Fund no longer owns the applicable securities, the proceeds are recorded as realized gains.

Federal Income Tax Status

The Fund intends to qualify each year as a regulated investment company under Subchapter M of the Internal Revenue Code, as amended, and will distribute substantially all of its taxable income (including net short-term capital gains), if any, for its tax year, and as such will not be subject to federal income taxes. In addition, the Fund intends to distribute in each calendar year substantially all of its net investment income, capital gains and certain other amounts, if any, such that the Fund should not be subject to federal excise tax. Therefore, no federal income or excise tax provision is recorded.

Foreign Taxes

The Fund may be subject to foreign taxes on income, gains on investments or currency repatriation, a portion of which may be recoverable. The Fund will accrue such taxes and recoveries, as

applicable, based upon its current interpretation of tax rules and regulations that exist in the markets in which it invests.

Realized gains in certain countries may be subject to foreign taxes at the Fund level, based on statutory rates. The Fund accrues for such foreign taxes on net realized and unrealized gains at the appropriate rate for each jurisdiction, as applicable.

Dividends to Stockholders

In November 2010, the Fund paid its first dividend under the Fund’s new, managed distribution policy adopted by the Fund’s Board. Prior to the managed distribution policy, the Fund paid distributions pursuant to a level rate distribution policy. Under its former distribution policy and consistent with the 1940 Act, as amended, the Fund could not distribute long-term capital gains, as defined in the Internal Revenue Code of 1986, more often than once in any one taxable year. In October 2010, the Fund received exemptive relief from the Securities and Exchange Commission that permits the Fund to distribute long-term capital gains more often than once in any one taxable year. After consideration by the Fund’s Board, the Fund adopted the current managed distribution policy which allows the Fund to make periodic distributions of long-term capital gains. Under its managed distribution policy, the Fund intends to make quarterly distributions to Common Stockholders at a rate that reflects the past and projected performance of the Fund. The Fund expects to receive all or some of its current income and gains from the following sources: (i) dividends received by the Fund that are paid on the equity and equity-related securities in its portfolio; and (ii) capital gains (short-term and long-term) from option premiums and the sale of portfolio securities. It is possible that the Fund’s distributions will at times exceed the earnings and profits of the Fund and therefore all or a portion of such distributions may constitute a return of capital as described below. A return of capital is a return of a portion of an investor’s original investment. A return of capital is not taxable, but it reduces a Stockholder’s tax basis in his or her shares, thus reducing any loss or increasing any gain on a subsequent taxable disposition by the Stockholder of his or her shares. Distributions may vary, and the Fund’s distribution rate will depend on a number of factors, including the net earnings on the Fund’s portfolio investments and the rate at which such net earnings change as a result of changes in the timing of, and rates at which, the Fund receives income from the sources described above. The net investment income of the Fund consists of all income (other than net short-term and long-term capital gains) less all expenses of the Fund.

The Board may change the Fund’s distribution policy and the amount or timing of the distributions, based on a number of factors, including, but not limited to, as the Fund’s portfolio and market conditions change, the amount of the Fund’s

 

 

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   Columbia Seligman Premium Technology Growth Fund

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

undistributed net investment income and net short- and long-term capital gains and historical and projected net investment income and net short- and long-term capital gains. Over time, the Fund will distribute all of its net investment income and net short-term capital gains. In addition, at least annually, the Fund intends to distribute any net capital gain (which is the excess of net long-term capital gain over net short-term capital loss) or, alternatively, to retain all or a portion of the year’s net capital gain and pay federal income tax on the retained gain.

Dividends and other distributions to Stockholders are recorded on ex-dividend dates.

Guarantees and Indemnifications

Under the Fund’s organizational documents and, in some cases, by contract, 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.

Recent Accounting Pronouncement

Disclosures about Offsetting Assets and Liabilities

In December 2011, the Financial Accounting Standards Board (FASB) issued ASU No. 2011-11, Disclosures about Offsetting Assets and Liabilities. The objective of the FASB is to enhance current disclosure requirements on offsetting of certain assets and liabilities and to enable financial statement users to compare financial statements prepared under GAAP and International Financial Reporting Standards.

Specifically, ASU No. 2011-11 requires an entity to disclose both gross and net information for derivatives and other financial instruments that are subject to a master netting arrangement or similar agreement. The standard requires disclosure of collateral received in connection with the master netting agreements or similar agreements. The effective date of ASU No. 2011-11 is for interim and annual periods beginning on or after January 1, 2013. At this time, management is evaluating the implications of this guidance and the impact it will have on the financial statement amounts and footnote disclosures, if any.

Note 3. Fees and Compensation Paid to Affiliates

Investment Management 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 1.00% of the Fund’s average daily Managed Assets. “Managed Assets” means the net asset value of the Fund’s outstanding Common Stock plus the liquidation preference of any issued and outstanding Preferred Stock of the Fund and the principal amount of any borrowings used for leverage.

Administration Fees

Under an Administrative Services Agreement, the Investment Manager serves as the Fund Administrator. The Fund pays the Fund Administrator an annual fee for administration and accounting services equal to 0.06% of the Fund’s average daily Managed Assets.

Other Expenses

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, 2012, there were no expenses incurred for these particular items.

Compensation of Board Members

Board members are compensated for their services to the Fund as disclosed in the Statement of Operations. Under a Deferred Compensation Plan (the Plan), the Board members who are not “interested persons” of the Fund, as defined under the 1940 Act, may elect to defer payment of up to 100% of their compensation. Deferred amounts are treated as though equivalent dollar amounts had been invested in shares of certain funds managed by the Investment Manager. The Fund’s liability for these amounts is adjusted for market value changes and remains in the Fund until distributed in accordance with the Plan.

Note 4. Federal Tax Information

The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from GAAP because of temporary or permanent book to tax differences.

At June 30, 2012, the cost of investments for federal income tax purposes was approximately $249,267,000 and the aggregate gross approximate unrealized appreciation and depreciation based on that cost was:

 

Unrealized appreciation

    $27,983,000   

Unrealized depreciation

    (17,702,000

Net unrealized appreciation

    $10,281,000   
 

 

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Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

Under current tax rules, regulated investment companies can elect to treat certain late-year ordinary losses incurred and post-October capital losses (capital losses realized after October 31) as arising on the first day of the following taxable year. The Fund has elected to treat late year ordinary losses of $928 attributed to security transactions at December 31, 2011 as arising on January 1, 2012.

Management of the Fund has concluded that there are no significant uncertain tax positions that would require recognition in the financial statements. However, management’s conclusion may be subject to review and adjustment at a later date based on factors including, but not limited to, new tax laws, regulations, and administrative interpretations (including relevant court decisions). Generally, the Fund’s federal tax returns for the prior three fiscal years remain subject to examination by the Internal Revenue Service.

Note 5. Portfolio Information

The cost of purchases and proceeds from sales of securities, excluding short-term obligations, aggregated to $114,671,105 and $145,970,284, respectively, for the six months ended June 30, 2012

Note 6. Dividend Investment Plan and Stock Repurchase Program

The Fund, in connection with its Dividend Investment Plan (the Plan), issues shares of its own Common Stock, as needed, to satisfy Plan requirements. A total of 22,401 shares were issued to Plan participants during the six months ended June 30, 2012 for proceeds of $393,572, a weighted average discount of 6.29% from the net asset value of those shares.

Pursuant to the Plan, unless a Common Stockholder elects otherwise, all cash dividends, capital gains distributions, and other distributions are automatically reinvested in additional Common Stock. If you hold your shares in street name or other nominee (i.e., through a broker), you should contact them to determine their policy, as the broker firm’s policy with respect to Fund distributions may be to default to a cash payment. Common Stockholders who elect not to participate in the Plan (including those whose intermediaries do not permit participation in the Plan by their customers) will receive all dividends and distributions payable in cash directly to the Common Stockholder of record (or, if the shares of Common Stock are held in street or other nominee name, then to such nominee). Common Stockholders may elect not to participate in the Plan and to receive all distributions of dividends and capital gains or other distributions in cash by sending written instructions to American Stock Transfer & Trust Company, LLC (AST), 59 Maiden Lane Plaza Level, New York, New York 10038. Participation in the Plan may be terminated or resumed at any time without penalty by written

notice if received by AST, prior to the record date for the next distribution. Otherwise, such termination or resumption will be effective with respect to any subsequently declared distribution.

Under the Plan, Common Stockholders receive shares of Common Stock in lieu of cash distributions unless they have elected otherwise as described above. Common Stock will be issued in lieu of cash by the Fund from previously authorized but unissued Common Stock. If the market price of a share on the exdividend date of such a distribution is at or above the Fund’s net asset value per share on such date, the number of shares to be issued by the Fund to each Common Stockholder receiving shares in lieu of cash distributions will be determined by dividing the amount of the cash distribution to which such Common Stockholder would be entitled by the greater of the net asset value per share on such date or 95% of the market price of a share on such date. If the market price of a share on such an ex-dividend date is below the net asset value per share, the number of shares to be issued to such Common Stockholders will be determined by dividing such amount by the per share market price. The issuance of Common Stock at less than net asset value per share will dilute the net asset value of all Common Stock outstanding at that time. Market price on any day means the closing price for the Common Stock at the close of regular trading on the NYSE on such day or, if such day is not a day on which the Common Stock trades, the closing price for the Common Stock at the close of regular trading on the immediately preceding day on which trading occurs.

The Fund, under its stock repurchase program, currently intends to make open market purchases of its Common Stock from time to time when the Fund’s Common Stock is trading at a discount to its net asset value, in an amount approximately sufficient to offset the growth in the number of shares of Common Stock issued as a result of the reinvestment of the portion of its distributions to Common Stockholders that are attributable to distributions received by the Fund from its underlying portfolio investments less fund expenses. No shares were purchased in the open market during the six months ended June 30, 2012.

The Fund reserves the right to amend or terminate the Plan as applied to any distribution paid subsequent to written notice of the change sent to participants in the Plan at least 90 days before the record date for such distribution. There are no service or brokerage charges to participants in the Plan; however, the Fund reserves the right to amend the Plan to include a service charge payable to the Fund by the participants. The Fund reserves the right to amend the Plan to provide for payment of brokerage fees by Plan participants in the event the Plan is changed to provide for open market purchases of Common Stock on behalf of Plan participants. All correspondence concerning the Plan should be directed to AST.

 

 

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   Columbia Seligman Premium Technology Growth Fund

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

Note 7. Affiliated Money Market Fund

The Fund may invest its daily cash balances in Columbia Short-Term Cash Fund, an affiliated money market fund established for the exclusive use by the Fund and other affiliated funds. The income earned by the Fund from such investments is included as “Dividends from affiliates” in the Statement of Operations. As an investing fund, the Fund indirectly bears its proportionate share of the expenses of Columbia Short-Term Cash Fund.

Note 8. Significant Risks

Non-Diversification Risk

A non-diversified fund is permitted to invest a greater percentage of its total assets in fewer issuers than a diversified fund. The Fund may, therefore, have a greater risk of loss from a few issuers than a similar fund that invests more broadly.

Technology and Technology-related Investment Risk

The Fund invests a substantial portion of its assets in technology and technology-related companies. The market prices of technology and technology-related stocks tend to exhibit a greater degree of market risk and price volatility than other types of investments. These stocks may fall in and out of favor with investors rapidly, which may cause sudden selling and dramatically lower market prices. These stocks also may be affected adversely by changes in technology, consumer and business purchasing patterns, government regulation and/or obsolete products or services. In addition, a rising interest rate environment tends to negatively affect technology and technology-related companies. In such an environment, those companies with high market valuations may appear less attractive to investors, which may cause sharp decreases in the companies’ market prices. Further, those technology or technology-related companies seeking to finance their expansion would have increased borrowing costs, which may negatively impact their earnings. As a result, these factors may negatively affect the performance of the Fund. Finally, the Fund may be susceptible to factors affecting the technology and technology-related industries, and the Fund’s net asset value may fluctuate more than a fund that invests in a wider range of industries. Technology and technology-related companies are often smaller and less experienced companies and may be subject to greater risks than larger companies, such as limited product lines, markets and financial and managerial resources. These risks may be heightened for technology companies in foreign markets.

Writing Call Options Risk

A principal aspect of the Fund’s investment strategy involves writing call options on the NASDAQ 100. This part of the

Fund’s strategy subjects the Fund to certain additional risks. A decision as to whether, when and how to use options involves the exercise of skill and judgment, and even a well-conceived transaction may be unsuccessful to some degree because of market behavior or unexpected events. The principal factors affecting the market value of an option include supply and demand, interest rates, the current market price of the underlying index or security in relation to the exercise price of the option, the actual or perceived volatility of the underlying index or security and the time remaining until the expiration date.

The Fund intends to write call options on the NASDAQ 100; however, it does not intend to have a portfolio of securities that mirrors the securities in the NASDAQ 100. As a result, during a period when the Fund has outstanding call options written on the NASDAQ 100, the NASDAQ 100 may appreciate to a greater extent than the securities in the Fund’s portfolio. If the call options are exercised in these circumstances, the Fund’s loss on the options will be greater because it will be paying the option holder not only an amount effectively representing appreciation on securities in its own portfolio but also an amount representing the greater appreciation experienced by the securities in the NASDAQ 100 that the Fund does not own. If, at a time these call options may be exercised, the securities underlying these options have market values above the exercise price, then these call options will be exercised and the Fund will be obligated to deliver to the option holder either the securities underlying these options or to deliver the cash value of those securities, in exchange for which the option holder will pay the Fund the exercise price. In either case, the Fund will incur losses to the extent the market value of the underlying securities exceed the sum of the premium the Fund received from writing the call options and the exercise price of the call options, which loss may be very substantial.

To the extent all or part of the Fund’s call options are covered, the Fund forgoes, during the option’s life, the opportunity to profit from increases in the market value of the security underlying the call option above the sum of the option premium received and the exercise price of the call, but has retained the risk of loss should the price of the underlying security decline below the exercise price minus the option premium received. The writer of an exchange-listed option on a security has no control over when during the exercise period of the option (which may be a single day or multiple days) it may be required to fulfill its obligation as a writer of the option. Once an option writer has received an exercise notice, it would be obligated to deliver the underlying security at the exercise price. Thus, the writing of call options may require the Fund to sell portfolio securities at inopportune times or for prices other than current market values and will limit the amount of appreciation the Fund can realize above the exercise price of an option.

 

 

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Columbia Seligman Premium Technology Growth Fund  

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

The Fund may be required to sell investments from its portfolio to effect cash settlement (or transfer ownership of a stock or other instrument to physically settle) on any written call options that are exercised. Such sales (or transfers) may occur at inopportune times, and the Fund may incur transaction costs that increase the costs borne by Common Stockholders. The Fund may sell written call options over an exchange or in the OTC market. The options in the OTC markets may not be as liquid as exchange-listed options. The Fund may be limited in the number of counterparties willing to take positions opposite the Fund or may find the terms of such counterparties to be less favorable than the terms available for listed options. The Fund cannot guarantee that its options strategies will be effective. Moreover, OTC options may provide less favorable tax treatment than listed options.

The value of options may be adversely affected if the market for such options becomes less liquid or smaller. There can be no assurance that a liquid market will exist when the Fund seeks to close out an option position, in the case of a call option written, by buying the option back. Reasons for the absence of a liquid secondary market on an exchange include the following: (i) there may be insufficient trading interest in certain options; (ii) restrictions may be imposed by an exchange on opening transactions or closing transactions or both; (iii) trading halts, suspensions or other restrictions may be imposed with respect to particular classes or series of options; (iv) unusual or unforeseen circumstances may interrupt normal operations on an exchange; (v) the facilities of an exchange or the Options Clearing Corporation (OCC) may not at all times be adequate to handle current trading volume; or (vi) one or more exchanges could, for economic or other reasons, decide or be compelled to discontinue the trading of options (or a particular class or series of options) at some future date. If trading were discontinued, the secondary market on that exchange (or in that class or series of options) would cease to exist. However, outstanding options on that exchange that had been issued by the OCC as a result of trades on that exchange would continue to be exercisable in accordance with their terms. The Fund’s ability to terminate OTC options will be more limited than with exchange-traded options and may involve the risk that broker-dealers participating in such transactions will not fulfill their obligations.

The hours of trading for options may not conform to the hours during which the underlying securities are traded. To the extent that the options markets close before the markets for the underlying securities, significant price and rate movements can take place in the underlying markets that would not be reflected concurrently in the options markets. Call options are marked to market daily and their value will be affected by changes in the value of and dividend rates of the underlying common stocks, changes in interest rates, changes in the

actual or perceived volatility of the stock market and the underlying common stocks and the remaining time to the options’ expiration. Additionally, the exercise price of an option may be adjusted downward before the option’s expiration as a result of the occurrence of certain corporate events affecting the underlying equity security, such as extraordinary dividends, stock splits, merger or other extraordinary distributions or events. A reduction in the exercise price of an option would reduce the Fund’s capital appreciation potential on the underlying security.

The Fund’s options transactions will be subject to limitations established by each of the exchanges, boards of trade or other trading facilities on which such options are traded. These limitations govern the maximum number of options in each class which may be written or purchased by a single investor or group of investors acting in concert, regardless of whether the options are written or purchased on the same or different exchanges, boards of trade or other trading facilities or are held or written in one or more accounts or through one or more brokers. Thus, the number of options which the Fund may write or purchase may be affected by options written or purchased by other investment advisory clients of the Investment Manager. An exchange, board of trade or other trading facility may order the liquidation of positions found to be in excess of these limits, and may impose certain other sanctions.

Options Risk

The Fund engages in transactions in options on securities, indices, exchange traded funds and market baskets of securities on exchanges and in the OTC markets. In general, exchange-traded options have standardized exercise prices and expiration dates and require the parties to post margin against their obligations, and the performance of the parties’ obligations in connection with such options is guaranteed by the exchange or a related clearing corporation. OTC options have more flexible terms negotiated between the buyer and the seller, but generally do not require the parties to post margin and are subject to greater credit risk. OTC options also involve greater liquidity risk.

In addition to writing call options as described above, the Fund may purchase put options. By buying a put option, the Fund will pay a premium to acquire a right to sell the securities or instruments underlying the put at the exercise price of the option. The Fund will lose money if the securities or instruments underlying the option do not decline in value below the exercise price of the option by an amount sufficient to offset the premium paid to acquire the option. To the extent the Fund purchases put options in the OTC market, the Fund will be subject to the credit risk of the seller of the option. The Fund also may write put options on the types of securities or instruments that may be held by the Fund, provided that such put options are secured by segregated, liquid instruments. The

 

 

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   Columbia Seligman Premium Technology Growth Fund

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

Fund will receive a premium for writing a put option, which increases the Fund’s return. In exchange for the premium received, the Fund has the obligation to buy the securities or instruments underlying the option at an agreed-upon exercise price if the securities or instruments decrease below the exercise price of the option.

The Fund will lose money if the securities or instruments decrease in value so that the amount the Fund is obligated to pay the counterparty to the option to purchase the securities underlying the option upon exercise of the option exceeds the value of those securities by an amount that is greater than the premium received by the Fund for writing the option.

The Fund may purchase call options on any of the types of securities or instruments in which it may invest. In exchange for paying the option premium, a purchased call option gives the Fund the right to buy, and obligates the seller to sell, the underlying security or instrument at the exercise price. The Fund will lose money if the securities or instruments underlying the option do not appreciate in value in an amount sufficient to offset the premium paid by the Fund to acquire the option.

Small and Mid-cap Companies Risk

The Fund may invest all or a substantial portion of its Managed Assets in companies whose market capitalization is considered small- or mid-cap. These companies often are newer or less established companies than larger companies. Investments in these companies carry additional risks because earnings of these companies tend to be less predictable; they often have limited product lines, markets, distribution channels or financial resources; and the management of such companies may be dependent upon one or a few key people. The market movements of equity securities of small-cap and mid-cap companies may be more abrupt or erratic than the market movements of equity securities of larger, more established companies or the stock market in general. Historically, small-cap and mid-cap companies have sometimes gone through extended periods when they did not perform as well as larger companies. In addition, equity securities of these companies generally are less liquid than those of larger companies. This means that the Fund could have greater difficulty selling such securities at the time and price that the Fund would like. Smaller-company stocks, as a whole, may experience larger price fluctuations than large-company stocks or other types of investments. During periods of investor uncertainty, investor sentiment may favor large, well-known companies over small, lesser-known companies. There may be less trading in a smaller company’s stock, which means that buy and sell transactions in that stock could have a larger impact on the stock’s price than is the case with larger company stocks.

Foreign Securities Risk

The Fund may invest up to 25% of its Managed Assets in securities of companies organized outside the United States. Investments in foreign securities involve certain risks not associated with investments in U.S. companies. Securities markets in certain foreign countries are not as developed, efficient or liquid as securities markets in the United States. Therefore, the prices of foreign securities are often volatile and trading costs are higher. Certain foreign countries may impose restrictions on the ability of issuers of foreign securities to make payments of principal and interest to investors located outside the country, due to blockage of foreign currency exchanges or otherwise. Generally, there is less publicly available information about foreign companies due to less rigorous disclosure or accounting standards and regulatory practices. In addition, the Fund will be subject to risks associated with adverse political and economic developments in foreign countries, which could cause the Fund to lose money on its investments in foreign securities.

The Fund may invest in securities of issuers located or doing substantial business in “emerging markets” (lesser developed countries). Because of the less developed markets and economics and, in some countries, less mature governments and governmental institutions, the risks of investing in foreign securities can be intensified in the case of investments in issuers domiciled or doing substantial business in emerging markets. These risks include a high concentration of market capitalization and trading volume in a small number of issuers representing a limited number of industries, as well as a high concentration of investors and financial intermediaries; political and social uncertainties; over-dependence on exports, especially with respect to primary commodities, making these economies vulnerable to changes in commodity prices; overburdened infrastructure and obsolete or unseasoned financial systems; environmental problems; less developed legal systems; and less reliable custodial services and settlement practices.

Note 9. Subsequent Events

Management has evaluated the events and transactions that have occurred through the date the financial statements were issued and noted no items requiring adjustment of the financial statements or additional disclosure.

Note 10. Information Regarding Pending and Settled Legal Proceedings

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

 

 

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Columbia Seligman Premium Technology Growth Fund  

 

Notes to Financial Statements (continued)

June 30, 2012 (Unaudited)

 

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 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 funds’ Boards of Directors.

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.

 

 

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   Columbia Seligman Premium Technology Growth Fund

 

Supplemental Information

(Unaudited)

 

Change in Independent Registered Public Accounting Firm

At a meeting held on June 14, 2012, the Board, upon recommendation of the Audit Committee, approved the replacement of Ernst & Young LLP (Ernst & Young) as the independent registered public accounting firm for the Fund and certain other funds in the Columbia Family of Funds (collectively, the Funds) and appointed PricewaterhouseCoopers LLP (PwC). PwC’s engagement is effective at the completion of Ernst & Young’s audits of the financial statements of the Funds with fiscal years ending July 31, 2012, which are expected to be completed in September 2012. The Fund did not consult with PwC during the fiscal years ended December 31, 2011 and 2010 and through the June meeting.

Ernst & Young’s reports on the financial statements of the Fund as of and for the fiscal years ended December 31, 2011 and 2010 contained no adverse opinion or disclaimer of opinion and were not qualified or modified as to uncertainty, audit scope or accounting principles. During such fiscal periods and through the June meeting, there were no: (1) disagreements between the Fund and Ernst & Young on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure which, if not resolved to Ernst & Young’s satisfaction, would have caused them to make reference to the subject matter of the disagreement in connection with their reports, or (2) reportable events.

 

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Columbia Seligman Premium Technology Growth Fund  

 

Approval of Investment Management Services Agreement

 

Columbia Management Investment Advisers, LLC (Columbia Management or the investment manager), a wholly-owned subsidiary of Ameriprise Financial, Inc. (Ameriprise Financial), serves as the investment manager to Columbia Seligman Premium Technology Growth Fund, Inc. (the Fund). Under an investment management services agreement (the IMS Agreement), Columbia Management provides investment advice and other services to the Fund and all funds distributed by Columbia Management Investment Distributors, Inc. (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 2012, including reports based on analyses of data provided by an independent organization 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 were first supplied in draft form to designated representatives of the Independent Directors, i.e., Independent Legal Counsel, the Board’s Chair and the Chair of the Contracts Committee, and the final materials were revised to reflect comments provided by these Board representatives. In addition, throughout the year, the Board (or its committees) regularly meets with portfolio management teams and senior management personnel, and 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 its Contracts Committee, Investment Review Committee and Compliance Committee in determining whether to continue the IMS Agreement.

The Board, at its April 10-12, 2012 in-person Board meeting (the April Meeting), considered the renewal of the IMS Agreement for an additional one-year term. At the April 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 the renewal of the IMS Agreement.

Nature, Extent and Quality of Services Provided by Columbia Management

The Independent Directors analyzed various reports and presentations they had received detailing the services performed by Columbia Management, as well as its expertise, resources and capabilities. The Independent Directors 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 Funds’ operations and the successful completion of various integration initiatives and the consolidation of dozens of Funds. The Independent Directors noted the information they received concerning Columbia Management’s ability to retain key portfolio management personnel. In that connection, the Independent Directors took into account their meetings with Columbia Management’s Chief Investment Officer (the CIO) and considered the CIO’s successful execution of additional risk and portfolio management oversight applied to the Funds. The Independent Directors also assessed Columbia Management’s significant investment in upgrading technology (such as an equity trading system) and considered management’s commitments to enhance existing resources in this area.

In connection with the Board’s evaluation of the overall package of services provided by Columbia Management, the Board also considered the quality of administrative services provided to the Fund by Columbia Management. In addition, 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 and the Fund’s other services agreements with Ameriprise affiliates. 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 providing the results of analyses performed by an independent organization showing, for various periods, the performance of the Fund, the performance of a benchmark index and the percentage ranking of the Fund among its comparison group. The Board observed that while the

 

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   Columbia Seligman Premium Technology Growth Fund

 

Approval of Investment Management Services Agreement (continued)

 

Fund underperformed its benchmark on a total NAV return basis, its short-term year-to-date performance was in the top quintile of its peer group. The Board also observed the Fund’s relatively high yield. The Board determined that the Fund’s investment performance reflected the interrelationship of market conditions with the particular investment strategies employed by the portfolio management team.

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 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 (based on analyses conducted by an independent organization) showing a comparison of the Fund’s expenses with median expenses paid by other closed-end funds, as well as a peer universe of open-end technology-focused funds. The Board also reviewed 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 Fund family. The Board observed that although the Fund’s expense ratio was higher than the comparative peer group’s median expense ratios, the Fund, unlike many funds in the peer universe, employs a unique options-writing strategy designed to cushion its downside performance. Further, the Board reviewed the fees charged to comparable institutional or other accounts/vehicles managed by Columbia Management and discussed differences in how the products are managed and operated, noting no unreasonable differences in the levels of contractual fees. The Board was satisfied that the fee schedule applicable to the Fund reflected the consistent and rational pricing approach applied across the Fund family. 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 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 Funds. In this regard, the Board observed that 2011 profitability, while slightly lower than 2010, was generally in line with the reported profitability of other asset management firms. The Board also considered the indirect economic benefits flowing to Columbia Management or its affiliates in connection with managing, operating and, as the case may be, distributing the Funds, such as the enhanced ability to offer various other financial products to Ameriprise Financial customers, soft dollar benefits and overall reputational advantages. The Board noted that the fees paid by the Funds 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 noted that the management fee schedule does not contain breakpoints that reduce the fee rate on assets above specified levels. However, due to the Fund’s closed-end structure, the Board did not view the potential for realization of economies of scale as the Fund’s assets grow to be a material factor in its deliberations.

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 12, 2012, the Board, including all of the Independent Directors, approved the renewal of the IMS Agreement.

 

26   Semiannual Report 2012


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Columbia Seligman Premium Technology Growth Fund  

 

Results of Meeting of Stockholders

 

The 2nd Annual Meeting of Stockholders of Columbia Seligman Premium Technology Growth Fund, Inc. (the Fund) was held on April 12, 2012. Stockholders voted in favor of each of the two proposals. The description of each proposal and number of shares voted are as follows:

Proposal 1

To elect three Directors to the Fund’s Board, each to hold office until the 2015 Annual Meeting of Stockholders and all until their successors are elected and qualify:

 

Director

    For        Withheld   

Kathleen Blatz

    14,197,979        97,918   

Pamela Carlton

    14,189,208        106,689   

Alison Taunton-Rigby

    14,193,202        102,695   

Proposal 2

To ratify the selection of Ernst & Young LLP as the Fund’s independent registered public accounting firm for 2012:

 

For     Against        Abstain   
14,181,728     53,520        60,653   

 

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   Columbia Seligman Premium Technology Growth Fund

 

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28   Semiannual Report 2012


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Columbia Seligman Premium Technology Growth Fund  

 

Important Information About This Report

 

Each fund mails one shareholder report to each shareholder address. If you would like more than one report, please call shareholder services at 800.937.5449 and additional reports will be sent to you.

The policy of the Board is to vote the proxies of the companies in which the fund holds investments consistent with the procedures that can be found by visiting columbiamanagement.com. 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 columbiamanagement.com; or searching the website of the SEC at sec.gov.

Each fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Each fund’s Form N-Q is available on the SEC’s website at sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. Information on the operation of the Public Reference Room may be obtained by calling 800.SEC.0330. Each fund’s complete schedule of portfolio holdings, as filed on Form N-Q, can also be obtained without charge, upon request, by calling 800.937.5449.

 

Semiannual Report 2012     29   


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LOGO

Columbia Seligman Premium Technology Growth Fund

P.O. Box 8081

Boston, MA 02266-8081

columbiamanagement.com

 

You should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing. You can obtain the Fund’s most recent periodic reports and other regulatory filings by contacting your financial advisor or American Stock Transfer & Trust Company at 800.937.5449. These reports and other filings can also be found on the Securities and Exchanges Commission’s EDGAR Database. You should read these reports and other filings carefully before investing.

© 2012 Columbia Management Investment Advisers, LLC. All rights reserved.

 

SL-9949 E (08/12)


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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. The Fund has a share repurchase plan approved by the Fund’s Board of Directors. The Fund has not repurchased shares during the period.

 

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


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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.


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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)  

Columbia Seligman Premium Technology Growth Fund, Inc.

 
By (Signature and Title)  

/s/ J. Kevin Connaughton

 
  J. Kevin Connaughton, President and Principal Executive Officer  
Date  

August 21, 2012

 

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 (Signature and Title)  

/s/ J. Kevin Connaughton

  J. Kevin Connaughton, President and Principal Executive Officer
Date  

August 21, 2012

By (Signature and Title)  

/s/ Michael G. Clarke

  Michael G. Clarke, Treasurer and Chief Financial Officer
Date  

August 21, 2012